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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 20, 1999
KALAN GOLD CORPORATION
(Exact name of registrant as specified in its charter)
COLORADO 0-25658 84-1357927
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
NO. 60A JALAN 19/3
46300 PETALING JAYA
SELANGOR, MALAYSIA
(Address of principal executive offices)
Registrant's telephone number, including area code: 011-60-3-756-5082
Former Address, if Changed Since Last Report: Tower II, Suite 100, 12835 E.
Arapahoe Road, Englewood, Colorado 80112
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The Registrant's Current Report on Form 8-K dated April 21, 1999 filed with the
Securities and Exchange Commission on April 21, 1999 (the "Original Form 8-K")
is amended as follows.
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
The Original Form 8-K states that in connection with the
acquisition of 100% of the issued and outstanding common shares of Animated
Electronic Industries Sdn Bhd ("AEI"), the Registrant issued a total of
87,000,000 shares to the shareholders of AEI. AEI has subsequently advised
the Registrant that only 83,320,000 shares were issued to shareholders of
AEI, and that it contends that the remaining 3,680,000 shares were improperly
issued to two persons who rendered services to the Registrant in connection
with the acquisition. The Registrant is attempting to negotiate a settlement
with such persons, pursuant to which such persons would receive cash
compensation in exchange for the 3,680,000 shares.
The Original Form 8-K contains certain historical and
forward-looking statements relating to the operating revenues and after-tax
profit of AEI for the fiscal years ended 1998, 1999 and 2000 under generally
accepted accounting principles in effect in Malaysia ("Malaysian GAAP"). Such
statements do not take into account differences in the accounting treatment
of certain items on AEI's financial statements under generally accepted
accounting principles in effect in the United States ("US GAAP") as compared
to Malaysian GAAP and, accordingly, such statements should not be relied upon
for purposes of describing AEI's historical or anticipated results under US
GAAP.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Businesses Acquired. The
financial statements of Animated Electronic
Industries Sdn Bhd are set forth as Exhibit 99.1, and
are incorporated by reference herein.
(b) Pro Forma Financial Statements. Pro forma condensed
consolidated financial statements of Kalan Gold
Corporation are set forth as Exhibit 99.2 and are
incorporated by reference herein.
(c) Exhibits
2.1 Agreement and Plan of Reorganization, dated
April 20, 1999, among Kalan Gold Corporation,
Animated Electronic Industries Sdn Bhd ("AEI"),
and the stockholders of AEI set forth
therein........................................
99.1 Financial statements of Animated Electronic
Industries Sdn Bhd as of December 31, 1998 and
1997 and for the two years ended December 31,
1998 and as of March 31, 1999 and for the
three-month period then ended..................
99.2 Kalan Gold Corporation pro forma condensed
financial statements as of March 31, 1999 and
for the fiscal year ended December 31, 1998 and
for the three-month period ended March 31,
1999...........................................
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KALAN GOLD CORPORATION
(Registrant)
Date: July 2, 1999. By: /s/ PATRICK SOON-HOCK LIM
---------------------------------
Patrick Soon-Hock Lim
President and Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
2.1 Agreement and Plan of Reorganization, dated April 20, 1999,
among Kalan Gold Corporation, Animated Electronic Industries
Sdn Bhd ("AEI"), and the stockholders of AEI set forth
therein.......................................................
99.1 Financial statements of Animated Electronic Industries Sdn Bhd
as of December 31, 1998 and 1997 and for the two years ended
December 31, 1998 and as of March 31, 1999 and for the
three-month period then ended.................................
99.2 Kalan Gold Corporation pro forma condensed financial
statements as of March 31, 1999 and for the fiscal year ended
December 31, 1998 and for the three-month period ended March
31, 1999......................................................
</TABLE>
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AGREEMENT AND PLAN OF REORGANIZATION
April 20th, 1999
KALAN GOLD CORPORATION
ACQUISITION OF
ANIMATED ELECTRONIC INDUSTRIES SDN BHD.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1. Plan of Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
3. Delivery of Shares and Assets . . . . . . . . . . . . . . . . . . . . . .2
4. Representations of Stockholders and Acquirees. . . . . . . . . . . . . . .2
5. Representations of Acquiring Corporation . . . . . . . . . . . . . . . . .4
6. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
7. Conditions Precedent to the Obligations of Acquiror. . . . . . . . . . . .6
8. Conditions Precedent to the Obligations of Acquiree. . . . . . . . . . . .7
9. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
10. Nature and Survival of Representations . . . . . . . . . . . . . . . . . .8
11. Documents at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . .8
12. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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AGREEMENT AND PLAN OF REORGANIZATION
THIS Agreement and Plan of Reorganization is entered into this 20th day
of April, 1999, by and between KALAN GOLD CORPORATION, of address Tower II,
Suite 100, 12835 E. Arapahoe Road, Englewood, Colorado a Colorado corporation,
currently a SEC reporting company and listed and trading on the NASD Bulletin
Board (hereinafter "Acquiror"); and ANIMATED ELECTRONIC INDUSTRIES Sdn Bhd,
address of 60A Jalan 19/3, 46300 Petaling Jaya, Selangor, Malaysia, a Malaysian
corporation; (hereinafter referred to as "Acquiree"); and the undersigned
Stockholders of Acquiree, (hereinafter referred to as "Stockholders").
RECITALS
Stockholders of Acquiree own or control all of the issued and outstanding
common stock of Acquiree. Acquiror desires to acquire all of the issued and
outstanding stock of Acquiree, making Acquiree a wholly-owned subsidiary of
Acquiror, and Stockholders desire to make a tax-free exchange solely of their
shares in Acquiree for shares of Acquiror's common stock to be exchanged as set
out herein with said Stockholders. Upon completion the Acquiror shall apply to
list its stock on the Nasdaq National Market.
NOW, THEREFORE, for the mutual consideration set out herein, the parties
agree as follows:
AGREEMENT
1. PLAN OF REORGANIZATION. Stockholders of Acquiree are the
owners of all the issued and outstanding common stock of said
Acquiree. It is the intention of the parties hereto that all of
the issued and outstanding common stock of Acquiree shall be
acquired by Acquiror in exchange solely for newly issued Acquiror
voting stock. It is also the intention, of the parties hereto
that this transaction qualify as a tax-free reorganization under
Section 351 of the Internal Revenue Code of 1986, as amended, and
the applicable provisions of Malaysian tax law.
2. EXCHANGE OF SHARES. Acquiror and Stockholders agree that
all of the issued and outstanding shares of common stock of
Acquiree shall be exchanged with Acquiror for a total of
87,000,000 shares, in the aggregate, of restricted common stock of
Acquiror, which in any case shall be 87%, in the aggregate, of the
issued and outstanding common shares of the Company, on a fully
diluted basis at the time of the delivery of such shares to the
Stockholders, which, however, does not include an additional
5,000,000 common shares which the combined companies will issue in
a private placement subsequent to the closing of the transaction.
The Acquiror shares will, on the date of delivery to the
Stockholders, (which is hereafter defined as the Delivery Date),
be delivered to the Stockholders in exchange for their shares in
Acquiree. Stockholders represent and warrant that they will hold
such shares of common stock of Acquiror for investment purposes
and not for further public distribution and agree that the shares
shall be appropriately restricted under rule 144.
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3. DELIVERY OF SHARES AND ASSETS. On the Delivery Date (which
is defined as the date in Paragraph 6 herein), Stockholders will
deliver certificates for the shares of Acquiree duly endorsed so
as to make Acquiror the sole holder thereof free and clear of all
claims and encumbrances. On the Delivery Date, delivery of
Acquiror shares, which will be appropriately restricted as to
transfer, will be made to the Stockholders as set forth herein. A
list of the shares of Acquiree, the owners thereof, and shares of
Acquiror to be received by said Stockholders is attached hereto as
Exhibit "A" and by this reference is incorporated herein.
4. REPRESENTATIONS OF STOCKHOLDERS AND ACQUIREE. The
Stockholders and Acquiree, hereby represent and warrant that, with
respect to their own shares and as to the Acquiree, effective this
date, the Closing Date (which is defined as the date in Paragraph
6 herein), and the Delivery Date, the representations listed below
are true and correct to the best of their knowledge, information,
and belief. Said representations are meant and intended by all
parties to apply to the Acquiree:
(a) The listed Stockholders on Exhibit "A" are the sole owners
of all of the issued and outstanding shares of common stock
of Acquiree; such shares are free from claims, liens, or
other encumbrances; and Stockholders have the unqualified
right to transfer and dispose of such shares and assets.
(b) The issued shares of Acquiree constitute validly issued
shares of Acquiree, fully-paid and nonassessable.
(c) The audited year-end financial statements of Acquiree
covering the last fiscal year (which includes the balance
sheet as of the 1997 fiscal year end and the operational
statements as of the 1996 and 1997 fiscal year ends) and
the audited financial statements as of December 31st,
1998, which have been delivered to Acquiror, are complete,
accurate and fairly present the financial condition of
Acquiree as of the dates thereof and the results of its
operations for the periods covered. There are no
liabilities, either fixed or contingent, not reflected in
such financial statements 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 such Acquiree as reflected in such financial
statements. These financial statements have been prepared
in accordance with US Generally Accepted Accounting
Principles consistently applied.
(d) Prior to and as of the Closing Date and the Delivery Date,
there will not be any negative material changes in the
financial position of Acquiree, except changes arising in
the ordinary course of business, which changes will in no
event adversely affect the financial position of said
Acquiree. From the date of signing this contract neither
party shall enter into any agreements with third parties
except to enable them to fullfill the terms of this
Agreement.
