<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1
TO FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------------
CASMYN CORP.
(EXACT NAME OF THE COMPANY AS SPECIFIED IN ITS CHARTER)
0-14136
-------
SEC FILE NO. 333-08341
<TABLE>
<S><C>
COLORADO 1081 84-0987840
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER IDENTIFICATION
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.) NUMBER)
</TABLE>
1335 GREG STREET, UNIT #104
SPARKS, NEVADA 89431
(702) 331-5524
________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES)
JENKENS & GILCHRIST
A PROFESSIONAL CORPORATION
1445 ROSS AVENUE
SUITE 3200
DALLAS, TEXAS 75202
(214) 855-4500
______________________________________________________________________________
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Approximate date of commencement of proposed sale to the public:
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ X ]
<TABLE>
<CAPTION>
==========================================================================================
TITLE OF EACH AMOUNT PROPOSED PROPOSED
CLASS OF SECURITIES TO BE MAXIMUM MAXIMUM
TO BE REGISTERED REGISTERED OFFERING PRICE AGGREGATE REGISTRATION
PER SHARE OFFERING FEE (1)
PRICE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.04 par value 4,371,267 $13.00 $31,491,245 $10,859
==========================================================================================
</TABLE>
(1) ESTIMATED SOLELY FOR PURPOSES OF CALCULATING THE REGISTRATION FEE IN
ACCORDANCE WITH RULE 457 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a) MAY DETERMINE.
<PAGE>
CASMYN CORP.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION OF FORM S-1 CAPTION IN PROSPECTUS
----------------------------------- ---------------------
<S> <C> <C>
1. Forepart of Registration Statement and Facing Page; Cross Reference Sheet; Outside
Outside Front Cover Page of Prospectus Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover Pages
of Prospectus of Prospectus
3. Summary Information, Risk Factors, Ratio Prospectus Summary; Risk Factors
of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Plan of Distribution
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Description of the Company's Securities
10. Interests of Named Experts and Counsel Experts; Legal Matters
11. Information with Respect to Registrant Front Cover Page; Prospectus Summary; Risk
Factors; Capitalization; Selected Consolidated
Financial Data; Analysis of Financial Condition
and Results of Operations; Casmyn Corp.; Management;
Principal Shareholders; Description of the
Company's Securities
12. Disclosure of Commission Position on Not Applicable
Indemnification for Securities
Act Liabilities
</TABLE>
<PAGE>
4,371,267 SHARES
CASMYN CORP.
COMMON STOCK
This Prospectus relates to 4,371,267 shares of common stock, par value
$.04 per share (the "common stock"), of Casmyn Corp. (the "Company") that may
be offered and sold from time to time by certain shareholders of the Company
(the "Selling Shareholders."). Such shares consist of (i) 2,805,791 shares
of common stock that were issued in private placements, (ii) 833,333 shares
of common stock issuable in connection with the conversion of a $5,000,000
convertible debenture, and (iii) 732,143 shares of common stock issuable upon
the exercise of warrants. The Company will not receive any of the proceeds
from the sale of shares by the Selling Shareholders. See "Plan of
Distribution."
The common stock of the Company is traded in the over-the-counter market
and is listed in the "Pink Sheets" maintained by members of the National
Association of Securities Dealers, Inc. under the symbol CMYN. On September
5, 1996, the last reported sale price for the Company's common stock was
$14.50 per share. See "Price Range of Common Stock."
PROSPECTIVE PURCHASERS SHOULD CONSIDER THE FACTORS
SPECIFIED UNDER THE CAPTION "RISK FACTORS."
________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
________________________
September 6, 1996
1
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information may be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street N.W., Washington, D.C. 20549, and at the following Regional Offices or
public reference facilities of the Commission: 230 South Dearborn Street,
Chicago, Illinois 60604, and 75 Park Place, 14th Floor, New York, New York
10007. Copies of such material can also be obtained from the Public Reference
Section of the Commission at 450 FIFTH STREET N.W., WASHINGTON, D.C. 20549 AT
PRESCRIBED RATES.
Additional information regarding the Company and the shares offered
hereby is contained in the Registration Statement on Form S-1, of which this
Prospectus forms a part and the exhibits and schedules relating thereto filed
with the Commission under the Securities Act of 1933, as amended (the "1933
Act"). For further information pertaining to the Company and such shares,
reference is made to the Registration Statement and the exhibits and
schedules thereto, which may be inspected without charge at, and copies
thereof may be obtained at prescribed rates from, the offices of the
Commission at 450 Fifth Street N.W., Washington, D.C. 20549.
2
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY 4
THE COMPANY 4
THE OFFERING 4
AVAILABLE INFORMATION 2
SUMMARY CONSOLIDATED FINANCIAL INFORMATION 5
RISK FACTORS 6
USE OF PROCEEDS 8
PRICE RANGE OF COMMON STOCK AND DIVIDENDS 8
CAPITALIZATION 9
SELECTED CONSOLIDATED FINANCIAL DATA 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 11
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS 15
CASMYN CORP. 20
MANAGEMENT 34
SUMMARY COMPENSATION TABLE 37
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR 39
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES 41
LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR 41
PRINCIPAL SHAREHOLDERS 44
LEGAL PROCEEDINGS 45
DESCRIPTION OF THE COMPANY'S SECURITIES 46
PLAN OF DISTRIBUTION 47
EXPERTS 48
LEGAL MATTERS 49
FINANCIAL STATEMENTS F
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS II
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS
PROSPECTUS, ALL OF WHICH SHOULD BE READ CAREFULLY AND THOROUGHLY.
THE COMPANY
The Company's focus is global natural resource development based on a strategy
of applying the effective use of advanced technologies to products and services
oriented toward providing efficient, cost effective and profitable solutions to
global environmental and resource development challenges. Primary challenges
currently being addressed include mineral resources development and water
treatment in developing countries.
The business activities of the Company have centered around mineral resource
development. The primary focus to date has been the acquisition and exploration
of precious mineral resource properties in South Africa and Zimbabwe and
research and development related to minerals testing, process engineering and
environmental technologies. In addition, the Company has positioned itself in
the environmental industry through an investment in the preferred stock of
Vector Environmental Technologies, Inc., ("VETI") a Delaware corporation, a
company controlled by the Company. VETI is currently focused primarily on the
development, manufacture, sale and management of water treatment equipment and
facilities. Therefore, the Company and its wholly-owned and majority-owned,
through voting control, subsidiaries, are considered to operate in two business
segments, mining and environmental technologies, principally water treatment
systems.
On January 31, 1996, Casmyn Corp. (Company) acquired 100% of the shares of a
group of five (5) private mining companies (the "Acquired Companies") controlled
by the Muir Family in Zimbabwe through E.W.B. Properties (Private) Limited:
Matabeleland Minerals (Private) Limited, Greenhorn Mines (Private) Limited,
Morven Mining (Private) Limited, Motapa Minerals (Private) Limited and Turk
Mines (Private) Limited. The Acquired Companies own mining claims controlling
gold and silver mineral rights on properties that lie within the Bubi Greenstone
Belt, which is one of the largest greenstone formations in Zimbabwe and include
numerous shafts, mining equipment and mineral processing mills with a total
capacity of 1,000 tonnes per day. The Company estimates that total gold
resources at the Turk Mines are 5,000,000 ounces. Independent engineering
studies are currently underway which may cause this estimate to change. The
Company has commenced gold mining operations and is in the process of upgrading
and retro-fitting various mine facilities.
