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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR QUARTERLY PERIOD ENDED MARCH 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-25658
Kalan Gold Corporation
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1357927
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Suite 11.02, 11th Floor, No. 1, Jalan 19/3, 46300 Petaling Jaya,
Selangor, Malaysia
(Address of principal executive offices)
011 603 756-7026
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Common stock, $.00001 par value 97,290,999
Class Number of shares outstanding at April 30, 2000
<PAGE>
FORM 10-QSB
1ST QUARTER
INDEX
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<CAPTION>
Page
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS *
Condensed consolidated balance sheet as at March 31, 2000 and December 31,
1999(Unaudited)................................................................ 3
Condensed consolidated statement of operations for the three months ended
March 31, 2000 and March 31, 1999 (Unaudited).................................. 4
Condensed consolidated statements of cash flows for the three months ended
March 31, 2000 and March 31, 1999 (Unaudited).................................. 5
Notes to condensed consolidated financial statements (Unaudited)............... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS................................... 7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS...................................................... 11
ITEM 2. CHANGES IN SECURITIES.................................................. 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES........................................ 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE........................................ 12
ITEM 5. OTHER INFORMATION...................................................... 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................... 12
SIGNATURES..................................................................... 13
</TABLE>
* The accompanying financial statements are not covered by an independent
Certified Public Accountant's report.
2
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PART I. ITEM. 1. FINANCIAL INFORMATION
KALAN GOLD CORPORATION
Condensed Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 28,830 $ 3,959
Accounts receivable, net of reserve for bad debts of $194,737 17,601 162,369
Accounts receivable - related or affiliated parties, net of
reserve for bad debts of $1,059,835 20,263 148,684
Other accounts receivable, net of reserve for bad debts of $389,960 208,378 4,272
Other accounts receivable - related or affiliated parties, net of
reserve for bad debts of $1,391,007 - -
Inventories 6,786 6,786
Patent 448,567 448,567
----------- -----------
Total current assets 730,425 774,637
TANGIBLE FIXED ASSETS
Net book value 1,632,523 1,683,926
----------- -----------
Total Assets $ 2,362,948 $ 2,458,563
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Others accounts payable & accrued liabilities $ 318,824 $ 438,989
Amount due to a company in which a director has financial interest - 311,428
Amount due to a director 3,677 551,695
Obligation under capital leases 14,536 13,660
----------- -----------
Total current liabilities 337,037 1,315,772
----------- -----------
LONG TERM LIABILITIES
Obligation under capital leases 146,066 152,473
Deferred tax 84,360 84,436
----------- -----------
Total long term liabilities 230,426 236,909
----------- -----------
MINORITY INTERESTS (23,016) -
SHAREHOLDERS' EQUITY
Preferred stock, $0.10 par value, 1,000,000 shares authorized, - -
-0- shares issued and outstanding
Common stock, $.00001 par value, 100,000,000 shares 973 950
authorized, 97,290,999 and 94,990,999 shares issued and
outstanding at March 31, 2000 and December 31, 1999, respectively
Additional paid-in capital 3,412,415 2,262,438
Accumulated deficit (1,651,603) (1,413,853)
Foreign currency translation reserve 56,716 56,347
----------- -----------
Total shareholders' equity 1,818,501 905,882
=========== ===========
Total liabilities and shareholders' equity $ 2,362,948 $ 2,458,563
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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KALAN GOLD CORPORATION
Condensed Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
REVENUES
Sales of goods $ 789 $ --
Consulting and production fees receivable -- 248,086
------------ ------------
789 248,086
------------ ------------
Less: Cost of Sales
Cost of goods sold (632) --
------------ ------------
(632) --
------------ ------------
Gross Profit 157 248,086
Less: Operating expenses
Sales and marketing 22,241 1,246
Depreciation 51,403 11,497
General administration 201,341 190,075
Interest 3,539 --
------------ ------------
Total operating expenses 278,524 202,818
------------ ------------
Operating Profit/(Loss) (278,367) 45,268
Add: Other income
Gain on disposal of tangible assets -- 41,522
Other income 17,601 --
------------ ------------
Income from continuing operations before taxation (260,766) 86,790
Taxation -- --
------------ ------------
Net income for the year (260,766) 86,790
Minority interests 23,016 (23,920)
------------ ------------
Net income applicable to common shareholders (237,750) 62,870
Comprehensive income - translation adjustment -- 10,128
------------ ------------
Net income (loss) (237,750) 72,998
Weighted average number of common shares outstanding 95,926,164 94,990,999
Basic earnings per share (cent) 0 0
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
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KALAN GOLD CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
2000 1999
---------- -------
$ $
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities (260,152) (76,855)
---------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of fixed assets -- 79,881
---------- -------
Net cash provided by investing activities -- 79,881
---------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares of common stock 1,150,000 --
Payment of obligation under capital leases (5,531) --
Repayment of amount due to a company in which a
director has a financial interest (311,428) --
Repayment of amount due to a director (548,018) --
---------- -------
Net cash provided by financing activities 285,023 --
---------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 24,871 3,026
Cash and cash equivalents, beginning of period 3,959 826
---------- -------
Cash and cash equivalents, end of period 28,830 3,852
========== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
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KALAN GOLD CORPORATION
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of Kalan
Gold Corporation (the "Company") include the accounts of Animated Electronic
Industries Sdn. Bhd. ("AEI") and its Malaysian subsidiary companies, Vistel
(Malaysia) Sdn Bhd, and Perwimas Telecommunications Sdn. Bhd. ("PTSB"). All
significant intercompany accounts and transactions have been eliminated on
consolidation.