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(e) Except as previously disclosed in audited and unaudited
financial statements, to the best of Acquiree's knowledge,
information and belief, it is not involved in, and has not
received judicial notice of any pending litigation or
governmental investigation or proceeding not reflected in
such financial statement, or otherwise disclosed in writing
to Acquiror and, to the best knowledge of Acquiree and
Stockholders, no material litigation, claims, or
assessments, or governmental investigation or proceeding is
threatened against Acquiree, its principal stockholders or
properties.
(f) As of the Closing Date and the Delivery Date, Acquiree will
be in good standing in its jurisdiction of incorporation,
and will be in good standing and in the process of becoming
duly qualified to do business in each jurisdiction where
required to be so qualified.
(g) Acquiree has complied with all applicable Malaysian laws in
connection with its formation, issuance of securities,
organization, capitalization and operations, and to the
best of Acquiree's knowledge, information and belief, no
contingent liabilities have been threatened or claims made,
and no basis for the same exists with respect to said
operations, formation or capitalization, including claims
for violation of any US state or federal securities laws.
(h) Acquiree has filed all Malaysian governmental, tax or
related returns and reports due or required to be filed and
has paid all taxes or assessments which have or which
shall become due as of the Closing Date and the Delivery
Date.
(i) Except as disclosed in this Agreement or on any Exhibit,
Acquiree has not breached any material agreement to which
it individually or collectively may be a party.
(j) Acquiree has subsidiary corporations as listed in Exhibit B
hereto.
(k) Duly certified true copies of the corporate financial
records, minute books, and other documents and records of
Acquiree are to be available to present management of
Acquiror prior to the Closing Date and turned over to new
management of Acquiror in their entirety on the Delivery
Date.
(l) The execution of this Agreement will not violate or breach
any agreement, contract, or commitment to which Acquiree or
Stockholders are a party and has been duly authorized by
all appropriate and necessary action.
(m) The authorized capitalization of Acquiree are as set forth
in the most recent audited balance sheet of Acquiree.
Acquiree has one class of common stock. All outstanding
shares have been duly authorized, validly issued and are
fully paid and nonassessable with no personal liability
attaching to the ownership thereof. There are no
outstanding convertible securities, warrants, options or
commitments of any nature which may cause authorized but
unissued shares to be issued to any person.
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(n) To the best knowledge of Stockholders and Acquiree,
Acquiree is not subject to any material labor disputes or
disagreements, either actual or contingent.
(o) To the best knowledge of Stockholders and Acquiree,
Acquiree's products, materials and brochures do not
infringe the patent or copyright rights of any other person
or entity.
(p) At the date of this Agreement, Stockholders have, and at
the Closing Date and the Delivery Date, they will have to
the best of their knowledge, disclosed all events,
conditions and facts materially affecting the business and
prospects of Acquiree and its assets. Stockholders have not
now and will not have, at the Closing Date or the Delivery
Date, withheld knowledge of any such events, conditions,
and facts which they know, or have reasonable grounds to
know, may materially affect the business and prospects of
Acquiree or its assets.
5. REPRESENTATIONS OF ACQUIRING CORPORATION. Acquiror hereby
represents and warrants as follows, effective this date, the
Closing Date, and the Delivery Date, the representations listed
below are true and correct to the best of its knowledge,
information, and belief:
(a) As of the Delivery Date, the Acquiror shares to be
delivered to the Stockholders will constitute valid and
legally issued shares of Acquiror, fully-paid and
nonassessable, and will be legally equivalent in all
respects to the common stock of Acquiror issued and
outstanding as of the date thereof.
(b) 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.
(c) Acquiror has made available to Acquiree combined audited
financial statements for the past three fiscal years, which
shall be true, complete and accurate; there are and shall
be no liabilities, either fixed or contingent, not
reflected in such financial statements and records or to
which the Acquiree has not been made aware. Said financial
statements fairly and accurately reflect the financial
condition of the Acquiror as of the date thereof and the
results of operations for the period reflected therein.
Such statements shall have been prepared in accordance with
US Generally Accepted Accounting Principles, consistently
applied.
(d) Prior to and as of the Closing Date and the Delivery Date,
there will not be any negative material changes in the
financial position of Acquiror, except changes arising in
the ordinary course of business, which changes will in no
event affect the financial condition of the Acquiror.
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(e) Except as previously disclosed, Acquiror is not involved in
any pending litigation, claims, or governmental
investigation or proceeding not reflected in such financial
statements or otherwise disclosed in writing to the
Stockholders, and there are otherwise no lawsuits, claims,
assessments, investigations, or similar matters, to the
best knowledge of management, threatened or contemplated
against Acquiror, its management or properties.
(f) As of the Closing Date and the Delivery Date, 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 its property and to carry on its business as
now being conducted and is duly qualified to do business in
any jurisdiction where so required.
(g) Acquiror will have filed, by the Delivery Date, all
federal, state, county and local income, excise, property
and other tax returns, forms, or reports, which are due or
required to be filed by it prior to the date hereof and has
paid or made adequate provision for the payment of all
taxes, fees, or assessments which have or may become due
pursuant to such returns or pursuant to any assessments
received.
(h) Except as previously disclosed, Acquiror has not breached,
nor is there any pending or threatened claims or any legal
basis for a claim that Acquiror has breached, any of the
terms or conditions of any agreements, contracts or
commitments to which it is a party or is bound and the
execution and performance hereof will not violate any
provisions of applicable law of any agreement to which
Acquiror is subject.
(i) The present capitalization of Acquiror comprises authorized
common stock of 100,000,000 shares, $0.00001 par value, of
which no more than 7,999,999 shares are issued and
outstanding as of the date hereof and authorized preferred
stock of 1,000,000 shares, with a $0.10 par value, to have
such classes and preferences as the Acquiror may determine
from time to time. No preferred shares are issued and
outstanding as of the date hereof. All outstanding shares
have been duly authorized, validly issued, and fully paid.
There will be no outstanding or authorized securities,
warrants, options or related commitments of any nature as
of the Delivery Date.
(j) Acquiror has no subsidiary corporations.
(k) The shares of restricted common stock of Acquiror to be
issued to Stockholders as of the Delivery Date, will be
validly issued, nonassessable and fully-paid under Colorado
corporation law and will be issued in a non-public offering
and exempted transaction under federal and state securities
laws.
(l) At the date of this Agreement, Acquiror has, and at the
Closing Date, and as of the Delivery Date it will have,
disclosed all events, conditions and facts materially
affecting the business and prospects of Acquiror. Acquiror
has not
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now and will not have, at the Closing Date, or at the
Delivery Date, withheld disclosure of any such events,
conditions, and facts which it, through management has
knowledge of, or has reasonable grounds to know, may
materially affect the business and prospects of Acquiror.
(m) Acquiror is a public company and represents that, except as
previously disclosed, it has no outstanding contracts,
existing or threatened liabilities, claims, lawsuits, or
basis for the same with respect to its shareholders, the
public, brokers, the U.S. Securities and Exchange
Commission, state agencies or other persons. This includes
matters relating to state or federal securities laws as
well as general common law or state corporation law
principles.
6. CLOSING AND DELIVERY DATE. The Closing Date herein referred
to shall be upon such date as the parties hereto may mutually
agree for the execution of this Agreement but is expected to be on
or about April 20th, 1999. This Agreement is executed by the
parties and effective as of the date hereof, subject only to the
ratification and approval of the transaction by the shareholders
of the Acquiror and the divestiture of Acquiror operations. The
date of ratification and approval of the transaction and the
divestiture of Acquiror operations shall be known as the Delivery
Date. Certain exhibits, etc. may be delivered subsequent to the
Delivery Date upon the mutual agreement of the parties hereto. The
Stockholders will be deemed to have accepted, as of the Delivery
Date, delivery of the certificates of stock to be issued in their
respective names, and in connection therewith will make delivery
of their stock in Acquiree to Acquiror.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ACQUIROR. All
obligations of the Acquiror under this Agreement are subject to
the fulfillment, prior to, as of the Closing Date, or at the
Delivery 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 Acquiree pursuant to the
provisions hereof shall be true in all material respects at
and as of the Closing Date and the Delivery Date 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 Date, subject only to the conditions
required on the Delivery Date.
(c) On the Delivery Date, the present Directors of Acquiror
shall resign from the Board of Directors of Acquiror. The
Acquiree shall have the right to name the new Board of
Directors, which shall consist of up to seven (7) members,
as of the Delivery Date.
(d) The Acquiror shall have disposed of all prior Acquiror
operations as of the Delivery Date.
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(e) The Directors of Acquiror shall have approved this
transaction and such other reasonable matters as requested
by Acquiree as pertaining to this transaction.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ACQUIREE. All
obligations of the Acquiree and Stockholders under this Agreement
are subject to the fulfillment, prior to, as of the Closing
Date, or at the Delivery Date, of each of the following
conditions:
(a) The representations and warranties by Acquiree and
Stockholders 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
Closing Date and the Delivery Date as though such
representations and warranties were made at and as of such
time.
(b) Acquiree and Stockholders 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 Date, subject only to the conditions
on the Delivery Date.