THE OFFERING
This Prospectus relates to 2,805,791 shares of common stock that have been
previously issued, 732,143 shares of common stock issuable upon the exercise of
warrants and 833,333 shares of common stock issuable under a convertible
debenture. The Company will not receive any of the proceeds from the sale of
shares by the Selling Shareholders.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA (1)
HISTORICAL --------------------------
----------------------------------------------------- NINE
YEAR MONTHS
NINE MONTHS ENDED ENDED ENDED
YEAR ENDED SEPTEMBER 30, SEPTEMBER JUNE
JUNE 30, 30, 30,
------------------------------- -------------------- ------------- -----------
1993 1994 1995 1995 1996 1995 1996
--------- --------- --------- --------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues $ 75 $ 601 $ 382 $ 375 $ 1,066 $ 2,723 $ 1,939
Loss from operations (1,566) (4,189) (6,400) (4,278) (5,139) (6,015) (4,985)
Other income, net 1,272 4,879 3,325 2,067 706 3,035 895
Income (loss) from continuing
operations (294) (690) (3,075) (2,211) (4,433) $ (2,980) $ (4,090)
------------- -----------
------------- -----------
Gain (loss) from discontinued
operations (292) (643) 33 32 - -
--------- --------- --------- --------- ---------
Net income (loss) $ (586) $ 47 $ (3,042) $ (2,179) $ (4,433)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income (loss) per common share:
Income (loss) from continuing
operations $ (0.09) $ 0.14 $ (0.40) $ (0.29) $ (0.71) $ (0.23) $ (0.38)
------------- -----------
------------- -----------
Income (loss) from discontinued
operations (0.09) (0.13) - -
--------- --------- --------- --------- ---------
Net income (loss) $ (0.18) $ 0.01 $ (0.40) $ (0.29) $ (0.71)
--------- --------- --------- --------- ---------
Weighted average common shares
outstanding 3,244 4,946 7,651 7,575 6,271 12,735 10,775
--------- --------- --------- --------- --------- ------------- -----------
--------- --------- --------- --------- --------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------
PRO
HISTORICAL FORMA (2)
------------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................................... $ 4,652 $ 12,317
Total assets.......................................................................... 27,502 35,048
Convertible debt...................................................................... 5,000 -
Stockholders' equity.................................................................. 19,572 31,995
</TABLE>
- ------------------------
(1) Gives effect to the acquisitions of the Zimbabwe properties, 100% of the
common shares of Auromar Development Corporation and a 65% interest in
WestAmerica Corporation, and the issuance of common stock upon conversion
of the convertible debt and the exercise of the warrants. It is assumed
that these transactions took place on October 1, 1994. See "Pro Forma
Consolidated Financial Statements."
(2) Includes the effect of the acquisition of the Zimbabwe properties which
occurred on January 31, 1996 and the acquisition of the interest in
WestAmerica Corporation which occurred on May 24, 1996 and assumes the
acquisitions of Auromar Development Corporation and the interest in
WestAmerica Corporation and the issuance of the common stock upon
conversion of the convertible debt and the exercise of the warrants
occurred on June 30, 1996. Also includes reclassification of investment
in Auromar shares of $204 to treasury stock. See "Pro Forma Consolidated
Financial Statements."
5
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS
RELATING TO THE BUSINESS OF THE COMPANY AND THIS OFFERING, TOGETHER WITH THE
INFORMATION AND FINANCIAL DATA SET FORTH ELSEWHERE IN THIS PROSPECTUS, PRIOR
TO PURCHASING ANY SHARES OF COMMON STOCK OFFERED HEREBY.
LIMITED OPERATING HISTORY UNDER CURRENT MANAGEMENT
The Company has only been operating under its current management since March
1994. Since that time, it has engaged in limited business operations and is
still in the process of acquiring and developing mineral properties and
technologies for its business plans, and it has been operating with losses.
There is no assurance that the Company will be able to generate the revenues
necessary to be profitable or that it will be successful if forced to seek
additional funds for further development of its current mining properties and
technologies. (See "Casmyn Corp. - Business Of the Company", "Casmyn Corp. -
Management Of the Company", "Certain Transactions" and "Financial
Statements.")
RELIANCE ON OUTSIDE FINANCING
The Company's management believes that in the long term it will be able to
generate revenues sufficient to fund its operations and continue with its
proposed business plans. However, to complete current projects under
development and should the Company expand its operations and/or make
acquisitions that would require substantial sums of money, it will have to
seek additional debt or equity financing. There can be no assurance that
such financing would be available on terms acceptable to the Company, as and
when needed. Since inception, the Company's operations have been financed,
in part, through private sales of the Company's securities and private loans.
(See "Certain Transactions" and "Financial Statements.")
RELIANCE UPON OFFICERS AND DIRECTORS
The Company is wholly dependent, at present, upon the personal efforts and
abilities of its officers and directors. The loss of one or more of its
officers or directors could have a material adverse effect on the Company's
operating results. While the Company will solicit business through its
officers and directors, there can be no assurance as to the volume of
business, if any, which the Company may obtain, or that its operations will
prove to be as profitable as presently anticipated. (See "Casmyn Corp. -
Management Of the Company" and "Certain Transactions.")
CONFLICTS OF INTEREST
The Company anticipates obtaining certain of its products and services from
companies of which its officers, directors and principal shareholders are
officers, directors and/or principal shareholders. All such products and
services will be obtained by the Company at terms competitive in the
marketplace and at least as favorable to the Company as would be obtained by
a third party. The Company has previously engaged, and will continue to
engage in certain transactions with its officers, directors, and principal
shareholders and will endeavor to insure that such transactions will be as
favorable to the Company as comparable arms-length transactions would be.
(See "Casmyn Corp. - Business Of the Company" and "Certain Transactions.")
RECENT UNPROFITABILITY
Despite the business experience of the officers, directors and principal
shareholders of the Company, the Company has been operating at a loss and has
not been profitable since 1994, when Mr. Dahya acquired majority ownership.
There can be no assurance the Company will be productive and/or profitable in
the future, or that such productivity and/or profitability, if attained, will
be sufficient to permit the Company to be successful in the future or to
expand or continue to operate. (See "Casmyn Corp. - Business Of the
Company.")
6
<PAGE>
COMPETITION
There is intense competition in the mineral exploration and development and
environmental products industries in which the Company operates. Many of the
Company's competitors have greater financial and other resources, better
distribution networks and/or greater name recognition than the Company.
There can be no assurance that the Company will be able to successfully
compete in these industries. (See "Casmyn Corp. - Business Of the Company.")
GOVERNMENTAL REGULATIONS
The environmental products and mineral exploration and development activities
of the Company are significantly impacted by environmental, health and
import/export related government regulations and programs which the Company
must comply with. If additional regulations were to be implemented, there
can be no assurance that the Company would be able to comply with them
without incurring substantial additional costs for compliance therewith.
(See "Casmyn Corp. - Business Of the Company.")
The mining operations of the Company, through its wholly-owned subsidiaries,
Casmyn Mining Corporation and Casmyn Zimbabwe (Private) Ltd, are conducted
primarily through its offices in South Africa and Zimbabwe. Casmyn Mining
Corporation is qualified to do business in South Africa and, as such, is
subject to the laws of that country, which includes permits to allow the
Company to conduct exploration activities on optioned properties.
COMPLIANCE WITH ENVIRONMENTAL LAWS
The mining operations of the Company are directed at determining the presence
of economically viable mineral resource deposits on properties under option
in South Africa. It is the Company's intention, once such mineral resource
deposits are discovered, to identify a joint venture partner to develop and
operate the mining properties. Under the South Africa Minerals Act, 1991,
the Company and/or its joint venture partner are responsible for development
of an environmental impact assessment and an environmental management program
for the proposed mining venture which must be approved prior to the start of
exploration and/or mining operations. The cost of environmental compliance
relating to mineral development is estimated by management to be immaterial as
of September 30, 1995 due to the nature of the Company's exploration
activities. Through January 31, 1996, the Company did not have any producing
mining properties. On Janaury 31, 1996, the Company acquired various gold
mining properties and processing facilities in Zimbabwe and has begun mining
and processing gold at those facilities. The Company is in compliance with
environmental laws of Zimbabwe.
RISK OF DEVELOPMENT, CONSTRUCTION AND MINING OPERATIONS
Should the Company, alone or with a joint venture partner, decide to proceed
with development of a mineral resource property, the ability to meet cost
estimates and construction and production time estimates cannot be assured.
Technical considerations, delay in obtaining governmental approvals,
inability to obtain financing or other factors could cause delays in
developing mineral resource properties.
The businesses of gold and/or diamond mining are subject to a variety of
risks and hazards, including environmental hazards, industrial accidents,
flooding and the discharge of toxic chemicals. The Company (and its joint
venture partners, when identified) intend to obtain insurance in amounts the
Company considers to be adequate to protect itself against certain of these
risks of mining and processing. However, the Company may become subject to
liability for certain hazards for which it cannot obtain insurance or which
it may elect not to obtain insurance against because of premium costs or
other reasons.
EXPLORATION PROGRAMS
A major part of the Company's business is the exploration of its existing
properties and the evaluation and pursuit of potential new prospects in the
exploration stage or of interests in companies which own such properties.