The unaudited condensed consolidated financial statements presented herein have
been prepared in accordance with the instructions to Form 10-QSB and do not
include all the information and note disclosures required by generally accepted
accounting principles for complete financial statements.
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 interim periods presented are not necessarily indicative
of the results to be expected for the entire year.
The financial statement has been prepared on the basis that the Company is a
going concern. Financial data presented herein are unaudited, pursuant to the
rules and regulations of the Securities and Exchange Commission.
TRANSLATION OF CURRENCIES
The functional currency of the Company's subsidiaries is the local currency. The
financial statements of these subsidiaries are translated to United States
dollars using period-end rates of exchange for assets and liabilities, and
average rates of exchange for the period for revenues, costs, and expenses.
Translation gains/(losses), which are deferred and accumulated, is treated as a
component of shareholders' equity.
The following exchange rates of Ringgit Malaysia (RM) into U.S. Dollars (USD)
were used in preparing the financial statements.
<TABLE>
<S> <C> <C> <C>
January 1, 1999 3.7797 January 1, 2000 3.800
March 31, 1999 3.7998 March 31, 2000 3.800
Average 1/1/99-3/31/99 3.7997 Average 1/1/00-3/31/00 3.800
</TABLE>
REVENUE RECOGNITION
Revenue represents the net invoiced value of goods sold or fees receivables for
production of multimedia programs and Intranet and management and consulting
services. The Company recognizes revenue from the sales of goods in the period
where significant risks and rewards of ownership has been transferred to its
customers. The Company recognizes revenue from the provision of services when
there is no significant uncertainty regarding the consideration to be received
and in the associated costs to be incurred.
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. Actual results could differ from those
estimates.
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RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been reclassified
for comparative purposes to conform to the presentation in the current year
financial statements.
RELATED PARTY TRANSACTIONS
The Company has significant related party transactions with the following
entities:
LSH ASSET HOLDINGS SDN BHD ("LSH")
LSH is a company wholly owned by the Company's Chief Executive Officer and
President and Director, Mr. Patrick Lim and Mr. Lim's wife. During the quarter
ended March 31, 2000, LSH billed the Company $75,000 for management fees.
VISIONEWS ASIA SDN BHD ("VASB")
During the period ended March 31, 2000, the Company billed VASB a total
amount of $9,706 for administration fee and subletting a portion of the
Company's premises to VASB. The amount due from VASB, included under Accounts
Receivable as at March 31, 2000, was $96,554, which included an amount of
$86,848 brought forward from 1999 for fees receivable for production of
multimedia programs, for administration works and for subletting a portion of
the Company's premises. VASB has given a written undertaking to the Company
to settle progressively this amount by August 2000. The Company has reserved
$86,848 in the 1999 financial statements as allowance for doubtful
receivables in view of the long overdue period. The terms of repayment for
the amount due from VASB is similar to terms accorded to the Company's other
existing customers and the Company will continue to pursue vigorously the
collection of the balance outstanding. Mr. Patrick Lim is a director of VASB
and owns a 40% equity interest in VASB. Mr. Mustaffa Yacob, who is a director
of PTSB, is also a director of VASB and owns a 20% equity interest in VASB.