(c) Stockholders shall deliver to Acquiror a letter commonly
known as an "investment letter" agreeing that the shares of
stock in Acquiror are being acquired for investment
purposes, and not with a view to resale subject only to
Securities Exchange Commission regulations, State and
Federal securities laws and regulations of the NASD and
NASDAQ boards, whichever is applicable.
(d) Stockholders shall state, and reaffirm as of the Delivery
Date, that the materials, including, current financial
statements, prepared and delivered by Acquiror to
Stockholders, have been read and understood by
Stockholders, that they are familiar with the business of
Acquiror, that they are acquiring the Acquiror shares under
Section 4(2), commonly known as the private offering
exemption of the Securities Act of 1933, under Regulation S
of said Act, and that the shares are restricted and may not
be resold, except in reliance on an exemption under the
Act.
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
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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 three
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 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 Delivery
Date, the following transactions shall occur, all of such
transactions being deemed to occur simultaneously:
(a) Stockholders will deliver, or cause to be delivered, to
Acquiror the following:
(1) stock certificates for the stock of Acquiree being
tendered hereunder, duly endorsed in blank,
(2) Certified true copies of all corporate records of
Acquiree, including without limitation corporate minute
books (which shall contain copies of the Articles of
Incorporation and Bylaws, as amended to the Delivery Date),
stock books, stock transfer books, corporate seals, and
such other corporate books and records as may reasonably
requested for review by Acquiror and its counsel;
(3) a certificate of the President of Acquiree to the
effect that all representations and warranties of Acquiree
made under this Agreement are reaffirmed on the Closing
Date and the Delivery Date, the same as though originally
given on said date;
(4) 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
Stockholders and Acquiree:
stock certificates for Common Stock to be issued as a part
of the exchange as listed on Exhibit "A" after the date of
approval of this transaction by the Acquiror shareholders;
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(2) a certificate of the President of Acquiror to the
effect that all representations and warranties of Acquiror
made under this Agreement are reaffirmed on the Closing
Date and the Delivery Date, the same as though originally
given on said date;
(3) certified copies of resolutions by Acquiror's Board
of Directors and shareholders authorizing this transaction;
(4) Certified true copies of all corporate records of
Acquiror, including without limitation corporate minute
books (which shall contain copies of the Articles of
Incorporation and Bylaws, as amended to the Delivery Date),
stock books, stock transfer books, corporate seals, and
such other corporate books and records as may reasonably
requested for review by Acquiror and its counsel;
(5) 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 any property 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) BROKERS. Neither party has employed any brokers or finders
with regard to this Agreement unless otherwise described in
writing to all parties hereto.
(d) 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.
(e) 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.
(f) 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.
(g) 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
9
<PAGE>
Colorado, and the securities being issued herein are being
issued and delivered outside the jurisdiction of the United
States in accordance with the isolated transaction and
non-public offering exemption and with Regulation S of the
Act..
(h) BINDING EFFECT. 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.
(i) ENTIRE AGREEMENT. This Agreement is the entire agreement of
the parties covering everything agreed upon or understood
in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms
of any kind of condition or inducements to the execution
hereof.
(j) TIME. Time is of the essence.
(k) SEVERABILITY. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in
full force and effect.
(l) DEFAULT COSTS. In the event any party hereto has to resort
to legal action to enforce any of the terms hereof, such
party shall be entitled to collect attorneys fees and other
costs from the party in default.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
KALAN GOLD CORPORATION
a Colorado Corporation
By: /s/ SANFORD ALTBERGER
--------------------------
President
ANIMATED ELECTRONIC INDUSTRIES Sdn. Bhd
a Malaysian Corporation
By: /s/ PATRICK SOON-HOCK LIM
--------------------------------
President
10
<PAGE>
_____________________________________________________________________________
Agreement and Plan of Reorganization
April , 1999
Kalan Gold Corporation
Acquisition of
Animated Electronic Industries Sdn Bhd
______________________________________________________________________________
SHAREHOLDERS OF ACQUIREE:
<TABLE>
<CAPTION>
NO. OF ACQUIREE
SHAREHOLDERS' NAME & ADDRESS STOCKS OWNED SIGNATURE
<S> <C> <C>
LSH Asset Holdings Sdn Bhd 8,699,999 /s/ PATRICK SOON-HOCK LIM
No. 60A Jalan 19/3 -----------------------
46300 Petaling Jaya Authorized Officer
Selangor
MALAYSIA
Dato' Wan Abdul Razak bin Muda 300,000 /s/ DATO' WAN ABDUL RAZAK
No. 18, Jalan Belangkas BIN MUDA
Off Jalan Kg. Pandan -----------------------
55100 Kuala Lumpur
MALAYSIA
Lim Soon Hock 1 /s/ PATRICK SOON-HOCK LIM
No. 60A Jalan 19/3 -----------------------
46300 Petaling Jaya
Selangor
MALAYSIA
</TABLE>
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
NO. OF ACQUIREE NO. OF ACQUIROR
STOCKHOLDERS'S NAME AND ADDRESS STOCKS OWNED STOCKS TO BE ISSUED
<S> <C> <C>
Lim Soon Hock 1 26,157,000
60A Jalan 19/3
46300 Petaling Jaya
Selangor
MALAYSIA
Dato' Wan Abdul Razak bin Muda 300,000 60,000
No. 18, Jalan Belangkas
Off Jalan Kg. Pandan
55100 Kuala Lumpur
MALAYSIA
LSH Asset Holdings Sdn Bhd 8,699,999 38,000,000
60A Jalan 19/3
46300 Petaling Jaya
Selangor
MALAYSIA
Andrew Lim Su Ming - 8,000,000
60A Jalan 19/3
46300 Petaling Jaya
Selangor
MALAYSIA
Lim Hong Choo - 8,000,000
60A Jalan 19/3
46300 Petaling Jaya
Selangor
MALAYSIA
Rosini Amal binti Wan Abdul Razak - 60,000
No. 18, Jalan Belangkas
Off Jalan Kg. Pandan
55100 Kuala Lumpur
MALAYSIA
</TABLE>
- i -
<PAGE>
<TABLE>
<S> <C> <C>
Rohaya Amal binti Wan Abdul Razak - 60,000
No. 18, Jalan Belangkas
Off Jalan Kg. Pandan
55100 Kuala Lumpur
MALAYSIA
Puteh binti Ali - 60,000
No. 18, Jalan Belangkas
Off Jalan Kg. Pandan
55100 Kuala Lumpur
MALAYSIA
Rosnah Amal binti Wan Abdul Razak - 60,000
No. 18, Jalan Belangkas
Off Jalan Kg. Pandan
55100 Kuala Lumpur
MALAYSIA
Looi Hoi Fah - 2,500,000
8-6-5 Danau Permai Condo
Jalan 3/109F
Taman Danau Desa
58100 Kuala Lumpur
MALAYSIA
Mustaffar @ Mustaffa bin Yacob - 120,000
No. 18 Jalan Cincin 11/6
40000 Shah Alam
Selangor
MALAYSIA
Ahmad Faizal bin Ahmad - 40,000
No. 18 Jalan Cincin 11/6
40000 Shah Alam
Selangor
MALAYSIA
Aris bin Ahmad - 40,000
56-1 Jalan Bakri
84000 Muar
Johor
MALAYSIA
Rohana binti Yacob - 40,000
49 Jalan 5/24A
Wangsa Melawati
53300 Kuala Lumpur
MALAYSIA
</TABLE>
- ii -
<PAGE>
<TABLE>
<S> <C> <C>
Halilah binti Ahmad - 60,000
No. 18 Jalan Cincin 11/6
40000 Shah Alam
Selangor
MALAYSIA
Hanafiah bin Mohd Aris - 15,000
12 Jalan Amzil
Taman Melewar
68000 Kuala Lumpur
MALAYSIA
Zuraidah binti A. Manan - 15,000
54 Taman Cheneras Jaya
27200 Kuala Lipis
Pahang Darulmakmur
MALAYSIA
Voo Nyuk Wei - 20,000
11 Jalan Watan 5
Taman Sri Watan
68000 Ampang
SELANGOR
Voo Nyuk Pui - 8,000
No. 34, Jalan SS2/41
47300 Petaling Jaya
Selangor
MALAYSIA
Phang Huey Meng - 5,000
64 Jalan 20/5
Paramount Garden
46300 Petaling Jaya
Selangor
MALAYSIA
------------ ------------
9,000,000 83,320,000*
------------ ------------
</TABLE>
- ------------
*Remaining 3,680,000 shares to be issued to persons designated by AEI at a
future date.
- iii -
<PAGE>
EXHIBIT B
SUBSIDIARY COMPANIES OF ACQUIREE
<TABLE>
<CAPTION>
ISSUED &
DATE & PAID-UP
NAME OF COUNTRY OF SHARE EQUITY INTEREST PRINCIPAL
COMPANY INCORPORATION CAPITAL DIRECT INDIRECT TOTAL ACTIVITIES
- ---------------- ------------- ------------- ------ -------- ------ -------------------
US$ % % %
<S> <C> <C> <C> <C> <C> <C>
Vistel (Malaysia) May 6, 1995 26,315.00 51.0 - 51.0 Investment
Sdn Bhd Malaysia holding
Perwimas Jan 13, 1993 3,500,000.00 43.72 16.61 60.33 Countrywide
Telecommunications Malaysia wireless broadband
Sdn Bhd network service provider
for multimedia
applications & services
</TABLE>
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF THE AUDITORS 2-3
CONSOLIDATED BALANCE SHEET 4
CONSOLIDATED PROFIT AND LOSS ACCOUNT 5
COMPANY BALANCE SHEET 6
COMPANY PROFIT AND LOSS ACCOUNT 7
CONSOLIDATED CASH FLOW STATEMENT 8-10
NOTES TO THE ACCOUNTS 11-26
</TABLE>
<PAGE>
REPORT OF THE AUDITORS TO THE MEMBERS
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
We have audited the financial statements set out on pages 4 to 26 in accordance
with Approved Auditing Standards and, accordingly, included such tests of the
accounting records and such other auditing procedures as we considered
appropriate in the circumstances.