Substantial expenditures may be incurred in an attempt to establish the
economic feasibility of mining operations by identifying
7
<PAGE>
mineral deposits and establishing reserves through drilling and other
techniques, designing facilities and planning mining operations. The
economic feasibility of a project depends on numerous factors, including the
cost of mining and production facilities required to extract the desired
minerals, the total mineral deposits that can be mined using a given
facility, the proximity of the mineral deposits to a user of the minerals,
and the market price of the minerals at the time of sale. There is no
assurance that existing or future exploration programs or acquisitions will
result in the identification of deposits that can be mined profitably.
NO CASH DIVIDENDS
The Company has never paid and has no present plans to pay any cash dividends
on its common stock. The Company currently intends to retain its earnings to
finance the growth and development of its business. See "Price Range of
Common Stock and Dividends."
USE OF PROCEEDS
This Prospectus relates to shares of Common Stock that may be offered and
sold from time to time by the Selling Shareholders. See "Plan of
Distribution." There will be no proceeds to the Company from the conversion
of the convertible debenture into common stock or from previously completed
private placements of common stock. The Company would receive $7,785,716 in
proceeds (net of approximately $125,000 which is the estimated cost of this
offering) from the exercise of warrants. Such proceeds are expected to be
used for mineral property development and general corporate purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The shares of Common Stock of the Company are traded in the over-the-counter
market in the "pink sheets" by members of the National Association of
Securities Dealers, Inc. The following table identifies the high/low or
bid/asked sales prices per share based upon information obtained from the
National Daily Quotation Service, for each quarterly period, and the last six
(6) months, since acquisition of the Company by present Management:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
QUARTER
ENDING DATE HIGH LOW
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
July 1, 1996 through September 5, 1996 $ 16.50 $ 14.50
- --------------------------------------------------------------------------------
June 30,1996 $ 18.00 $ 15.00
- --------------------------------------------------------------------------------
March 31, 1996 $ 20.00 $ 16.00
- --------------------------------------------------------------------------------
December 31, 1995 $ 21.50 $ 8.00
- --------------------------------------------------------------------------------
September 30, 1995 $ 9.00 $ 6.00
- --------------------------------------------------------------------------------
June 30, 1995 $ 8.50 $ 6.00
- --------------------------------------------------------------------------------
March 31, 1995 $ 8.00 $ 7.00
- --------------------------------------------------------------------------------
December 31, 1994 $ 9.687 $ 7.75
- --------------------------------------------------------------------------------
September 30, 1994 $ 13.50 $ 8.125
- --------------------------------------------------------------------------------
June 30, 1994 $ 13.00 $ .95
- --------------------------------------------------------------------------------
March 31, 1994 * nil nil
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company has never paid and has no present plans to pay any cash dividends
on its common stock. The Company currently intends to retain its earnings to
finance the growth and development of its business.
As of June 30, 1996, there were 7,286,992 shares of the Company's Common
Stock issued and outstanding.
8
<PAGE>
The Company believes that as of June 30, 1996 there were approximately 100
holders of common stock of record or through nominee or street name accounts
with brokers.
On September 5, 1996 the last day of trading for shares of the Company's
Common Stock prior to the date of this Prospectus, the closing price in the
over the-counter market for the Company's Common Stock was $14.50.
* Trading activity prior to March 31, 1994 was nil.
CAPITALIZATION
The following table sets forth as of June 30, 1996 the actual consolidated
capitalization of the Company, the consolidated pro forma acquisitions
capitalization to give effect to the acquisitions of the common stock of
Auromar Development Corporation and WestAmerica Corporation and the
consolidated pro forma as adjusted capitalization of the Company to give
effect to the Offering for those shares that are being registered that are
issuable upon exercise of warrants and upon conversion of a convertible
debenture. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Pro Forma Consolidated Financial Statements," and the Consolidated Financial
Statements and Notes thereto.
June 30, 1996 (in thousands)
- --------------------------------------------------------------------------------
Actual Pro Forma Pro-Forma As
Acquisitions(1) Adjusted(2)
--------- --------------- ------------
Convertible debt $ 5,000 $ 5,000 $ -
--------- --------------- ------------
Stockholders' Equity:
Preferred stock, $.10 par value;
20,000 shares authorized; 2,707
shares issued and outstanding 271 271 271
Common stock, $.04 par value;
300,000 shares authorized; issued
and outstanding: 7,285 shares
actual; 10,199 shares pro forma
acquisitions; 11,764 shares pro
forma as adjusted (3) 292 409 472
Additional paid-in capital 27,854 27,823 40,301
Accumulated deficit (8,501) (8,501) (8,501)
Less: treasury stock (25) (229) (229)
Foreign currency translation
adjustment (319) (319) (319)
--------- --------------- ------------
Total stockholders' equity 19,572 19,454 31,995
--------- --------------- ------------
Total capitalization $ 24,572 $ 24,454 $ 31,995
--------- --------------- ------------
--------- --------------- ------------
- -----------
(1) Gives effect to the issuance of 2,702 shares of common stock in the
acquisition of 100% of the common shares of Auromar Development Corporation,
the issuance of 237 additional common shares to the holder of the convertible
debentures pursuant to the Auromar acquisition. See "Pro Forma Consolidated
Financial Statements" and "Business of the Company."
(2) Gives effect to the common stock issued in the acquisitions discussed in
(1) above, the issuance of 833 shares of common stock upon conversion of the
convertible debenture, and a total of 732 shares of common stock upon the
exercise of warrants. Also includes an increase in additional paid-in
capital of $245 to reflect the adjustment of unamortized debt issuance costs
related to convertible debt and the reclass of investment in Auromar shares
of $204 to treasury stock.
(3) The number of common shares issued and outstanding do not include shares
of common stock issuable upon the exercise of outstanding stock options. See
"Employee Stock Option Plan."
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated historical financial data presented below as of and
for the years ended September 30, 1993, 1994 and 1995 are derived from the
Company's audited consolidated financial statements. The selected
consolidated historical financial data as of June 30, 1996 and for the nine
months ended June 30, 1995 and 1996 are derived from the Company's unaudited
consolidated financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments necessary for a
fair presentation of the results for such interim periods, have been
reflected therein. The results of operations for the nine months ended June
30, 1996 are not necessarily indicative of the results of operations that may
be expected for the full fiscal year 1996. The data set forth below should
be read in conjunction with the consolidated financial statements of the
Company and the notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Pro Forma Consolidated
Financial Statements" appearing elsewhere herein.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA (1)
--------------------------------------------------------- --------------------
YEAR YEAR YEAR NINE MONTHS NINE MONTHS YEAR NINE MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER SEPTEMBER SEPTEMBER JUNE 30, JUNE 30, SEPTEMBER JUNE 30,
30, 1993 30, 1994 30, 1995 1995 1996 30, 1995 1996
----------- --------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales $ 75 $ 601 $ 382 $ 375 $1,066 $ 2,723 $ 1,939
Cost of goods sold 1 603 490 270 757 1,886 1,270
-------------------------------------------------------- --------------------
Gross profit (loss) 74 (2) (108) 105 309 837 669
-------------------------------------------------------- --------------------
Costs and expenses:
Selling, general and administrative
expense 1,077 3,225 4,998 3,296 4,695 5,364 4,830
Depreciation, depletion and
amortization 80 39 99 167 101 293 172
Mineral exploration expense - - 1,010 769 448 1,010 448
Research and development 85 15 185 151 204 185 204
Write down and abandonment of assets 399 908 - - - - -
-------------------------------------------------------- --------------------
Total costs and expenses 1,641 4,187 6,292 4,383 5,448 6,852 5,654
-------------------------------------------------------- --------------------
Loss from operations (1,566) (4,189) (6,400) (4,278) (5,139) (6,015) (4,985)
-------------------------------------------------------- --------------------
Other income (expense):
Minority interest in net loss of
subsidiary 1,302 4,581 3,502 1,991 499 3,502 499
Other income (expense) (30) 298 (177) 76 207 (467) 396
-------------------------------------------------------- --------------------
Other income, net 1,272 4,879 3,325 2,067 706 3,035 895
-------------------------------------------------------- --------------------
Income (loss) from continuing operations (294) 690 (3,075) (2,211) (4,433) $(2,980) $(4,090)
--------------------
--------------------
Gain (loss) from discontinued operations (292) (643) 33 32 -
--------------------------------------------------------
Net income (loss) $ (586) $ 47 $(3,042) $(2,179) $(4,433)
--------------------------------------------------------
--------------------------------------------------------
Income (loss) per common share:
Income (loss) from continuing operations
$(0.09) $ 0.14 $ (0.40) $(0.29) $ (0.71) $ (0.23) $ (0.38)
--------------------
--------------------
Income (loss) from discontinued operations
(0.09) (0.13) - - -
--------------------------------------------------------
Net income (loss) $(0.18) $ 0.01 $ (0.40) $(0.29) $ (0.71)
--------------------------------------------------------
--------------------------------------------------------
Weighted average number of common
shares outstanding 3,244 4,946 7,651 7,575 6,271 12,734 10,775
-------------------------------------------------------- --------------------
-------------------------------------------------------- --------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
JUNE 30,
SEPTEMBER SEPTEMBER SEPTEMBER JUNE 30, 1996, AS
30, 1993 30, 1994 30, 1995 1996 ADJUSTED (2)
--------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets $ 2,309 $3,369 $14,316 $27,504 $35,048
Long term debt 207 110 5,071 5,000 --
Stockholders' equity (deficit) (507) 2,214 8,144 19,572 31,995
</TABLE>
(1) Gives effect to the acquisitions of the Zimbabwe properties, 100% of the
common shares of Auromar Development Corporation and a 65% interest in
WestAmerica Corporation, and the issuance of common stock upon conversion of
the convertible debt and the exercise of the warrants. It is assumed that
these transactions took place on October 1, 1994. See "Pro Forma
Consolidated Financial Statements."