All transactions between the Company and VASB were in Ringgit Malaysia, the
local currency of Malaysia.
SYNERVEST SDN BHD ("SSB")
During the period ended March 31, 2000, the Company billed SSB a total amount
of $7,895 for administration fee. The amount outstanding included in Accounts
Receivable as at March 31, 2000 was $100,000, which included an amount of
$92,105 brought forward from 1999 for project consulting fees for design and
development work on a multimedia website and Internet Protocol-based Extranet
and for administration fee. As at March 31, 2000, an overdue amount of
$1,391,007 was included in Other Accounts Receivable. This amount primarily
arose in the year ended December 31, 1998 when the Company sold to SSB
tangible and intangible assets used in the operations of a subsidiary, that
has since been disposed. These assets, comprising analog video hardware and
peripherals and a patent for image display, were sold to SSB for a total sum
of $1,661,175. SSB has given a written undertaking to the Company to settle
progressively these amounts by August 2000. The Company has reserved
$1,483,112 in the 1999 financial statements as allowance for doubtful
receivables in view of the long overdue period of these amounts. The terms of
repayment for the amount due from SSB are similar to terms accorded to the
Company's other existing customers and the Company will continue to pursue
vigorously the collection of the balance outstanding.
The Company acquired a patent for digital image display technology from SSB in
1999, for an aggregate purchase price of $448,567, as consideration for
settlement of an amount owing by SSB. The Company entered into a Sales and
Purchase Agreement on May 4, 2000 with a third party to acquire this patent from
the Company for consideration of $492,105 (RM1,870,000). The Company received a
deposit of $4,921 (RM18,700) from the acquirer on May 5, 2000. Pursuant to the
terms of the Sales and Purchase Agreement, the balance of the purchase price is
required to be paid by June 30, 2000.
Mustaffa Yacob is a director of SSB and holds a 60% equity interest in SSB. All
transactions between the Company and SSB were in Ringgit Malaysia, the local
currency of Malaysia.
7
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KHIDMAT MAKMUR SDN BHD ("KMSB")
Mustaffa Yacob is a director of KMSB and holds a 30% equity interest in KMSB.
The amount outstanding of $384,329 included in Accounts Receivable as at March
31, 2000 was brought forward from 1999 for project consulting fees for design
and development work on multimedia website. KMSB has given a written undertaking
to the Company to settle progressively this amount by August 2000. The Company
has reserved $384,329 in the 1999 financial statements as allowance for doubtful
receivables in view of the long overdue period. The terms of repayment for the
amount due from KMSB are similar to terms accorded to the Company's other
existing customers and the Company will continue to pursue vigorously the
collection of the balance outstanding. All transactions between the Company and
KMSB were in Ringgit Malaysia, the local currency of Malaysia.
MY ARCHITECT ("MYA") AND MY DRAUGHTING SERVICES ("MDS")
Mustaffa Yacob is the principal partner of MYA and MDS. The amount outstanding
included in Accounts Receivable as at March 31, 2000 was $363,158 for MYA and
$133,395 for MDS respectively for design and development fees for work on
multimedia website. MYA and MDS have each given a written undertaking to the
Company to settle progressively their respective overdue amount by August 2000.
The Company has reserved an aggregate amount of $496,553 in the 1999 financial
statements as allowance for doubtful receivables in view of the long overdue
period of these amounts. The terms of repayment for the amount due from both
firms are similar to terms accorded to the Company's other existing customers
and the Company will continue to pursue vigorously the collection of the balance
outstanding. All transactions between the Company and both firms were in Ringgit
Malaysia, the local currency of Malaysia.
PATRICK LIM
As of March 31, 2000, the Company owed the President and Chief Executive Officer
of the Company, Mr. Patrick Lim, $3,677, for short-term cash advances made to
the subsidiary of the Company for working capital purposes from time to time.
The amount owing to Mr. Lim is unsecured, bears no interest and has no fixed
terms of repayment and is recorded in the financial statements as "due to a
director".
INVENTORIES
Inventories, which comprised accessories for production of multimedia programs,
telecommunication equipment and spare parts, are stated at the lower of cost and
net realizable value. Cost is determined on a first-in-first-out basis.
INCOME TAX
No income tax provision was made for the period as the Company incurred a loss
for the three-month period ended March 31, 2000. For the three-month period
ended March 31, 1999, no provision of income tax was made on any profits earned,
following a tax exemption order granted by the Government of Malaysia to all
individual and corporate taxpayers for the entire fiscal year 1999.