In our opinion:-
(b) the accounts and notes which have been prepared in accordance with
applicable approved accounting standards and under the historical cost
convention, are properly drawn up so as to give a true and fair view
of:
(b) the matters required by Section 169 of the Companies Act, 1965 to
be dealt with in the accounts of the Group and of the Company.
(b) the state of affairs of the Group and of the Company at 31
December 1998 and of the results of the operations of the Group
and of the Company for the year ended on that date, in accordance
with the provisions of the Companies Act, 1965; and
(b) the cash flows of the Group for the year ended 31 December 1998.
(b) the accounting and other records and the registers required by the
Companies Act, 1965 to be kept by the Company and its subsidiary
companies have been properly kept in accordance with the provisions of
the said Act.
We are satisfied that the accounts of the subsidiaries that have been
consolidated with the Company's accounts are in form and content appropriate and
proper for the purposes of the preparation of the consolidated accounts and we
have received satisfactory information and explanations required by us for those
purposes.
Our auditors' reports on the accounts of the subsidiaries were not subject to
any qualification and did not include any comment made under subsection (3) of
Section 174 of the Companies Act 1965.
Without qualifying our opinion above, we draw your attention to Note 6 to the
accounts whereby capital transactions undertaken by the Group and the Company
during the financial year has resulted in amount of RM30,397,500 and
RM22,725,000 owing to the Group and Company respectively as at 31 December 1998.
At the date of our audit report, the above balances has not been settled by the
respective parties. The directors are of the opinion that the amount will be
settled within twelve months from the date of the transactions.
2
<PAGE>
REPORT OF THE AUDITORS TO THE MEMBERS
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD. (Cont'd)
(INCORPORATED IN MALAYSIA)
Accounting principles generally accepted in Malaysia vary in certain respects
from accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of the
aforementioned financial statements to the approximate extent indicated in Note
14.
CH YAP & CO. YAP CHEE CHING
NO. AF 1005 NO. 1627/3/2000 (J)
PUBLIC ACCOUNTANTS PROPRIETOR
Kuala Lumpur
Dated: 16th April 1999
3
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 1998
PRESENTED IN RINGGIT MALYASIA
<TABLE>
<CAPTION>
Note 1998 1997
---- ---- ----
<S> <C> <C> <C>
RM RM
FIXED ASSETS 3 2,403,400 4,087,883
GOODWILL ON CONSOLIDATION 4 2,157,018 5,749,423
CURRENT ASSETS
Stocks 25,649 202,350
Trade debtor 500 2,958
Non trade debtors and deposits 6 30,756,337 628,759
Cash and bank balances 1,281 1,219
---------------- -----------------
30,783,767 835,286
---------------- -----------------
CURRENT LIABILITIES
Non trade creditors and accruals 296,875 239,456
Amount owing to ultimate holding company 7 801,835 -
Amount owing to corporate shareholders 8 - 2,647,597
Amount owing to a director 2,129,604 3,643,641
Hire purchase creditors 68,386 206,213
---------------- -----------------
3,296,700 6,736,907
---------------- -----------------
NET CURRENT ASSETS/(LIABILITIES) 27,487,067 (5,901,621)
---------------- -----------------
32,047,485 3,935,685
---------------- -----------------
---------------- -----------------
REPRESENTING:
SHARE CAPITAL 9 9,000,000 500,000
RETAINED PROFITS 20,353,236 2,189,426
---------------- -----------------
29,353,236 2,689,426
MINORITY INTEREST 2,221,354 794,650
LONG TERM LIABILITIES
Hire purchase creditors 472,895 451,609
---------------- -----------------
32,047,485 3,935,685
---------------- -----------------
---------------- -----------------
</TABLE>
THE NOTES ON PAGES 11 TO 26 FORM AN INTEGRAL PART OF THESE ACCOUNTS.
AUDITORS' REPORT ON PAGES 2 AND 3.
4
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE YEARS ENDED 31 DECEMBER 1998 AND 1997
PRESENTED IN RINGGIT MALYASIA
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
RM RM
REVENUE 4,683,927 34,237
--------------- ----------------
--------------- ----------------
PROFIT FOR THE YEAR (Note 11) 18,215,047 988,504
MINORITY INTEREST (51,237) 270,770
--------------- ----------------
PROFIT AFTER MINORITY INTEREST 18,163,810 1,259,274
PRE-ACQUISITION LOSS - 995,145
--------------- ----------------
PROFIT ATTRIBUTABLE TO THE GROUP 18,163,810 2,254,419
ACCUMULATED PROFIT/(LOSSES) 2,189,426 (64,993)
BROUGHT FORWARD
--------------- ----------------
RETAINED PROFITS CARRIED FORWARD 20,353,236 2,189,426
--------------- ----------------
--------------- ----------------
RETAINED BY:
The Company 19,963,390 2,470,152
Subsidiary companies 389,846 (280,726)
--------------- ----------------
20,353,236 2,189,426
--------------- ----------------
--------------- ----------------
</TABLE>
THE NOTES ON PAGES 11 TO 26 FORM AN INTEGRAL PART OF THESE ACCOUNTS.
AUDITORS' REPORT ON PAGES 2 AND 3.
5
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
BALANCE SHEET AT 31 DECEMBER 1998
<TABLE>
<CAPTION>
Note 1998 1997
---- ---- ----
<S> <C> <C> <C>
RM RM
FIXED ASSETS 3 574,235 4,581
SUBSIDIARY COMPANIES 5 5,860,999 7,425,632
CURRENT ASSETS
Non trade debtors and deposits 6 22,726,827 9,855
Cash and bank balances 52 150
----------------- ---------------
22,726,879 10,005
----------------- ---------------
CURRENT LIABILITIES
Non trade creditors and accruals 63,633 24,358
Amount owing to a corporate shareholder 8 - 2,618,166
Amount owing to a director 135,090 1,827,542
----------------- ---------------
198,723 4,470,066
----------------- ---------------
NET CURRENT ASSETS/(LIABILITIES) 22,528,156 (4,460,061)
----------------- ---------------
28,963,390 2,970,152
----------------- ---------------
----------------- ---------------
REPRESENTING:
SHARE CAPITAL 9 9,000,000 500,000
RETAINED PROFITS 10 19,963,390 2,470,152
----------------- ---------------
28,963,390 2,970,152
----------------- ---------------
----------------- ---------------
</TABLE>
THE NOTES ON PAGES 11 TO 26 FORM AN INTEGRAL PART OF THESE ACCOUNTS.
AUDITORS' REPORT ON PAGES 2 AND 3.
6
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
PROFIT AND LOSS ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 1998
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
RM RM
REVENUE 4,204,264 151,587
--------------- ---------------
--------------- ---------------
PROFIT FOR THE YEAR (Note 11) 17,493,238 2,388,178
RETAINED PROFITS BROUGHT FORWARD 2,470,152 81,974
--------------- ---------------
RETAINED PROFITS CARRIED FORWARD 19,963,390 2,470,152
--------------- ---------------
--------------- ---------------
</TABLE>
THE NOTES ON PAGES 11 TO 26 FORM AN INTEGRAL PART OF THESE ACCOUNTS.
AUDITORS' REPORT ON PAGES 2 AND 3.
7
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1998 AND 1997
PRESENTED IN RINGGIT MALYASIA
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
RM RM
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) for the year 18,215,047 988,504
Pre-acquisition loss - 995,145
------------------ ------------------
18,215,047 1,983,649
Adjustments for:
Amortisation of goodwill 165,924 410,673
Depreciation of fixed assets 403,490 4,397
Goodwill on consolidation written off - 479,707
Gain on disposal of associated companies - (3,665,507)
Gain on disposal of patent and design (1,630,000) -
Gain on disposal of fixed assets (3,251,961) -
Gain on disposal of unquoted investment (12,000) -
Minority interest share of retained profits 3,024,352 (1,025,084)
Loss on disposal of fixed assets 2,485 -
------------------ ------------------
Operating profit/(loss) before working capital changes 16,917,337 (1,812,165)
Decrease/(increase) in trade and non-trade debtors (30,184,932) 263,145
Increase in trade and non-trade creditors (3,125,020) (2,361,758)
Decrease in stocks 107,115 20,605
------------------ ------------------
NET CASH USED IN OPERATING ACTIVITIES (16,285,500) (3,890,173)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of fixed assets 5,394,012 268,020
Purchase of fixed assets (1,203,701) (250,151)
Acquisition of subsidiaries net of cash acquired - 1,069
Disposal of subsidiaries net of cash 2,069,792 -
Proceeds from disposal of associated companies - 3,871,791
Investments in unquoted shares (912,000) -
Proceeds from disposal of unquoted shares 924,000 -
Purchase of patent and design (20,000) -
Proceeds from disposal of patent and design 1,650,000 -
------------------ ------------------
NET CASH GENERATED FROM INVESTING ACTIVITIES 7,902,103 3,890,729
------------------ ------------------
</TABLE>
THE NOTES ON PAGES 11 TO 26 FORM AN INTEGRAL PART OF THESE ACCOUNTS.