(2) Includes the effect of the acquisition of the Zimbabwe properties which
occurred on January 31, 1996 and the acquisition of the interest in
WestAmerica Corporation which occurred on May 24, 1996, and assumes the
acquisitions of Auromar Development Corporation and the issuance of the
common stock upon conversion of the convertible debt and the exercise of the
warrants occurred on March 31, 1996. Also includes reclassification of
investment in Auromar shares of $204 to treasury stock. See "Pro Forma
Consolidated Financial Statements."
Note: The Company was inactive during the years ended September 30, 1991 and
1992, therefore consolidated financial data for those periods has been
omitted.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's focus is global resource development based on a strategy of
applying the effective use of advanced technologies to products and services
oriented toward providing efficient, cost effective and profitable solutions
to global environmental and resource development challenges. Primary
challenges currently being addressed include mineral resources development
and water treatment in developing countries.
The business activities of the Company have centered around mineral resource
development. The primary focus to date has been the acquisition and
exploration of precious mineral resource properties in South Africa and
Zimbabwe and research and development related to minerals testing, process
engineering and environmental technologies through the Casmyn Mining Group.
In addition, the Company has positioned itself in the environmental industry
through an investment in the preferred stock of VETI. VETI is currently
focused primarily on the development, manufacture, sales and management of
water treatment equipment and facilities. Therefore, the Company and its
wholly-owned and majority-owned, through voting control, subsidiaries, are
considered to operate in two business segments, mining and environmental
technologies, principally water treatment systems. See Note 2 of the Notes
to the Consolidated Financial Statements for information on business segments.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1996 COMPARED TO THE NINE MONTHS ENDED JUNE 30,
1995
Revenues for the nine months ended June 30, 1996, were $1,065,538
compared to $375,270 for the nine months ended June 30, 1995. The $690,268
increase was due to an increase of $317,512 in sales of water purification
systems and $372,756 from the sale of gold produced in Zimbabwe. Overall
gross profit for the nine months ended June 30, 1996 was 29% compared to 28%
for the nine months ended June 30, 1995. Gross profit on water purification
equipment sales was 32% for the nine month period ended June 30, 1996
compared to 28% for the nine month period ended June 30, 1995 due to lower
freight charges.
11
<PAGE>
and lower component costs. Gross profit on gold sales was 23.4% for the nine
months ended June 30, 1996, there were no gold sales in the nine month period
ended June 30, 1995.
Costs and expenses were $5,448,216 for the nine months ended June 30, 1996,
compared to $4,383,570 for the nine months ended June 30, 1995, an increase of
$1,064,646. Compensation and benefits increased $394,757 for the nine month
period ended June 30, 1996 compared to the nine month period ended June 30, 1995
due primarily to the Company recording $364,560 in compensation expense related
to the granting of 246,000 non-qualified stock options and increased staff
levels in the nine month period ended June 30, 1996 compared to the period ended
June 30, 1995. Expenses related to professional services, primarily audit and
legal increased by $341,556 in the nine month period ended June 30, 1996
compared to the nine month period ended June 30, 1995. Travel related expenses
increased $261,781 in the nine month period ended June 30, 1996 compared to the
nine month period ended June 30, 1995 due to increased trips to Africa, India
and Vietnam related to the Company's operations in those countries. Mineral
exploration expense and depreciation decreased a total of $321,826 in the nine
month period ended June 30, 1996 compared to the nine months ended June 30, 1995
due to start up of limited gold production at the Zimbabwe mines. This decrease
was offset by a increase in research and development related expenses of
$53,345. Other general and administrative costs increased $335,033 for the nine
months ended June 30, 1996 compared to 1995 due primarily to higher costs
related to business activities in Vietnam, increased costs related to the U.S.
rollout of water purification products and expenses incurred at the Zimbabwe
mining properties.
Other income, exclusive of minority interest, was $207,436 for the nine month
period ended June 30, 1996, compared to $76,091 for the nine months ended June
30, 1995, an increase of $131,345. This increase was due primarily to interest
income earned on short term investments made by the Company offset by interest
expense. Minority interest in the net loss of VETI decreased by $1,492,526 for
the nine months ended June 30, 1996 due to a limitation on the amount of loss
which could be absorbed by the minority shareholders.
The Company anticipates that expenditures related to upgrading the newly
acquired mining properties in Zimbabwe will exceed revenues derived from the
sale of gold from the mines. The Company is in the process of preparing a
capital improvement budget for the Zimbabwe properties. Additionally, the
Company anticipates that expense levels experienced in the nine months ended
June 30, 1996 relating to active exploration programs in various countries will
continue for the foreseeable future. The Company charges to expense all mineral
resource exploration and development costs until the mineral property to which
they relate is determined to have proven reserves for which recovery is
economically feasible. Costs are then capitalized until the mineral property to
which they relate is placed into production, sold, abandoned or written down
where there is an impairment in value. Capitalized costs are to be charged to
future operations on a unit-of-production basis. The Company estimates that
total gold resources at the Turk Mines are 5,000,000 ounces. Independent
engineering studies are currently underway which may cause this estimate to
change. The gold occurs in sulfides, oxides and old mill tailings.
YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1994
Sales for the year ended September 30, 1995, were $382,158 compared to
$600,714 for the year ended September 30, 1994. The $218,556 decrease was due
primarily to a decrease of $34,383 from assaying and minerals testing
services and a decrease of $184,173 from sales of water purification
products. The decrease in assaying and minerals testing was due to
discontinuance of those services. The decrease in sales of water purification
products was the result of sales efforts being directed to market analysis
and new product design and testing thereby reducing sales volume. The gross
loss for the year ended September 30, 1995 was $107,431 compared to $1,964
for the year ended September 30, 1994. The increased loss was due mainly to
writing off obsolete water purification inventory items.
Costs and expenses were $6,292,140 for the year ended September 30, 1995,
compared to $4,186,541 for the year ended September 30, 1994, an increase of
$2,105,599. $1,010,334 of this increase was due to land fees and exploration
costs relating to active exploration programs presently underway on various
mineral properties that are under option to the Company. Selling, general and
administrative expenses increased $1,773,323 to $4,997,948. Compensation and
benefits increased $685,850 for the year ended September 30, 1995 compared to
the year ended September 30, 1994 due primarily to the Company recording
$955,100 in compensation expense related to the granting of non-qualified
stock options. Advertising and marketing costs increased $260,071 for the
year ended September 30, 1995 compared to the year ended September 30, 1994
due to various programs relating to the introduction of the Company's water
purification systems in
12
<PAGE>
the U.S. and foreign markets. Other general and administrative expenses
increased $204,668 for the year ended September 30, 1995 compared to the year
ended September 30, 1994 due primarily to increased professional and
consulting expenses. Research and development expenses for the year ended
September 30, 1995 were $185,053 compared to $15,294 for the year ended
September 30, 1994 due to increased projects related to the development of
water purification technologies. The increase in costs and expenses in 1995
was offset by decreases in abandonment of mineral properties of $150,000 and
write down of assets of $758,059 because no such transactions occurred in 1995.