EARNINGS/(LOSS) PER COMMON SHARE
Net income/(loss) per common share is computed by dividing net income available
to common shareholders for the period by the weighted average number of shares
of common stock outstanding for the period. The Company did not compute the
diluted earnings/(loss) per common share ss there were no exercisable
outstanding stock options as of March 31, 2000.
8
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PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
THE FOLLOWING ANALYSIS OF THE OPERATIONS AND FINANCIAL CONDITION OF THE
COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, OF THE COMPANY CONTAINED
ELSEWHERE IN THIS FORM 10-QSB.
OVERVIEW
The Company was incorporated in 1985 in the state of Colorado and had no
revenue-generating operations until the Reverse Acquisition by Animated
Electronic Industries Sdn Bhd ("AEI") on April 20, 1999. As a result of the
Reverse Acquisition, AEI became a wholly-owned subsidiary of the Company. This
acquisition has been treated as a recapitalization of AEI with AEI as the
acquirer.
The Company currently provides multimedia content production and the design and
development of websites. The Company hopes to be able to provide other broadband
multimedia communication services that include the operation of a wireless
digital broadband network, VISIONET, and the sale of customer premises
equipment.
The Company's current business plan is to devote its resources to the expansion
of the Company's existing business and the proposed pilot launch of VISIONET
at the end of the second quarter of 2000 to be followed by a full implementation
of multiple cells in the third quarter of 2000 in the Central Region of West
Malaysia.
The Company has successfully completed a "link budget" test in the first quarter
of 2000. The test was designed to determine the optimum transmission range under
adverse weather conditions and the subscriber capacity per cell. The test
results will form the basis for the proposed implementation of pilot cells in
the central region of Malaysia, popularly known as the Klang Valley, where Kuala
Lumpur and the Multimedia Super Corridor are located. Equipment for the pilot
cells are currently being installed and commissioned by engineers from EER
Systems Inc., USA ("EER"). EER, a company based in Virginia, has on April 7,
2000, executed a Letter of Intent with the Company for long-term supply of the
"best of breed" transceivers and to provide system integration services.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 TO THE THREE MONTHS ENDED
MARCH 31, 1999
NET SALES
Net sales for the three months ended March 31, 2000 (the "2000 First Quarter")
was $789 compared to $248,086 for the three months ended March 31, 1999 (the
"1999 First Quarter"), a reduction of $247,297 or 99.7%. The decrease in net
sales in the 2000 First Quarter as compared to the 1999 First Quarter was mainly
due to the Company's decision to stop accepting work orders from its existing
customers, which are mainly companies that are related or affiliated to the
Company and are overdue in paying on receivables due to the Company. As a
result, the Company has not generated any revenue from the development and
production of multimedia websites. During the 2000 First Quarter, the Company
focused its limited resources in preparing for the planned launch of VISIONET at
the end of the second quarter of 2000, in developing multimedia programs for
VISIONET and in marketing its services to corporations in Malaysia.
COST OF SALES
Cost of sales of $632 was recorded in the 2000 First Quarter. No cost of sales
was recorded in the 1999 First Quarter, as there were no sales of goods.
9
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TOTAL OPERATING EXPENSES
Total operating expenses, which includes sales and marketing, depreciation,
general administration and interest, were $278,524 for the 2000 First Quarter
compared to $202,818 in the 1999 First Quarter, an increase of $75,706 or
37%. The increase was primarily attributable to an increase in sales and
marketing expenses from $1,246 to $22,241, an increase in depreciation from
$11,497 to $51,403, an increase in general administration cost from $190,075
to $201,341 and an increase in interest cost from zero to $3,539. The
increase in sales and marketing expenses of $20,995, or 168%, was due to
higher marketing expenses incurred to promote the Company's business to
corporations in Malaysia. The increase in depreciation of $39,906, or 347%,
was due to additional communication equipment acquired by the Company in the
fourth quarter of 1999. In addition, the Company incurred interest on capital
leases of $3,539 during the 2000 First Quarter.