AUDITORS' REPORT ON PAGES 2 AND 3.
8
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1998 AND 1997 (Cont'd)
PRESENTED IN RINGGIT MALYASIA
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
RM RM
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of shares 8,500,000 -
Payment to hire purchase creditors (116,541) -
------------------ ------------------
NET CASH GENERATED FROM FINANCING ACTIVITIES 8,383,459 -
------------------ ------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 62 556
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 1,219 663
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 1,281 1,219
------------------ ------------------
------------------ ------------------
REPRESENTED BY:
Cash and bank balances 1,281 1,219
------------------ ------------------
------------------ ------------------
</TABLE>
ANALYSIS OF DISPOSAL OF SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
1998
----
<S> <C>
RM
NET ASSETS DISPOSED:
Fixed assets 340,158
Goodwill 3,922,975
Cash and bank balances 208
Trade and non trade debtors 59,812
Stocks 69,586
Trade and non trade creditors (177,360)
Minority interest (130,139)
----------------
Share of net assets disposed 4,085,240
Loss on disposal of subsidiary companies (2,015,240)
----------------
Total purchase consideration 2,070,000
less: Cash in subsidiary companies disposed (208)
----------------
Cash inflow on disposal of subsidiary companies 2,069,792
----------------
----------------
</TABLE>
THE NOTES ON PAGES 11 TO 26 FORM AN INTEGRAL PART OF THESE ACCOUNTS.
AUDITORS' REPORT ON PAGES 2 AND 3.
9
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1998 AND 1997 (Cont'd)
PRESENTED IN RINGGIT MALYASIA
ANALYSIS OF ACQUISITION OF SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
1997
----
RM
<S> <C>
NET ASSETS ACQUIRED:
Fixed assets 4,083,302
Investment in associated company 3,310,000
Goodwill on consolidation 4,680,356
Stocks 202,350
Trade and non trade debtors 443,008
Cash and bank balances 1,069
Trade and non trade creditors (4,329,629)
Minority interest (2,090,504)
----------------
Share of net assets acquired 6,299,952
Goodwill on consolidation 1,959,447
----------------
Total purchase consideration 8,259,399
less: Cash in subsidiary companies acquired (8,260,468)
----------------
Cash inflow on acquisition of subsidiary companies (1,069)
----------------
----------------
</TABLE>
THE NOTES ON PAGES 11 TO 26 FORM AN INTEGRAL PART OF THESE ACCOUNTS.
AUDITORS' REPORT ON PAGES 2 AND 3.
10
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
1. PRINCIPAL ACTIVITIES
The Company is principally engaged in the designing, manufacturing and
marketing of video telecommunication and surveillance devices.
One of the subsidiaries, Perwimas Telecommunication Sdn. Bhd., is the
exclusive holder of a wireless broadband multimedia network licence
granted by the Ministry of Energy, Communications & Multimedia of
Malaysia operating under the name, VISIONET. The subsidiary company is
licensed to provide network facilities and services for two-way
wireless broadband multimedia application which include distance
learning, live news coverage, remote video surveillance, emergency
field services (e.g. telemedicine, etc.), on-site progress monitoring,
energy conservation and building management.
In addition to the above-named applications, VISIONET provides support
for the design and production of multimedia programs, data hosting,
broadband Virtual Private Network interconnection, digital video
multi-cast and transmission of bandwidth-sensitive multimedia
applications and services throughout Malaysia.
The principal activities of the other subsidiary companies are set out
in Note 5 to the accounts.
There have been no significant changes in the nature of these
activities during the financial year.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF ACCOUNTING
The accounts of the Group and of the Company have been prepared under
the historical cost convention and comply with applicable approved
accounting standards.
(b) INVESTMENT IN SUBSIDIARY COMPANIES
Investment in subsidiary companies are stated at cost. Where in the
opinion of the directors there has been a permanent diminution in value
of the investment, provision for the diminution in value would be made.
11
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
2. SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(c) BASIS OF CONSOLIDATION
The consolidated accounts included the accounts of the Company and its
subsidiary companies made up to the same financial year-end. The
results of the subsidiary companies acquired or disposed of during the
year are included in the consolidated profit and loss account from/to
the effective dates of acquisition or disposal.
Inter-company transactions are eliminated on consolidation and the
consolidated accounts reflect external transactions only.
The difference between the fair value of the net tangible assets of
subsidiary companies at the date of acquisition and the purchase price
is included in the consolidated balance sheet as goodwill or reserve
arising on consolidation. Goodwill arising on consolidation is charged
to the profit and loss account in the year of acquisition.
Where in the opinion of the Directors that the subsidiary companies are
expected to become profitable in the foreseeable future, goodwill on
consolidation is amortised over the expected useful life.
Goodwill on consolidation from the acquisition of subsidiary company,
Perwimas Telecommunication Sdn. Bhd. is amortised over a period of 15
years commencing from the financial year ended 31 December 1997.
(d) FIXED ASSETS AND DEPRECIATION
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is calculated on a straight-line method over the expected
useful lives of the assets concerned.
The principal annual rates are:
<TABLE>
<CAPTION>
<S> <C>
Motor vehicle 20%
Office equipment 20%
Furniture and fittings 20%
Tools and equipment 10%
Video communication hardware and peripherals 10%
Computer software 10%
Office renovation 10%
</TABLE>
12
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
2. SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(e) INVESTMENT IN ASSOCIATED COMPANIES
The Company treats as associated companies those companies in which a
long term equity interest of between 20 and 50 percent is held and
where is permanent participation through Board representation.
Investments in associated companies are stated at cost. The Group's
share of profits less losses of associated companies are included in
the consolidated profit and loss account, and the Group share of
post-acquisition retained profits and reserves is added to the cost of
investment in the consolidated balance sheet. These amounts are taken
from the audited accounts of the companies concerned, made up to the
financial year end of the Group. Where the accounting policies of the
consolidation where the amounts involved are considered significant to
the Group.
(f) LONG TERM INVESTMENTS
Investments in unquoted shares are stated at cost less provision for
diminution in value.
(g) STOCKS
Stocks are stated at the lower of cost and net realisable value. In
general, cost is determined on a first-in first-out basis.
(h) DEFERRED TAXATION
Deferred taxation, calculated by the liability method, is provided on
timing differences arising from the different treatments in accounting
and taxation of certain items except where it can be demonstrated with
reasonable probability that the tax deferral will continue for the
foreseeable future. In accounting for timing differences, deferred tax
debits are not accounted for unless there is a reasonable expectation
of their realisation.
(i) DEBTORS
Known bad debts are written off and specific provision is made against
accounts which are doubtful of recovery.
13
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
2. SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(j) FOREIGN CURRENCY CONVERSION
Foreign currency assets and liabilities at the balance sheet date have
been converted into Ringgit Malaysia at the rate of exchange ruling at
the balance sheet date. Foreign currency transactions during the year
have been converted into Ringgit Malaysia at the rates of exchange
ruling at the dates of transactions. Gains or losses on exchange are
included in the profit and loss account.
(k) LONG TERM LIABILITIES
Long term liabilities represent amount repayable twelve months after
the balance sheet date.
(l) REVENUE
Revenue of the Group and the Company represents the net invoiced value
of goods sold, management fees received, professional and tuition fees
and other income earned.
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
3. FIXED ASSETS
THE GROUP
<TABLE>
<CAPTION>
Balance Accumulated Net Book
1998 31.12.98 Depreciation Value
---- ---------------- ------------------ ---------------
<S> <C> <C> <C>
RM RM RM
Motor vehicle - - -
Office equipment 272,499 97,549 174,950
Furniture and fittings 87,822 57,498 30,324
Tools and equipment 578,283 217,515 360,768
Video communication hardware and peripherals 2,334,313 781,356 1,552,957
Computer software 521,779 262,156 259,623
Office renovation 41,615 16,837 24,778
---------------- ------------------ ---------------
3,836,311 1,432,911 2,403,400
---------------- ------------------ ---------------
---------------- ------------------ ---------------
</TABLE>
14
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
3. FIXED ASSETS (Cont'd)
THE GROUP
<TABLE>
<CAPTION>
Balance Accumulated Net Book
1997 31.12.97 Depreciation Value
---- ---------------- ------------------ ---------------
<S> <C> <C> <C>
RM RM RM
Motor vehicle 40,067 32,053 8,014
Office equipment 110,456 53,939 56,517
Furniture and fittings 83,056 43,182 39,874
Tools and equipment 315,106 197,892 117,214
Video communication hardware and peripherals 5,073,808 1,844,063 3,229,745
Computer software 994,905 379,054 615,851
Office renovation 39,201 18,533 20,668
---------------- ------------------ ---------------
6,656,599 2,568,716 4,087,883
---------------- ------------------ ---------------
---------------- ------------------ ---------------
</TABLE>
THE COMPANY
<TABLE>
<CAPTION>
Balance Accumulated Net Book
1998 31.12.98 Depreciation Value
--------------- ------------------- --------------
<S> <C> <C> <C>
RM RM RM
COST:
Office equipment 111,515 36,594 74,921
Furniture and fittings 5,507 4,830 677
Tools and equipment 4,965 4,928 37
Communication equipment 554,000 55,400 498,600
Office renovation 11,196 11,196 -
--------------- ------------------- --------------
687,183 112,948 574,235
--------------- ------------------- --------------
--------------- ------------------- --------------
</TABLE>
15
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
3. FIXED ASSETS (Cont'd)
THE COMPANY
<TABLE>
<CAPTION>
1997 Balance Accumulated Net Book
---- 31.12.97 Depreciation Value
-------------- ----------------------- ---------------
<S> <C> <C> <C>
RM RM RM
COST:
Office equipment 22,299 19,751 2,548
Furniture and fittings 5,507 4,488 1,019
Tools and equipment 5,845 4,831 1,014
Computer software - - -
Office renovation 11,196 11,196 -
-------------- ----------------------- ---------------
44,847 40,266 4,581
-------------- ----------------------- ---------------
-------------- ----------------------- ---------------
</TABLE>
At the balance sheet date, there were fixed assets of the Group which
were acquired under instalment purchase plans for which there were
outstanding instalments. The net book value of these assets amounted to
RM776,862 (1997: RM894,569).