Other income, exclusive of minority interest, decreased by $476,325 in the
fiscal year ended September 30, 1995, compared to the fiscal year ended
September 30, 1994, due mainly to gains on the sale of investments in related
parties of $253,218 that were realized in 1994, with a loss on sale in
investments in related parties of $150,000 in 1995. Minority interest in the
net loss of consolidated subsidiary decreased $1,078,293 to $3,502,401 for
the fiscal year ended September 30, 1995.
The Company discontinued its metal fabrication business segment in fiscal
1995 recognizing a loss from discontinued operations in the year ended
September 30, 1995 of $77,354 compared to a loss of $643,767 for the year
ended September 30, 1994. A gain of $109,783 was recognized on the disposal
of certain metal fabrication equipment during 1995.
Due to net operating loss carry forwards there was no tax provision for the
fiscal year ended September 30, 1995.
YEAR ENDED SEPTEMBER 30, 1994 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1993
Revenues for the year ended September 30, 1994, were $600,714 compared to
$75,421 for the year ended September 30, 1993, the $525,293 increase was due
primarily to sales of water purification products of $566,331, there were no
sales of these products in the year ended September 30, 1993. This increase
is offset by a decline in revenues recognized from ore assaying activities
($41,038), between 1994 and 1993. The Company curtailed its bulk ore assaying
activities due to increasing stringent government regulations relating to the
use and disposal of various substances used in the assaying process, and the
increasing demands on its technical personnel for engineering and process
development services for VETI.
Cost and expenses were $4,186,541 in the fiscal year ended September 30,
1994, compared to $1,640,946 in the fiscal year ended September 30, 1993, an
increase of $2,545,595. This increase primarily relates to an increase of
$831,672 in salaries and benefits due to higher staff levels in fiscal 1994
to support domestic water purification activities and the start-up of
operations in South Africa and Vietnam. General and administrative expenses
increased by $1,204,864 primarily due to increased accounting, legal,
consulting and mineral exploration expenses. During fiscal 1994 the Company
wrote off $150,000 related to an investment in mineral properties and wrote
off $758,059 in assets, while, in fiscal 1993, the Company wrote off certain
assets in the amount of $209,000 and abandoned certain mineral properties
totalling $190,470.
Other income, exclusive of minority interest, was $298,638 in the fiscal year
ended September 30, 1994 due mainly to gains realized on the sale of
marketable securities of related parties to unrelated third parties. Minority
interest in the net loss of consolidated subsidiary increased $3,278,890 to
$4,580,694 for the fiscal year ended September 30, 1994.
The Company realized a loss from its discontinued metal fabrication
operations of $643,767 in the fiscal year ended September 30, 1994 compared
to a loss of $291,812 in the fiscal year ended September 30, 1993.
Due to net operating loss carry forwards there was no tax provision for the
fiscal year.
CAPITAL RESOURCES AND LIQUIDITY
At June 30, 1996, the Company's working capital was $4,651,953, including
$5,473,211 in cash and cash equivalents. The Company's mineral resource
development business segment has acquired certain mineral properties in South
Africa and on January 31, 1996 concluded the acquisition of certain mining
properties and assets in Zimbabwe for $4,526,415 cash plus applicable taxes of
$1,017,854 to be paid upon assessment subject to certain adjustments. In
13
<PAGE>
addition, the water purification business segment has begun sales and marketing
programs in North America and in various third world countries.
Management anticipates that the net use of cash by operations will
increase during the foreseeable future due to expenditures on mineral
resource development projects in South Africa, mineral exploration and
facility upgrades at the Zimbabwe mining properties and development of
various markets for VETI's water purification technologies. The Company will
use current cash and cash equivalents to fund the on-going projects in the
short term and anticipates that it will be able to secure additional debt
and/or equity financing, to fund longer term projects. As evidence of the
Company's ability to secure debt and/or equity financing in the nine month
period ended June 30, 1996 the Company has received $8,809,862, net of
commissions and other expenses related to the transaction, through issuance
of 750,000 shares of restricted common stock in an exempt private
transaction. During the fiscal year ended September 30, 1995, the Company
completed private placements of 405,000 Common Shares and 714,286 units for
total net proceeds of $7,002,859, and completed placement of a $5,000,000,
2.5%, unsecured, convertible debenture (see Note 7 to the consolidated
financial statements) for net proceeds of $4,700,000. Additionally, during
the year ended September 30, 1995 VETI completed private placements of
500,000 Common Shares and 1,000,000 units for total net proceeds of
$3,375,000. During the fiscal year ended September 30, 1994, the Company
completed a private placement of 378,055 shares of common stock for net
proceeds of $1,908,000.
The following is a discussion of factors that have affected the Company's
financial position.
NET CASH USED IN OPERATING ACTIVITIES. Net cash used in operating activities
was $4,161,707 for the nine months ended June 30, 1996 compared to $4,547,789
for the nine months ended June 30, 1995. The decrease in net cash used in
operations was due principally to a decrease in minority interest in the net
loss of VETI of $1,492,526 offset by increases in the net loss because of
active exploration programs conducted on mineral properties in fiscal 1996
and expenses related to sales of water purification systems. Net cash used
in operating activities was $5,996,061, $4,476,585 and $2,196,566 for the
years ended September 30, 1995, 1994 and 1993 respectively. The increase in
the net cash used in operations in 1995 was due principally to the increase
in the net loss because of active exploration programs conducted on mineral
properties and increased costs and expenses relating to sales of water
purification systems. Also contributing to the increase in the net cash used
in operations was an increase in accounts receivable of $456,952 in 1995. The
increase in net cash used in operations in 1994 was due primarily to losses
attributed to the water purification business segment (the minority interest
in net loss of VETI increased by $3,278,890 in the year ended September 30,
1994 compared to 1993).
NET CASH USED IN INVESTING ACTIVITIES. Net cash used in investing activities
was $10,645,707 for the nine months ended June 30, 1996 compared to net cash
provided by investing activities of $605,018 for the nine months ended June
30, 1995. The increase in net cash used in investing activities was due to
the purchase of certain mineral properties and assets in Zimbabwe, and
purchases of equipment and improvements, primarily related to a water
bottling plant under construction in Vietnam. During the year ended
September 30,1995, the Company received $1,487,538 from the sale of
investments and $209,324 from the sale of assets, this was offset by $650,000
which was used to purchase investments in related parties, and $239,749 that
was used to purchase equipment and improvements. These transactions resulted
in net cash provided by investing activities of $807,113. In the year ended
September 30, 1994, proceeds from the sale of investments of $1,366,220 was
the major source of cash from investing activities, offset by purchases of
investments of $212,897, investments in and advances to related parties of
$413,223 and purchase of equipment and improvements of $142,530. These
transactions resulted in net cash provided by investing activities of
$599,570. In the year ended September 30, 1993, proceeds from the sales of
investments was $346,904 offset by investments in and advances to related
parties of $251,302 and purchases of equipment and improvements of $147,262
resulting in net cash used in investing activities of $51,660.
NET CASH PROVIDED BY FINANCING ACTIVITIES. Net cash provided by financing
activities was $15,668,020 for the nine months ended June 30, 1996 compared
to $2,864,398 for the nine months ended June 30, 1995. The increase is due
to the Company receiving $15,791,780 from the collection of funds, net of
costs, from private placements of common stock of the Company and VETI,
offset by the repayment of long-term debt of $98,760 and the purchase of
treasury stock of $25,000. As discussed above, during the year ended
September 30, 1995, the Company received $4,700,000 (net of debt issuance
costs) from the placement of a debenture and $3,060,712 from the issuance of
common stock of the Company and $1,326,564 from the issuance of VETI and VVC
common stock in private placements, offset by repayment of long-term debt of
$42,609, resulting in net cash provided by
14
<PAGE>
financing activities of $9,044,667. During the year ended September 30, 1994,
the Company received $1,100,000 from the issuance of common stock of the
Company and $3,080,820 from the issuance of common stock of VETI and VVC,
offset by repayment of long-term debt of $107,003, resulting in net cash
provided by financing activities of $4,073,817. During the year ended
September 30, 1993, the Company received $3,269,577 from the issuance of
common stock of VVC offset by payment of long-term debt of $178,661,
resulting in net cash provided by financing activities of $3,090,916.
