Replies to post #131998 on Golkor Inc (GKOR)

[gump90]

Around and around and around. Bottom Line ? The S E C was JUST STARTING to closely examine the KATG share bonus distribution on December 27, 2010. Personally I think there is a long time still to go until it gets approved and the shares finally get into the broker accounts of all those qualified to receive them. Eventually the Truth will finally come out about time lines and motives and agendas. Stick around !!!!

[Biochemist2002]

Case law (i.e. Datronics)

You had to click the link I provided and read through Comment 1

But here you go.

Response No. 1: We restate part 2 of our prior response to your Comment No. 1; we continue to believe, in short, that the spin-off (the “Spin-Off”) by Kat Exploration, Inc. (the “Parent”) of the shares of common stock of the Company held by it will not involve a transfer of value from the shareholders of the Parent (the “Parent Shareholders”) to the Parent and hence that no offer or sale was or will be made; as a result, neither could there have been a right offered to participate in the Spin-Off.

We note in passing that Rule 135(a)(viii)(A) of the Securities Act refers specifically to a subscription price in its description of what an issuer may state about a proposed rights offering. In this case, there is no price payable by the Parent Shareholders to the Parent or any other form of consideration surrendered by such shareholders. Indeed, Rule 135 permits the making of statements that contain more information than do the press releases issued by the Parent.

You have requested a fact-based analysis to support our position, which is provided below.

The Bulletin
In our prior response letter, we stated that we believed that the first three criteria set forth in Staff Legal Bulletin No. 4 (the “Bulletin”) permitting a spin-off to occur without registration were met, that the fourth was likely met but that the fifth was certainly not, hence the need to register the shares to be spun off. We have not sought to conduct the Spin-Off without registering the shares of common stock of the Company and do not seek to do so now. We do, however, believe that the fourth criterion of the Bulletin merits review for purposes of this response.

The Bulletin explains the view of the staff (the “Staff”) of the Division of Corporation Finance (the “Division”) that “When there is a valid business purpose for a spin-off, it is less likely that the parent indirectly will receive value for the spun-off shares through the creation of a market in those securities.” The Staff notes that the Division has recognized certain situations as examples of a valid business purpose in the context of spin-offs, whereas others have not been deemed valid business purposes.

For our purposes, we believe that the first and second examples may be tangentially applicable to the Spin-Off and that the fourth example, regarding doing business with competitors, is inapposite. However, the third example, “enhancing access to financing by allowing the financial community to focus separately on each business” is particularly apt: Upon completion of the Spin-Off, in which the Parent Shareholders will receive shares of common stock of the Company, there will be a significantly more diffuse ownership interest in the Company. The Company has already acquired the Handcamp property, meaning that the market should be able to ascribe a value thereto separate and apart from the Parent’s other properties. We do not believe that any such evaluation, if any, has had an impact given that the Company is at present virtually wholly owned by the Parent; however, we anticipate that the Spin-Off, in distributing the shares of Common Stock among a significantly greater number of shareholders, may serve to elicit interest in such shares by the financial community as well as by the individual Parent Shareholders and the market generally.

The Staff further illustrates certain examples that it does not believe constitute a valid business purpose:

* creating a market in the spun-off securities without providing adequate information to the shareholders or to the trading markets;

* the creation of a public market in the shares of a company that has minimal operations or assets; or

* the creation of a public market in the shares of a company that is a development stage company that has no specific business plan or whose business plan is to engage in a merger or acquisition with an unidentified company.


We believe that the first is inarguably inapplicable to the Spin-Off given that the Company is fully reporting under the Exchange Act. Further, we believe that neither of the other two examples is analogous to the Spin-Off since the Company has both significant operations and a business plan that in no way contemplates engaging in mergers or acquisitions with unnamed entities.

Accordingly, we feel that the Parent’s determination that the Spin-Off will when effectuated constitute a valid business purpose - and consequently that there will be no value accrued to the Parent - is entirely meritorious, notwithstanding the fact that none of the above scenarios is identical to the Spin-Off.

Datronics
The Fourth Circuit of the Court of Appeals (the “Court”) decided SEC v. Datronics Engineer, Inc. (490 F.2d 250 (4th Cir. 1973), cert. denied, 416 U.S. 937 (1974) (“Datronics”), a case brought by the Securities and Exchange Commission (the “Commission”) as the appellant against Datronics Engineers, Inc. (“DEI”), on July 27, 1973. We believe, despite the passage of time, that Datronics remains a leading case in the context of whether spin-offs constitute sales of securities. We have disregarded the aspects relating principally to violations of the anti-fraud provisions of the securities laws as they are wholly inapplicable to the Spin-Off.

In Datronics, the Court found for the Commission, reversing the summary judgment decision rendered by the court of first instance. However, the facts of Datronics bear virtually no resemblance to those surrounding the Spin-Off. While the dissimilarities are numerous, we summarize below those that we believe demonstrate these dissimilarities with greatest clarity.

1. Valid business purpose. The Court found (Datronics 490 F.2d at 253-55) that DEI had no valid business purpose in conducting its spin-offs (the “DEI Spin-offs”). The Commission has variously found this factor relevant in distinguishing Datronics. See, e.g., the No Action Letter relating to Kingfisher plc, 2003 WL 21005587 at *7 (SEC Apr. 25, 2003) (hereafter, “Kingfisher”).

In contrast to the facts of Datronics, as discussed in the review of the Bulletin, we firmly believe that the Parent has such a purpose. In addition, as noted above, we believe that there is a significant possibility that the Company and its business will receive more attention than it would receive were it to remain a virtually wholly owned subsidiary of the Parent. As such, the Parent has a valid business purpose in conducting the Spin-Off.

2. Pre-existing agreements. DEI entered into agreements with the principals of the various companies whose shares were to be spun off in the DEI Spin-offs (“Spinnees”). The terms of these agreements included, but were not limited to, the following: (i) the creation of new subsidiaries and subsequent mergers of these entities with the Spinnees; (ii) the retention of shares in the Spinnees by their principals; and (iii) the retention of shares in the Spinnees by DEI (Datronics 490 F.2d at 253). One judge on the Datronics panel, concurring on reargument, noted the significance of the pre-existing agreement (Datronics 490 F.2d at 256, Widener, J. concurring on reargument).

The Spin-Off does not involve agreements of any kind, nor does it in any other way provide for the occurrence of the events forming parts of the DEI Spin-offs. The Company will not be reorganized and none of its shares will be

http://www.sec.gov/Archives/edgar/data/1412126/000093041310005910/filename1.htm