4. GOODWILL ON CONSOLIDATION
THE GROUP
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
RM RM
Goodwill on consolidation 2,453,403 6,160,096
less: Amount amortised (296,385) (410,673)
---------------- -----------------
2,157,018 5,749,423
---------------- -----------------
---------------- -----------------
---------------- -----------------
</TABLE>
16
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
5. SUBSIDIARY COMPANIES
THE COMPANY
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
RM RM
Unquoted shares, at cost 5,860,999 6,300,999
Amount owing by a subsidiary - 1,202,844
Amount owing to a subsidiary - (40,309)
Amount owing by sub-subsidiary - 2,431
Amount owing to a sub-subsidiary - (40,333)
---------------- -----------------
5,860,999 7,425,632
---------------- -----------------
---------------- -----------------
</TABLE>
The subsidiary companies, all of which are incorporated in Malaysia are as
follows:-
<TABLE>
<CAPTION>
Name of company Principal activity Effective interest
--------------- ------------------ ------------------
1998 1997
---- ----
<S> <C> <C> <C>
% %
Perwimas Telecommunications Developing and operating a 60.33 63.00
Sdn. Bhd. wireless broadband network
facility; and producing, hosting
and transmitting 2-way interactive
multimedia programs
Vistel (Malaysia) Sdn. Bhd. Investment holding 51.00 51.00
SUBSIDIARY COMPANIES OF
PERWIMAS TELECOMMUNICATIONS SDN. BHD.
MHSB Research & Establishing and operating - 60.00
Development Sdn. Bhd. the wireless data
telecommunications network
Vistel (Asia) Sdn. Bhd. Provision of education through -
distance learning 75.00
Educasia Sdn. Bhd. Dormant - 100.00
--------- ----------
--------- ----------
</TABLE>
All the subsidiary companies were audited by Messrs. CH Yap & Co.
17
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
6. NON TRADE DEBTORS AND DEPOSITS
Included in this balance are the following significant balances owing
by certain parties due to capital transactions undertaken by the Group
and the Company during the financial year.
<TABLE>
<CAPTION>
THE GROUP THE COMPANY
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
RM RM RM RM
Proceeds from sale of patent and design 1,650,000 - - -
Proceeds from disposal of subsidiary
companies 1,170,000 - - -
Proceeds from disposal of fixed assets 4,852,500 - - -
Proceeds from part disposal of a
subsidiary company 18,760,000 - 18,760,000 -
Sales to a company in which a director
has financial interest 3,965,000 - 3,965,000 -
--------------- ----------- --------------- ----------
30,397,500 - 22,725,000 -
--------------- ----------- --------------- ----------
--------------- ----------- --------------- ----------
</TABLE>
Under the terms and conditions of the respective Sale & Purchase
Agreements, the amounts owing are repayable within 12 months from the
date of transaction. At the date of the accounts, the above balances
have not been settled by the respective parties. The Directors are of
the opinion that the amount due will be settled within 12 months from
the date of the transaction and they are fully recoverable.
7. AMOUNT OWING TO ULTIMATE HOLDING COMPANY
The ultimate holding company is LSH Asset Holdings Sdn. Bhd., a company
incorporated in Malaysia, which holds 96.66% (1997: 40%) of its issued
equities of the Company.
8. AMOUNT OWING TO CORPORATE SHAREHOLDERS
The amount owing to corporate shareholders for the comparative figure
is unsecured, interest-free and has no fixed terms of repayment.
18
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
9. SHARE CAPITAL
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
RM RM
Ordinary shares of RM1 each:
AUTHORISED:
Balance brought forward 500,000 500,000
Created during the year 9,500,000 -
--------------- -----------------
10,000,000 500,000
--------------- -----------------
--------------- -----------------
ISSUED AND FULLY PAID:
Balance brought forward 500,000 500,000
Issued during the year at par for cash 8,500,000 -
--------------- -----------------
9,000,000 500,000
--------------- -----------------
--------------- -----------------
</TABLE>
10. RETAINED PROFITS
The Company has no tax credit under Section 108 of the Income Tax Act,
1967 to frank the payment of dividends out of its entire retained
profits as at 31 December 1998 without incurring additional tax
liability. If the retained profits were to be distributed as dividends,
the Company would have a Section 108 shortfall of approximately
RM7,763,000 (1997: RM960,000).
19
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
11. PROFIT FOR THE YEAR
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
RM RM
This has been arrived at:
AFTER CHARGING:
Auditors' remuneration 8,000 4,500
Amortisation of goodwill
on consolidation 165,924 130,461
Depreciation of fixed assets 403,490 4,397
Director's fee - 12,000
Goodwill on consolidation written off - 2,538
Hire purchase interest 44,606 67,015
Loss on disposal of fixed assets
to a subsidiary - -
Loss on disposal of subsidiaries 2,015,240 -
Management fees paid to a subsidiary - -
Interest charged by holding company 29,385 2,594
Rental of office 148,744 22,800
AND CREDITING:
Management fees received from
a subsidiary company - -
Gain on disposal of associated
Companies - 3,665,507
Gain on part disposal of a subsidiary 17,420,000 -
Gain on disposal of unquoted
Investment 12,000 -
Gain on disposal of fixed assets 3,251,961 -
Gain on disposal of patent and design 1,630,000 -
Rental of motor vehicle 8,200 -
Rental of equipment to:
-a former subsidiary company 1,950 -
-company in which certain directors
Have financial interest 15,000 -
Rental from sub-let of office to:
-a former subsidiary company 53,229 -
- a subsidiary - -
-company in which certain directors
Have financial interest 10,250 -
--------------- --------------
--------------- --------------
</TABLE>
20
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
12. TAX LOSSES
There is no taxation charge on the Company's profit for the year due to
certain income which is not subject to income tax.
As at 31 December 1998, the Company has unabsorbed capital allowances
and tax losses amounting to approximately RM74,000 (1997: RM2,000) and
RM83,000 (1997: RM83,000) respectively, which can, subject to approval
by the tax authorities, be carried forward and utilised to offset
against future taxable profit of the Company.
As at 31 December 1998, a subsidiary company have unabsorbed tax losses
and capital allowances amounting to approximately RM1,743,000 (1997:
RM1,623,000) and RM4,214,000 (1997: RM3,672,000) respectively, which
can, subject to approval by the tax authorities, be carried forward and
utilised to offset against future taxable profit of the respective
subsidiary companies.
13. RELATED PARTY TRANSACTIONS
<TABLE>
<CAPTION>
THE GROUP THE COMPANY
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
RM RM RM RM
Sales of fixed assets to a subsidiary - - 27,575 718,020
Purchase of fixed assets from a subsidiary - - - 450,000
Purchase of fixed assets from
Holding company 995,597 - 554,000 -
Purchase of patent and design
from a director 20,000 - - -
Management fees paid to a subsidiary - - - 69,253
Management fees received from a subsidiary - - 120,000 120,000
Sales to a company in which certain
Directors have financial interest 3,965,000 22,962 3,965,000 22,962
Purchases from holding company 3,926,000 - 3,926,000 -
Sales of an associated company to a
Subsidiary - - - 3,000,000
Administrative and clerical fees received:
- a subsidiary company - - 66,169 -
- a company in which a director has
Financial interest 14,353 - 14,353 -
--------------- ----------- -------------- --------------
--------------- ----------- -------------- --------------
</TABLE>
21
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
14. DIFFERENCES BETWEEN MALAYSIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
The significant differences between generally accepted accounting principles
(GAAP) in Malaysia and in the United States are as follows:
Under U.S. GAAP, When a transaction is material to the financial
statements, it is acceptable to account for the transaction utilizing
the installment sales method. During 1998, the Company sold certain
assets that resulted in a significant gain. The payment for the assets
is to be received within twelve months of the closing of the
transaction. Due to the extended period of time prior to the Company
receiving payment for the assets, the collection of the receivable
becomes less probable, therefore it is acceptable under U.S. GAAP to
defer the gain on the sale until such time the consideration has been
received. The recorded gain of RM 21,905,143 has been recorded as a
contra-asset against the amount due of RM 26,432,500.
The significant differences in the consolidated profit and loss
accounts for the year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Profit, after minority interest,
following Malaysian GAAP RM 18,163,810
Deferral gains on disposal of patents and designs (1,630,000)
Deferral gains on disposal of fixed assets (2,855,143)
Deferral gains on disposal of subsidary company (17,420,000)
------------
Net loss, following U.S. GAAP (3,741,333)
------------
------------
</TABLE>
Under U.S. GAAP Certain components of revenues and income from
operations are required to be disclosed.