NET INCOME (LOSS)
The Company recorded a net loss of $237,750 for the 2000 First Quarter compared
to net income of $72,998 for the 1999 First Quarter. The decrease in net income
was primarily attributable to a decrease in net sales and an increase in total
operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, the Company had cash and cash equivalents of $28,830 and
working capital of $393,388. All operations were funded from internally
generated funds and working capital advanced by the principal shareholder,
director and officer of the Company. These advances bear no interest and have no
fixed terms of repayment.
During the 2000 First Quarter, the Company issued an aggregate of 2,300,000
shares of common stock to the Executive Chairman of PTSB in a private placement
for cash consideration of $1,150,000 at 50 cents per share. Proceeds from this
private placement were used to repay advances made to the Company by Mr. Patrick
Lim and LSH Asset Holdings Sdn Bhd.
The Company expects that its working capital requirements for the remainder of
2000 will be funded through internally generated funds and proceeds from an
equity or debt financing. The Company expects to incur capital expenditures
ranging between $10.0 million to $15.0 million during 2000 in connection with
the launch and build-out of network infrastructure to support the operation of
VISIONET. The Company intends to finance all or a portion of such capital
expenditures with additional debt or equity financing. There is, however, no
assurance that financing will be available or, if available, that it would be
offered to the Company on acceptable terms.
Y2K COMPLIANCE
As of the date of this Form 10-QSB, the Company did not experience any Y2K
compliance problems and all computer software appears to be functioning
properly.
SAFE HARBOR STATEMENT
This Form 10-QSB and other reports filed by the Company from time to time with
the Securities and Exchange Commission, as well as the Company's press releases,
contain or may contain forward-looking statements and information that are based
upon beliefs of, and information currently available to, the Company's
management, as well as estimates and assumptions made by the Company's
management. Forward-looking statements can be identified by the use of
forward-looking terminology such as "believes", "may", "should", "anticipates",
"estimates", "expects", "future", "intends", "hopes" or "plans" or the negative
thereof. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that could cause actual results of the Company
to vary materially from historical results or from any future results expressed
or implied in such
10
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forward-looking statements. Such factors include, among others, the following:
revocation of the Company's license, ability to successfully implement its
business plans, market acceptance of fixed wireless broadband services, ability
to obtain services provided by other communications companies, limited suppliers
of LMDS equipment, failure to obtain roof access, the ability of the Company to
raise capital on a timely basis, the Company's business is subject to existing
and future government regulations, failure to retain qualified personnel,
competitive pressures and potentially adverse tax and cash flow consequences
resulting from operating in multiple countries with different laws and
regulations, ability to maintain profitability in the future, the ability of the
Company to deploy VISIONET, and general economic and business conditions in
Malaysia. The Company does not undertake to update, revise or correct any of the
forward-looking information.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Following the Reverse Acquisition, certain disputes arose between the
Company and Sanford Altberger, Michael Raisch and David Wagner, the Company's
former President, Treasurer and legal counsel, respectively, each of whom either
directly and/or beneficially owns common stock of the Company. Those disputes
involved, among other things, the issuance of 1,840,000 shares of the Company's
common stock to an entity controlled by Mr. Wagner (the "Disputed Shares") at
the time of the Reverse Acquisition, bills for pre-acquisition legal services,
recovery of the Company's historical corporate records, and various claims of
alleged misrepresentations in connection with the Reverse Acquisition. On
December 14, 1999, these parties conducted a voluntary mediation and agreed to
settle all of their disputes arising out of the Reverse Acquisition pursuant to
the Amended Settlement Memorandum (the "Settlement Memorandum") filed as an
exhibit to the Form 10-KSB filed on April 14, 2000. The Settlement Memorandum
provided, among other things, for (i) the payment by the Company to Mr. Wagner
of $150,000 for attorneys' fees owed and in exchange for the transfer to the
Company of the Disputed Shares, (ii) the purchase by the Company of the
outstanding shares of common stock then owned by Messrs. Altberger, Raisch and
Wagner (excluding the Disputed Shares referred to in clause (i) above) at a
price of $1.00 per share and (iii) the delivery by Messrs. Altberger, Raisch and
Wagner of the Company's historical corporate records.
In mid-January 2000, Messrs. Altberger and Raisch repudiated the Settlement
Memorandum, and Mr. Wagner refused to close the settlement transactions. On
January 24, 2000, the Company filed an action in the Arapahoe County, Colorado,
District Court, titled KALAN GOLD CORP. V. SANFORD ALTBERGER, MICHAEL RAISCH,
DAVID J. WAGNER, DAVID J. WAGNER & ASSOCIATES, P.C., DAVID WAGNER & ASSOCIATES
DEFINED BENEFITS PLAN, MARION LIMITED LIABILITY COMPANY AND VERONICA BROWNELL,
Case No. 00CV0172, seeking to: (1) recover actual and consequential damages the
Company incurred as a result of the defendants' breach of the Settlement
Memorandum; (2) obtain a decree of specific performance requiring Messrs.