The Company is organized with a relatively small, highly trained staff and
anticipates that the overall staff level will remain low in the foreseeable
future because the majority of mineral resource development activities are
performed by independent contractors on a project by project basis. The
Company believes that these arrangements will not require a significant
investment by the Company in either personnel or facilities.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The discussions contained in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Casmyn Corp." sections of
this Registration Statement contain various "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Sections 21E of the Securities Exchange Act of 1934, as amended, which
represents the Company's expectations or beliefs concerning future events,
inlcuding the following: statements regarding the estimated mineral resource
levels located at the Company's mining properties in Zimbabwe; the ability of
the Company to secure additional debt and/or equity financing to fund future
expansion and operations; statements regarding new or increased markets for
the Company's water purification and water bottling business segment. In
addition, statements containing expressions such as "believes,"
"anticipated," "plans" or "expects" used in the Company's periodic reports on
Forms 10-KSB and 10-QSB filed with the SEC are intended to indentify,
forward-looking statements. The Company cautions that these and similar
statements included in this and in previously filed periodic reports
including reports filed on Forms 10-KSB and 10-QSB are further qualified by
important factors that could cause actual results to differ materially from
those in the forward-looking statement, including, without limitation, the
following: political and economic instability in international markets; the
effect of economic conditions; the effect of regulatory and governmental
actions; fluctuations in world gold prices, exchange rates, tariffs and other
barriers.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The pro forma consolidated financial statements are presented in two
steps: first, presenting the acquisitions adjustments for the acquisition of
the Zimbabwe properties and 100% of the common shares of Auromar Development
Corporation ("Auromar"); and a 65% interest in WestAmerica Corporation
("WestAmerica") and second, the adjustments for the issuance of shares of
common stock upon conversion of the convertible debt and the exercise of the
warrants.
These pro forma financial statements have been prepared to show the effect of
the January 31, 1996 acquisition of 100% of the shares of a group of five (5)
private mining companies controlled by the Muir Family in Zimbabwe through
E.W.B. Properties (Private) Limited ("EWB"), in accordance with the terms and
conditions of a formal Purchase Agreement concluded in August 1995. The
total consideration for this acquisition was $4,071,415 plus applicable taxes
which are currently estimated at $1,017,854. The acquisition includes
includes mining claims controlling gold and silver mineral rights on several
producing gold mining properties covering approximately 1,200 hectares
(approximately 2,965 acres) in the Bubi Greenstone Gold Belt of Zimbabwe.
These properties include infrastructure, mining and milling equipment. Also
on January 31, 1996, the Company purchased the assets of the Dawn Mine
property in Zimbabwe from Olympus Gold Mines Limited for $455,000. The Dawn
Mine is located in close proximity to the Turk mine and mill and will be
operated under a mine plan which includes the Turk mine and mining properties
owned by the Company. These transactions have been accounted for as
purchases.
These pro forma financial statements have also been adjusted to show the
effect of the acquisition on May 24, 1996 of a 65% interest in WestAmerica in
exchange for 606,061 common shares of the Company. This investment has been
accounted for using the equity method.
In addition, these pro forma financial statements have been adjusted to
reflect the exchange of approximately 2,701,000 shares of the Company's
common stock for approximately 7,025,000 shares (100%) of the common stock of
Auromar which acquisition is anticipated to be completed in the near future.
The pro forma consolidated statements of operations show what the results
of the Company's operations would have been for the fiscal year ended
September 30, 1995 and the nine months ended June 30, 1996 had the
acquisitions been completed on October 1, 1994. The pro forma balance sheet
as of June 30, 1996 includes the effect of the Zimbabwe acquisition which
occured on January 31, 1996 and the WestAmerica acquisition which occurred on
May 24, 1996 and assumes the other acquisitions described above occurred on
June 30, 1996.
The issuance of the common shares from the issuance of common stock upon
conversion of the convertible debt and the exercise of warrants being
registered by this offering were assumed to be on October 1, 1994 for the pro
forma consolidated statements of operations and on June 30, 1996 for the pro
forma consolidated balance sheet.
15
<PAGE>
CASMYN CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS ACQUISITIONS PRO FORMA REGISTRATION PRO FORMA AS
ACTUAL ENTRIES ACQUISITIONS ADJUSTMENTS ADJUSTED
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 5,473 $ - $ 5,473 $ 7,786 (d) $ 13,259
ACCOUNTS RECEIVABLE, NET 226 - 226 - 226
INVENTORIES 1,750 - 1,750 - 1,750
PREPAID EXPENSES AND OTHER ASSETS 135 - 135 - 135
----------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 7,584 - 7,584 7,786 15,370
----------------------------------------------------------------------------------
INVESTMENT IN RELATED PARTY 204 (204) (b) - - -
EQUIPMENT AND IMPROVEMENTS, NET 2,945 - 2,945 - 2,945
MINERAL PROPERTIES 6,712 207 (a) 6,919 - 6,919
INVESTMENT IN AFFILIATES 8,368 - 8,368 - 8,368
DUE FROM RELATED PARTIES, NET 67 - 67 - 67
OTHER ASSETS 1,624 - 1,624 (245) (e) 1,379
----------------------------------------------------------------------------------
TOTAL ASSETS $ 27,504 $ 3 $ 27,507 $ 7,541 $ 35,048
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITES:
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES $ 2,932 $ 121 (a) $ 3,053 $ - $ 3,053
----------------------------------------------------------------------------------
CONVERTIBLE DEBT 5,000 - 5,000 (5,000) (e) -
----------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, $.10 PAR VALUE 271 - 271 - 271
COMMON STOCK, $.04 PAR VALUE 292 108 (a) 409 33 (e) 472
9 (c) 30 (d)
ADDITIONAL PAID-IN CAPITAL 27,854 (22) (a) 27,823 4,722 (e) 40,301
(9) (c) 7,756 (d)
ACCUMULATED DEFICIT (8,501) - (8,501) - (8,501)
LESS: TREASURY STOCK (25) (204) (b) (229) - (229)
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT (319) - (319) - (319)
----------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 19,572 (118) 19,454 12,541 31,995
----------------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 27,504 $ 3 $ 27,507 $ 7,541 $ 35,048
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
16
<PAGE>
CASMYN CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACQUISITIONS PRO FORMA REGISTRATION PRO FORMA AS
ACTUAL ADJUSTMENTS ACQUISITIONS ADJUSTMENTS ADJUSTED
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALES $ 382 $ 2,341 (f) $ 2,723 $ - $ 2,723
COST OF GOODS SOLD 490 1,396 (f) 1,886 - 1,886
----------------------------------------------------------------------------------
GROSS PROFIT (LOSS) (108) 945 837 - 837
----------------------------------------------------------------------------------
COSTS AND EXPENSES:
General and administrative expense 4,998 366 (f) 5,364 - 5,364
Depreciation, depletion and
amortization 99 194 (f) 293 - 293
Mineral exploration expense 1,010 - 1,010 - 1,010
Research and development 185 - 185 - 185
----------------------------------------------------------------------------------
6,292 560 6,852 - 6,852
----------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS (6,400) 385 (6,015) - (6,015)
----------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Minority interest in net loss of
subsidiary 3,502 - 3,502 - 3,502
Equity in net loss of
unconsolidated affiliate - (321) (h) (321) (321)
Other (177) - (177) 31 (g) (146)
----------------------------------------------------------------------------------
Other income (expense), net 3,325 (321) 3,004 31 3,035
----------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS $ (3,075) $ 64 $ (3,011) $ 31 $ (2,980)
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS PER COMMON SHARE $ (.40) $ .13 (i) $ (.27) $ .04 (i) $ (.23)
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 7,651 3,518 11,169 1,565 12,734
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
17
<PAGE>
CASMYN CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACQUISITIONS PRO FORMA REGISTRATION PRO FORMA AS
ACTUAL ADJUSTMENTS ACQUISITIONS ADJUSTMENTS ADJUSTED
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALES $ 1,066 $ 873 (f) $ 1,939 $ - $ 1,939
COST OF GOODS SOLD 757 513 (f) 1,270 - 1,270
----------------------------------------------------------------------------------
GROSS PROFIT 309 360 669 - 669
----------------------------------------------------------------------------------
COSTS AND EXPENSES:
General and administrative
expense 4,695 135 (f) 4,830 - 4,830
Depreciation, depletion and
amortization 101 71 (f) 172 - 172
Mineral exploration expense 448 - 448 - 448
Research and development 204 - 204 - 204
----------------------------------------------------------------------------------
5,448 206 5,654 - 5,654
----------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS (5,139) 154 (4,985) - (4,985)
----------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Minority interest in net loss of
subsidiary 499 - 499 - 499
Equity in net income of
unconsolidated affiliate - 81 (h) 81 - 81
Other 207 - 207 108 (g) 315
----------------------------------------------------------------------------------
Other income, net 706 81 787 108 895
----------------------------------------------------------------------------------
NET INCOME (LOSS) $ (4,433) $ 235 $ (4,198) $ 108 $ (4,090)
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
INCOME (LOSS) PER COMMON SHARE $ (.71) $ .25 (i) $ (.46) $ .08 (i) $ (.38)
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 6,271 2,939 9,210 1,565 10,775
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
18
<PAGE>
CASMYN CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The pro forma adjustments and eliminations are as follows:
(a) To record the issuance of 2,701,103 shares of the Company's common stock
for 7,024,103 shares of the common stock of Auromar at the exchange rate of one
share of the Company's common stock for each two and six tenths (2.6) shares of
Auromar. The transaction has been recorded as a purchase (principally mineral
properties) with the purchase price of the net assets being recorded at
predecessor cost prior to their acquisition by Auromar.