<TABLE>
<CAPTION>
1998 1997
--------------------- ----------------------
<S> <C> <C>
Sales 3,971,742 22,962
Cost of Sales (3,931,539) (20,605)
--------------------- ----------------------
Gross Profit 40,203 2,357
Operating Expenses (211,487) (142,804)
Profit (loss) from operations (171,284) (140,447)
Other Income 17,664,522 2,528,625
Minority Interest 721,809 (1,399,674)
--------------------- ----------------------
Profit for the year 18,215,047 988,504
--------------------- ----------------------
--------------------- ----------------------
</TABLE>
22
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
14. DIFFERENCES BETWEEN MALAYSIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
BASIC INCOME PER COMMON SHARE
U.S. GAAP requires the presentation of basic earnings per share. Basic
earning per share is calculated using income available to common
shareowners divided by the weighted average of common shares
outstanding during the year. Diluted earnings per share is similar to
basic earnings per share except that the weighted average of common
shares outstanding is increased to include the number of additional
common shares that would have been outstanding if the dilutive
potential common shares, such as options, had been issued. The Company
has a simple capital structure and no outstanding options at December
31, 1998 and 1997 therefore, dilutive earnings per share are not
applicable and accordingly have not been presented.
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Net (loss) profit following U.S. GAAP RM (3,741,333) RM 2,254,419
--------------------- ---------------------
--------------------- ---------------------
Basic (loss) profit per share RM (.42) RM 4.51
--------------------- ---------------------
--------------------- ---------------------
Basic weighted shares outstanding 9,000,000 500,000
--------------------- ---------------------
--------------------- ---------------------
</TABLE>
the significant differences in the consolidated balance sheet at
December 31, 1998 relative to U.S. GAAP were the recording of the
deferred gain on the sale of assets in the amount of RM 21,905,143 as a
contra account to the amount due on the sale.
<TABLE>
<CAPTION>
Per Malaysian GAAP Adjustment Per U.S. GAAP
<S> <C> <C> <C>
Current assets RM 30,783,767 (21,905,143) RM 8,878,624
Other noncurrent assets 4,560,418 - 4,560,418
--------------------------- ----------------- ----------------------
RM 35,344,185 (21,905,143) RM 13,439,042
--------------------------- ----------------- ----------------------
--------------------------- ----------------- ----------------------
Current liabilities RM 3,296,700 - RM 3,296,700
Minority interest 2,221,354 - 2,221,354
Long-term liabilities 472,895 - 472,895
--------------------------- ----------------- ----------------------
5,990,949 - 5,990,949
Share capital 9,000,000 - 9,000,000
Retained profits (deficit) 20,353,236 (21,905,143) ( 1,551,907)
--------------------------- ----------------- ----------------------
RM 35,344,185 (21,905,143) RM 13,439,042
--------------------------- ----------------- ----------------------
--------------------------- ----------------- ----------------------
</TABLE>
23
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
DIFFERENCES BETWEEN MALAYSIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (Cont'd)
The significant differences in the consolidated cash flow statement for the year
ended December 31, 1998 follows:
Net cash provided from (used by) in RM:
<TABLE>
<CAPTION>
Operating Investing Financing
<S> <C> <C> <C>
For the year ended December 31, 1998:
Malaysian GAAP (16,285,500) 7,902,103 8,383,459
Reconciling items:
Decrease in profits using U.S. GAAP (21,905,143) - -
Increase in current liabilities for deferral
of gain on sale of assets 21,905,143 - -
Gain on sale of assets 7,672,500 - -
Cash not received for sale of patent and
design - (1,650,000) -
Cash not received for sale of fixed assets - (4,852,500) -
Cash not received for disposal of
subsidiary companies - (1,170,000) -
------------------ ----------------- ------------------
(8,613,000) 229,603 8,383,459
------------------ ----------------- ------------------
------------------ ----------------- ------------------
</TABLE>
ADDITIONAL SIGNIFICANT ACCOUNTING POLICIES AND DISCLOSURES REQUIRED FOLLOWING
U.S. GAAP:
USE OF ESTIMATES
The preparation of the financial statements in conformity with United States
GAAP requires management to make estimates and assumptions that affect certain
reported amounts of assets and liabilities, disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Accordingly, actual results
could differ from those estimates.
CASH EQUIVALENTS
For the purpose of the statements 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.
24
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
DIFFERENCES BETWEEN MALAYSIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (Cont"d)
ADDITIONAL SIGNIFICANT ACCOUNTING POLICIES AND DISCLOSURES REQUIRED FOLLOWING
U.S. GAAP: (CONT'D)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company has adopted the following new accounting pronouncements for the year
ended December 31, 1998. There was no effect on the financial statements
presented from the adoption of the new pronouncements. SFAS No. 130, "Reporting
Comprehensive Income," requires the reporting and display of total comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is based on the "management" approach for reporting segments. The
management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. SFAS No. 131 also requires
disclosure about the Company's products, the geographic areas in which it earns
revenue and holds long-lived assets, and its major customers. SFAS No. 132,
"Employers' Disclosures about Pensions and Other Post-retirement Benefits,"
which requires additional disclosures about pension and other post-retirement
benefit plans, but does not change the measurement or recognition of those
plans.
YEAR 2000 COMPLIANCE
The Year 2000 issue (Y2K) is the result of computer programs written using two
digits rather than four to define the applicable year. Any of the Company's
computer and telecommunications programs that have date sensitive software may
recognize a date using "00" as the year 1900 instead of 2000. This could result
in system failure or miscalculations causing disruptions in operations,
including the ability to process transactions, send invoices, or engage in
similar normal business activities.
The Company has evaluated its Y2K issue and management believes that the
Company's systems are substantially compliant and any costs to correct any minor
anticipated problems would not have a material effect on the financial
statements.
The Company cannot determine the extent to which the Company is vulnerable to
third parties' failure to remediate their own Y2K problems. As a result, there
can be no guarantee that the systems of other companies on which the Company's
business relies will be timely converted, or that failure to convert by another
company, or a conversion that is incompatible with the Company's systems, would
have a material adverse affect on the Company. In view of the foregoing, there
can be no assurance that the Y2K issue will not have a material adverse effect
on the Company's business. ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
25
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 DECEMBER 1998
DIFFERENCES BETWEEN MALAYSIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (Cont"d)
ADDITIONAL SIGNIFICANT ACCOUNTING POLICIES AND DISCLOSURES REQUIRED FOLLOWING
U.S. GAAP: (CONT'D)
DEFERRED TAXATION
At December 31, 1998, any deferred tax assets to be recognized related to net
operating loss carryforwards as calculated using U.S. GAAP of approximately RM
1,551,907 would have been offset by a valuation allowance.
CONCENTRATIONS OF CREDIT RISK - Customers Approximately 30 percent and 25
percent of the Company's total revenues earned in 1998 and 1997 were from
contracts with three customers and two customers, respectively.
LONG-TERM LIABILITIES
Long-term liabilities consisted of the following hire purchase creditors payable
at December 31, 1998 at an interest rate of eight percent per annum, secured by
equipment.
Maturities on the liability, subsequent to December 31, 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 RM 68,386
2000 84,078
2001 84,078
2002 87,078
2003 and thereafter 220,661
</TABLE>
26
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
UNAUDITED FINANCIAL STATEMENTS
THREE MONTHS ENDED 31 MARCH 1999
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
CONSOLIDATED BALANCE SHEET 28
CONSOLIDATED PROFIT AND LOSS ACCOUNT 29
CONSOLIDATED CASH FLOW STATEMENT 30
NOTES TO THE ACCOUNTS 31
</TABLE>
27
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
UNAUDITED CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 1999
PRESENTED IN RINGGIT MALYASIA
<TABLE>
<CAPTION>
Note RM
<S> <C> <C>
3 2,286,173
FIXED ASSETS
5 2,115,537
GOODWILL ON CONSOLIDATION
CURRENT ASSETS
Stocks 25,649
Trade debtor 900,500
Non trade debtors and deposits 30,840,061
Cash and bank balances 14,637
---------------
31,780,847
---------------
CURRENT LIABILITIES
Trade creditor 55,000
Non trade creditors and accruals 1,190,141
Amount owing to a director 4 2,209,100
Hire purchase creditors 35,877
---------------
3,490,118
---------------
NET CURRENT ASSETS/(LIABILITIES) 28,290,729
---------------
32,692,439
---------------
---------------
REPRESENTING:
SHARE CAPITAL 7 9,000,000
RETAINED PROFITS 20,907,303
MINORITY INTEREST 2,312,241
LONG TERM LIABILITIES
Hire purchase creditors 472,895
---------------
32,692,439
---------------
---------------
</TABLE>
28
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNTS
PRESENTED IN RINGGIT MALYASIA
FOR THE THREE MONTHS ENDED 31 MARCH 1999
<TABLE>
<CAPTION>
RM
<S> <C>
942,654
REVENUE
--------------
--------------
644,954
PROFIT/(LOSS) FOR THE YEAR
MINORITY INTEREST (90,887)
--------------
PROFIT ATTRIBUTABLE TO THE GROUP 554,067
ACCUMULATED PROFIT/(LOSSES) 20,353,236
BROUGHT FORWARD
--------------
RETAINED PROFITS CARRIED FORWARD 20,907,303
--------------
--------------
RETAINED BY:
The Company 20,420,718
Subsidiary companies 486,585
--------------
20,907,303
--------------
--------------
Basic earnings per common share RM .07
--------------
--------------
Basic weighted shares outstanding 9,000,000
--------------
--------------
</TABLE>
29
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
PRESENTED IN RINGGIT MALYASIA
FOR THE THREE MONTHS ENDED 31 MARCH 1999
<TABLE>
<CAPTION>
RM
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year 644,954
Adjustment for:
Amortisation of goodwill 41,481
Gain on disposal of fixed assets (157,771)
-----------------
528,664
OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES
Increase in trade and non-trade debtors (983,725)
Increase in trade and non-trade creditors 225,926
-----------------
(229,135)
NET CASH USED IN OPERATING ACTIVITIES
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of fixed assets 275,000
-----------------
275,000
NET CASH GENERATED FROM INVESTING ACTIVITIES
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment to hire purchase creditors (32,509)
-----------------
(32,509)
NET CASH USED IN FINANCING ACTIVITIES
-----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 13,356
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 1,281
-----------------
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 14,637
-----------------
-----------------
REPRESENTED BY:
Cash and bank balances 14,637
-----------------
-----------------
</TABLE>
30
<PAGE>
ANIMATED ELECTRONIC INDUSTRIES SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS - 31 MARCH 1999
BASIS OF PRESENTATION
The financial statements presented herein have been prepared by the
Company in accordance with the accounting policies in its annual
audited financial statements dated December 31, 1998 and should be read
in conjunction with the notes thereto.