Altberger, Raisch and Wagner to perform their obligations under the Settlement
Memorandum; (3) recover the Company's attorneys' fees and costs incurred in
enforcing the Settlement Memorandum; and (4) recover the Company's historical
corporate records and the Disputed Shares.
On March 3, 2000, the Company filed a motion to voluntarily dismiss,
without prejudice, all of its claims against Messrs. Altberger and Raisch, which
motion the court granted on March 7, 2000. As part of the agreement to dismiss
its claims, Messrs. Altberger and Raisch represented and warranted to the
Company that they do not have any of its corporate records in their possession,
custody or control.
On March 16, 2000, the defendants David J. Wagner, David J. Wagner &
Associates, P.C., David Wagner & Associates Defined Benefits Plan, Marion
Limited Liability Company and Veronica Brownell (the "Wagner defendants") filed
their answer and two counterclaims against the Company. The first counterclaim
seeks approximately $193,000 in attorneys' fees that David J. Wagner &
Associates, P.C. alleges the Company owes for legal services, the major portion
of which were rendered prior to the Reverse Acquisition, and the second
counterclaim seeks a declaration removing a stop transfer order the Company
issued to its stock transfer agent with respect to shares of common stock held
in the names of the Wagner defendants. The Company responded to the
counterclaims on April 10, 2000 asking the court to dismiss them because they
were all settled under the Settlement Memorandum and are therefore invalid as a
matter of Colorado law.
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In addition, on January 21, 2000, the Arapahoe County District Court issued
an order to show cause directing the Wagner defendants to appear and show cause
why the court should not direct them to return to the Company the Company's
corporate records and the Disputed Shares. The hearing with respect to such
order to show cause commenced on March 17, 2000 and was continued to April 24,
2000. On April 24, 2000, the Arapahoe County District Court declined to direct
the turnover of the Company's personal property. The court relied in part on the
fact that the Company was protected due to the fact that it issued a stop
transfer order to its transfer agent with respect to the 1,840,000 shares of
stock that were the subject of the Settlement Memorandum.
The Company intends to prosecute the case vigorously and believes it has
meritorious claims and defenses. The Company has set aside US$150,000 as a
contingency for its liability to the Wagner defendants. The Company can give no
assurances concerning the outcome of the dispute, but believes that the outcome
of this litigation will not have a material adverse effect on the Company's
business and results of operations.
ITEM 2. CHANGES IN SECURITIES
On February 24, 2000, the Company issued 2,300,000 shares of its restricted
common stock to the Executive Chairman of its PTSB subsidiary for a purchase
price of $0.50 per share, or $1,150,000 in the aggregate.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27* Financial Data Schedule
(b) Reports on Form 8-K:
On February 17, 2000, the Company filed a report on Form 8-K in
respect of the appointment of Arthur Andersen & Co. as its independent
accountant.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KALAN GOLD CORPORATION
(Registrant)
DATE: May 22, 2000 BY: /s/ Patrick Soon-Hock Lim
President & Chief Executive Officer
DATE: May 22, 2000 /s/ Chee Hong Leong
---------------------------------
Acting Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM KALAN GOLD
CORPORATION UNAUDITED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND THE
RELATED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS THEN ENDED
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 28,830
<SECURITIES> 0
<RECEIVABLES> 246,242
<ALLOWANCES> 0
<INVENTORY> 6,786
<CURRENT-ASSETS> 730,425
<PP&E> 1,632,523
<DEPRECIATION> 539,849
<TOTAL-ASSETS> 2,362,948
<CURRENT-LIABILITIES> 337,037
<BONDS> 0
0
0
<COMMON> 973
<OTHER-SE> 1,817,527
<TOTAL-LIABILITY-AND-EQUITY> 2,362,948
<SALES> 789
<TOTAL-REVENUES> 789
<CGS> 632
<TOTAL-COSTS> 278,524
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (260,766)
<INCOME-TAX> 0
<INCOME-CONTINUING> (260,766)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (237,750)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