(b) Reclassification of the carrying value of Casmyn's 425,750 shares of
Auromar common stock which are assumed exchanged for 163,750 Casmyn shares and
then recorded as treasury stock.
(c) Under the terms of the $5,000,000 unsecured convertible debenture with
Societe Generale ("Sogen"), the Company is required to issue additional shares
of its common stock upon the merger with Auromar such that Sogen would maintain
its relative ownership interest in the Company. Under this provision, the
Company would be required to issue 237,218 additional shares.
(d) Exercise of 714,286 warrants in exchange for 357,143 common shares at $8.50
per share and exercise of 750,000 warrants in exchange for 375,000 common shares
at $13.00 per share, total proceeds of $7,785,716 which is net of estimated
costs of $125,000.
(e) Conversion of the $5,000,000 convertible debenture to 833,333 common shares
at $6.00 per share. Decrease of additional paid-in capital of $245,000
representing the reclassification of unamortized debt issuance costs relating to
the convertible debenture.
(f) The acquisitions adjustment and eliminations include the estimated results
of operations of the Zimbabwe properties for the period October 1, 1994 through
and including January 31, 1996 (date of acquisition). Revenues were computed
based upon the actual gold production for the Zimbabwe properties for the
period, cost of sales was computed using average cost of production per ounce
obtained from local mine engineering firms. Costs and expenses were determined
based upon the per ounce costs actually realized by the prior owners on a per
ounce of production basis. The financial statements have been adjusted to
reflect depletion expense that would have been recorded in the periods presented
had the transaction occurred on October 1, 1994. The depletion expense per
ounce of production was determined by dividing the total cost the Company has
incurred in acquiring the gold reserves by the estimated gold reserves acquired.
(g) Reduction of interest expense of $63 and $21 and amortization of debt
issuance costs of $45 and $10, for the nine months ended June 30, 1996 and the
year ended September 30, 1995 respectively, to reflect the assumed conversion of
the convertible debenture on October 1, 1994.
(h) To record the Company's equity in the income (loss) of WestAmerica for
the period October 1, 1994 through and including May 24, 1996 (date of
acquisition of interest). The financial statements have been adjusted to
reflect depletion expense that would have been recorded in the periods
presented had the transaction occurred on October 1, 1994. The depletion
expense pertaining to oil and gas production was determined by dividing the
excess of the purchase price of WestAmerica over the Company's portion of the
net assets of WestAmerica by the estimated reserves.
(i) To decrease the net loss per share to give effect to changes in net loss as
described above and the issuance of additional shares.
19
<PAGE>
CASMYN CORP.
BUSINESS OF THE COMPANY
The Company was originally incorporated under the laws of the State of Colorado
on December 4, 1984, as Fintech, Inc. (the "Company"). In November, 1985, the
Company completed its initial public offering of securities. A total of
10,276,500 units were sold at a public offering price of $.02 per unit. The
units were comprised of one Common Share and one Class A Warrant to purchase an
additional Common Share of the Company at an exercise price of $.06 per share
and one Class B Warrant to purchase an additional Common Share of the Company at
an exercise price of $.12 per share expiring November 16, 1986 and January 16,
1987, respectively. No warrants were exercised. The Company received net
proceeds of approximately $148,844 after deducting costs of $56,686 related to
the offering. In 1986, the Company loaned funds obtained in the initial public
offering to companies in the medical diagnostic field. The loans were
subsequently written off. On November 29,1991, the Company changed its name
from Fintech, Inc. to Summa Metals Corporation. In addition, on November 29,
1991, the Company's Board of Directors authorized a 1 for 400 reverse stock
split, thereby decreasing the number of outstanding shares to 69,874 on that
date. The Company was in the development stage from its inception until August
1994 when it purchased for approximately $150,000 all of the common stock of
Casmyn USA, Inc. ("Casmyn USA"), a Nevada corporation, from Dahya Holdings,
Inc., a related party. Prior to 1994, the Company's principal business was
performing contract research and development services.
On March 31, 1994, Amyn Dahya, an individual, acquired 2,400,000 shares (74% of
the voting securities of the Company at that time) from certain officers,
directors and shareholders in consideration of an agreement to loan the sellers
the sum of $100,000.
On September 14, 1994 the Company changed its name from Summa Metals Corporation
to Casmyn Corp.
On July 19, 1995 the Company placed a $5,000,000, 2.5%, unsecured Convertible
Debenture, due July 31, 2000, ("Debenture") with Societe Generale, Paris, France
("Holder"). Interest is payable semi-annually commencing January 31, 1996,
which, at the election of the Company, may be paid through the issuance of
shares of common stock of the Company. The Debenture provides for conversion to
Common Stock of the Company at $6.00 per share for the first two years after
issuance, increasing to $6.50 during the third year, $7.00 during the fourth
year and $7.50 during the fifth year. If the Company merges with Auromar
Development Corporation. ("Auromar") on terms described below, or such other
terms pursuant to which the Company issues shares of its Common Stock in
exchange for a controlling interest in Auromar, then the Company is obligated to
issue to the Holder, within 30 days after the effective date of such merger, a
number of shares of its Common Stock, at no cost, such that upon conversion, the
Holder shall be entitled to receive the number and kind of shares which,
together with the shares issued to the Holder following the merger, would be
equal to the same percentage of the issued and outstanding shares of Common
Stock the Holder would have held if the then-outstanding Debenture had been
converted immediately prior to the effective date of the merger. At June 30,
1996, the number of additional shares that the Company would be required to
issue in relation to the proposed merger with Auromar would have been
approximately 237,000. The net proceeds from this debenture were $4,700,000
after deducting $300,000 in costs relating to the placement.
ACQUISITION OF CONTROLLING INTEREST IN VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
On June 29, 1995, the Company acquired a voting controlling interest in Vector
Environmental Technologies, Inc. ("VETI") through the acquisition of 3,000,000,
5%, cumulative, convertible, voting preferred shares of VETI ("preferred
shares"), in exchange for approximately $2,300,000 in debts owing to the
Company. On September 29, 1995, the Company purchased an additional 1,000,000
preferred shares of VETI at $2.00 per share. Each preferred share is
convertible, at the Company's option, into one share of VETI common stock.
Preferred shares are entitled to vote with Common Shares, with the further
provision that each preferred share will be entitled to the equivalent of four
(4) common share votes, with the result that the Company has effective voting
control of VETI with a 56.25% voting majority. VETI is also related to the
Company through certain common officers, directors and significant stockholders.
As a result of the relationships between the Company and VETI, the investment in
VETI has been accounted for as a combination of entities under common control,
which is a method similar to a pooling of interests. Therefore, the
20
<PAGE>
accompanying consolidated financial statements include assets and liabilities of
VETI at their historical cost and operations of VETI for all periods presented.