In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) which are necessary to provide a fair
presentation of operating results for the interim period presented have
been made. The results of operations for the period presented are not
necessarily indicative of the results to be expected for the year.
Interim financial data presented herein are unaudited.
DIFFERENCES BETWEEN MALAYSIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
The significant differences between generally accepted accounting principles
(GAAP) in Malaysia and in the United States are as follows:
There were no significant differences between GAAP in Malaysia and U.S. GAAP for
the three months ended March 31, 1999. However, there were significant
differences as reported in the Company's audited statements at December 31,
1998. The following is the effect of those differences on the March 31, 1999
statements.
<TABLE>
<CAPTION>
<S> <C>
Retained profits-Malaysian GAAP RM 20,907,303
Retained deficit-U.S. GAAP RM (997,840)
Current assets-Malaysian GAAP RM 31,780,847
Current assets-U.S. GAAP RM 9,875,704
</TABLE>
RELATED PARTY TRANSACTIONS
<TABLE>
<CAPTION>
RM
<S> <C>
------------
Purchases from holding company 55,000
Purchase of equipment from a subsidiary -
Management fees received from a subsidiary -
Administrative and clerical fees received:
- a subsidiary company -
- a company in which a director has financial 24,654
Interest
</TABLE>
SUBSEQUENT EVENT
On 21 April 1999, the Company became a wholly owned subsidiary company
of Kalan Gold Corporation, a company incorporated in the state of
Colorado, USA.
31
<PAGE>
KALAN GOLD CORPORATION
INTRODUCTION
On April 20, 1999, Animated Electronic Industries SDN. BHD. ("AEI")
exchanged 100 percent of its outstanding shares of common stock for
87,000,000 shares of the common stock of Kalan Gold Corporation
("KGC"). As a result of this stock acquisition, AEI became a wholly
owned subsidiary of KGC. This acquisition has been treated as a
recapitalization of AEI with AEI as the acquiror (reverse acquisition).
Costs of the transaction have not been determined, however when
determined, will be charged to the period.
The following unaudited pro-forma condensed consolidated balance sheet
and pro-forma condensed, consolidated statement of operations gives
effect to the merger of KGC and AEI. The unaudited condensed
consolidated statements of operations are presented as if the merger
had occurred at the beginning of the periods presented.
The unaudited pro-forma condensed, consolidated financial information
should be read in conjunction with the separate audited financial
statements and notes thereto of each of the companies included in the
pro-forma for the year ended December 31, 1998 and with the separate
unaudited interim financial statements and notes thereto of each of the
companies as of March 31, 1999, and for the three months then ended.
These unaudited pro-forma condensed statements are not necessarily
indicative of results of operations had the merger occurred at the
beginning of the periods presented nor of results to be expected in the
future.
The historical financial statements of AEI are stated in AEI's
functional currency, the Ringgit Malaysia ("RM"). The translations of
RM into U.S. Dollars ("USD") are included solely for the purposes of
the pro forma financial statements, using the prevailing exchange rate
of RM to USD as of and for the following periods:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
January 1, 1998 3.8800 March 31, 1999 3.7998
December 31, 1998 3.7797 Average 1/1/99-3/31/99 3.7997
Average 1998 3.9144
</TABLE>
Assets and liabilities have been translated at the rate as of the
balance sheet date, equity was translated at the rate as of January 1,
1998 and revenues and expenses were translated at the average rate for
the period presented. The translations should not be construed as
representations that the RM amounts have been, or could have been, or
could in the future be, converted into USD at this or any other rate of
exchange.
KGC anticipates that the reverse acquisition will qualify as a tax free
reorganization under Section 368 (a) (1) (B) of the Internal Revenue
Code. KGC also anticipates limitation of the use of its tax net
operating loss carryforwards as a result of the changes in ownership as
defined in Section 382 of the Internal Revenue Code. KGC can utilize
its existing tax net operating loss carryforwards, subject to the
limitation set out above, on future taxable income that it generates.
The unaudited pro-forma condensed consolidated financial statements do
not show a pro-forma benefit for income taxes. The benefit from the net
operating losses has been offset by the establishing of a valuation
allowance equal to the deferred tax asset derived from net operating
losses. The valuation allowance offsets the net deferred tax asset for
which there is no assurance of recovery.
-1-
<PAGE>
KALAN GOLD CORPORATION
The only adjustments reflected in the pro forma condensed consolidated
financial statements are:
1. The issuance of KGC's 87,000,000 shares of common stock in
exchange for the equity of AEI totaling $2,318,717.
2. The pro forma change in outstanding shares for KGC at the end of
all periods presented and the related effect on the pro forma
weighted average shares outstanding and basic earnings (loss) per
share.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
AEI AEI PRO FORMA
RM USD KGC ADJUSTMENTS CONSOLIDATED
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH 14,637 $ 3,852 $ 1,587 $ 5,439
CURRENT ASSETS 9,875,704 2,599,006 1,587 2,600,593
TOTAL ASSETS 14,277,414 3,757,412 4,158 3,761,570
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
CURRENT LIABILITIES 3,490,118 918,500 57,788 976,288
TOTAL LIABILITIES 3,963,013 1,042,953 57,788 1,100,741
MINORITY INTEREST 2,312,241 608,517 - 608,517
RETAINED DEFICIT (997,840) (245,683) (410,051) (655,734)
DEFERRED COMPENSATION - - (36,000) (36,000)
COMMON STOCK 9,000,000 2,319,587 80 (2,318,717) 950
ADDITIONAL PAID IN CAP. - - 392,341 2,318,717 2,711,058
SHAREHOLDERS' EQUITY 8,002,160 2,073,904 (53,630) 2,020,274
CUMULATIVE TRANSLATION ADJUSTMENT - 32,038 - 32,038
REVENUES 942,654 $ 248,086 $ - $ 248,086
EXPENSES (455,471) (119,870) (23,644) (143,514)
GAIN ON SALE OF ASSETS 157,771 41,522 - 41,522
INCOME (LOSS) FROM OPS 644,954 169,738 (23,644) 146,094
OTHER LOSS (90,887) (23,920) - (23,920)
---------------------------------------------- ---------------------
NET INCOME 554,067 145,819 (23,644) 122,175
---------------
---------------
FOREIGN CURRENCY TRANSLATION 10,428 - 10,428
-------------------------- --------------------
COMPREHENSIVE INCOME $ 156,247 $ (23,644) $ 132,603
-------------------------- --------------------
-------------------------- --------------------
BASIC LOSS PER SHARE $ * $ *
--------------- ---------------------
--------------- ---------------------
WEIGHTED SHARES 7,990,999 87,000,000 94,990,999
--------------- ---------------------
--------------- ---------------------
</TABLE>
- Less than $.01 per share
-2-
<PAGE>
KALAN GOLD CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
AEI AEI PRO FORMA
RM USD KGC ADJUSTMENTS CONSOLIDATED
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES 3,971,742 $ 1,014,649 $ - $ 1,014,649
EXPENSES (4,143,026) (1,058,406) (113,550) (1,171,956)
GAIN ON SALE OF ASSETS - - 4,517 4,517
LOSS FROM OPERATIONS (171,284) (43,757) (109,033) (152,790)
OTHER EXPENSES/LOSSES (3,570,049) (912,030) (912,030)
INTEREST - - (8,069) (8,069)
---------------------------------------------- ---------------------
NET LOSS (3,741,333) (955,787) (117,102) (1,072,889)
FOREIGN CURRENCY TRANSLATION - (42,466) - (42,466)
---------------------------------------------- ---------------------
COMPREHENSIVE LOSS (3,741,333) (998,253) (117,102) (1,115,355)
---------------------------------------------- ---------------------
BASIC LOSS PER SHARE $ (0.02) $ (0.01)
--------------- ---------------------
--------------- ---------------------
WEIGHTED SHARES 7,383,917 87,000,000 94,383,917
--------------- ---------------------
--------------- ---------------------
</TABLE>
-3-