INVESTMENT IN WESTAMERICA CORPORATION
On May 24, 1996 the Company entered into a Stock Purchase Agreement to exchange
shares with WestAmerica Corporation ("WACC" NASDAQ symbol - WACC), an Oklahoma
corporation, whereby the Registrant received 5,680,514 common shares of WACC
in exchange for 606,061 shares of the Company's common stock (approximately a
65% interest). WACC is engaged in the oil and gas exploration and production
business primarily in the states of Oklahoma and Texas. WACC also engages in
the securities and investment banking businesses through it's ownership of
WestAmerica Investment Group, Inc. and it's subsidiary WestAmerica Investment
Company, Inc. ("WIC"), a registered broker dealer. The exchange expands the
Registrant's strategic interests in resource development and will be accounted
for by the Registrant on the equity method.
Also on May 24, 1996, the Company entered into an Agreement with WACC and Edward
R. Foraker ("Foraker"), an individual and Director of WACC whereby the Company
is granted the authority to nominate two of the five members of the Board of
Directors of WACC. The Agreement also grants an irrevocable proxy to Foraker to
vote the WACC shares held by the Company, restricts any changes in the capital
structure of the companies and grants WACC a one year option to revoke the
transaction whereby the Company and WestAmerica would return the shares issued
under the Stock Purchase Agreement.
The Company's investment in WACC, representing approximately 65% of WACC's
outstanding common stock, is valued at approximately $6,970,000, representing
$11.50 per share of the Company's common stock. This value reflects a discount
from recent similar sized transactions to compensate for the restricted nature
of the shares issued in the transaction.
WACC was incorporated May 4, 1988 to consolidate oil and gas businesses, assets
and operations of its predecessor corporation with those of 11 limited
partnerships. Effective April 18, 1994 WACC changed its name from ECC Energy
Corporation. (See "Consolidated Financial Statements of WestAmerica
Corporation").
In 1994, WACC acquired the entire oil and gas leasehold interest in 7,448
contiguous acres in Washington, Nowata and Rogers counties of Northeastern
Oklahoma. WACC currently holds in excess of 17,000 acres of oil and gas leases
in the area, which include 119 wellbores with the potential for successful
completion in coalbed formations. Production from those wellbores will qualify
for tax credits under Section 29 of the IRC. During 1995, WACC completed
drilling the 14 well first phase of 28 well drilling program under contract with
Oklahoma Resources General Partnership, a 50% owned general partnership formed
by a wholly owned subsidiary of WACC to conduct the drilling program with
outside investors. All 14 of the wells found potentially productive natural gas
and will be completed in one or more coalbed formations.
In 1993, WACC purchased 100% of the common shares of WestAmerica Investment
Group, Inc.. WestAmerica Investment Group, Inc., operates through a wholly
owned subsidiary, WIC a registered broker-dealer and investment advisor business
which is headquartered in Scottsdale, Arizona.
PROPOSED ACQUISITION OF AUROMAR DEVELOPMENT CORPORATION
Pursuant to an agreement dated March 29, 1995, amended June 30, 1996, between
the Board of Directors of the Registrant and the Board of Directors of Auromar
Development Corporation, a British Columbia corporation, the Registrant has
offered to exchange one share of common stock of the Registrant for two and six-
tenths (2.6) shares of common stock of Auromar. The Offer to Exchange (the
"Offer") is applicable to all of the 7,024,103 shares of common stock of Auromar
outstanding on the date of consummation of the Offer. The exchange was approved
by the shareholders of Auromar at the Extraordinary General Meeting held on
March 12, 1996 pursuant to Sections 276-279 of the British Columbia Company Act
and has been approved by the Supreme Court of British Columbia. The Company
expects to complete the proposed acquisition in the near future.
21
<PAGE>
The purpose of the Offer is for Registrant to acquire 100% of all the issued and
outstanding shares of common stock of Auromar. Upon completion of the Offer
Auromar will become a wholly-owned subsidiary of the Registrant. Auromar is
related to the Registrant through common ownership of options to acquire certain
mineral properties in South Africa.
Auromar was incorporated under the laws of the Province of British Columbia,
Canada on August 20, 1987, as Kelan Resources Inc. The name was subsequently
changed to Auromar Development Corporation, pursuant to a Certificate of
Amendment to the Certificate of Incorporation filed with the Registrar of
Companies in the Province of British Columbia on June 22, 1992. Auromar's
principal business offices are located at 800 West Pender Street, Suite 440,
Vancouver, British Columbia V6C 2V6. Auromar is a mineral exploration company.
However, Auromar maintains no ongoing business operations. Auromar's primary
assets are options to purchase a 50% working interest in certain properties in
the Schweizer-Reneke area of South Africa on which the Registrant holds options
on the remaining 50% interest (See - "Casmyn Mining Corporation, South
Africa."). The acquisition of Auromar will provide the Registrant with full
control of the Schweizer-Reneke properties. The Company believes that such
control will facilitate negotiations with major mining companies in the
development of this property.
OTHER TRANSACTIONS
On September 14, 1994, the Company completed a private placement of 378,055
shares of common stock for net proceeds of $1,908,000. On September 29, 1995,
the Company completed a private placement of 714,286 units for net proceeds of
$4,750,009. Each unit consists of one share of Common Stock of the Company,
plus one warrant; two warrants, plus $8.50, will entitle the holder to purchase
one share of the Company's Common Stock. All warrants expire on October 1,
1997. VETI completed a private placement of 1,000,000 shares of its common
stock in September, 1995 for net proceeds of $2,375,000. At September 30, 1995,
$7,125,002 of these amounts was included in Common Stock subscriptions
receivable. The subscriptions receivable were collected subsequent to September
30, 1995.
The Company operates through the following subsidiaries:
<TABLE>
<CAPTION>
ENTITY: LOCATION BUSINESS PURPOSE
- ------- -------- ----------------
<S> <C> <C>
MINING
Casmyn Mining Corporation ("CMC") Nevada Mining operations - holding
company
Casmyn Mining Corporation, South Africa Nevada Mining operations - South
Africa
Casmyn Mining Zimbabwe [Private] Ltd. Zimbabwe Mining operations - Zimbabwe
Casmyn Gold Corporation Bahamas Gold acquisition and export
ENVIRONMENTAL TECHNOLOGIES
Casmyn USA, Inc. * Nevada Research and development
Casmyn Technologies Ltd. * Nevada Research and development of water
purification technology
Casmyn Desalco, Ltd. * Nevada Research and development on
desalination projects
Vector South Africa Ltd. * Nevada Licensed in South Africa to sell water
purification systems
Vector Environmental Technologies, Inc. Delaware Environmental technologies with a
focus on water treatment - world wide
</TABLE>
* Inactive or no significant activity, assets or liabilities.
Other than Vector Environmental Technologies, Inc. (VETI), all of the above
named companies are wholly-owned directly or indirectly, by the Company. The
Company owns 100% of the outstanding Series A Preferred shares of VETI which
results in a 56.25% voting majority.
22
<PAGE>
BUSINESS PURPOSE
The Company's focus is global resource development based on a strategy of
applying the effective use of advanced technologies to products and services
oriented toward providing efficient, cost effective and profitable solutions to
global environmental and resource development challenges. Primary challenges
currently being addressed include mineral resources development and water
treatment in developing countries.
Subsequent to the acquisition of the majority ownership of the Company by Mr.
Dahya, the business activities of the Company have centered around mineral
resource development. The primary focus to date has been the acquisition and
exploration of precious mineral resource properties in South Africa and Zimbabwe
and research and development related to minerals testing, process engineering
and environmental technologies through the Casmyn Mining Group. In addition,
the Company has positioned itself in the environmental industry through an
investment in the preferred stock of VETI. VETI is currently focused primarily
on the development, manufacture, sales and management of water treatment
equipment and facilities. Therefore, the Company and its wholly-owned and
majority-owned, through voting control, subsidiaries, are considered to operate
in two business segments, mining and environmental technologies, principally
water treatment systems. See Note 2 of the Notes to the Consolidated Financial
Statements for information on business segments.
CASMYN MINING GROUP
The Casmyn Mining Group ("CMG") operates principally through Casmyn Mining
Company, the holding company, and its wholly owned subsidiaries Casmyn Mining
Corporation, South Africa, and Casmyn Mining Zimbabwe [Private] Ltd. The
primary business activities of these subsidiaries is described below.
ACQUISITION OR DISPOSITION OF ASSETS
On January 31, 1996, the Company acquired 100% of the shares of a group of five
(5) private mining companies (the "Acquired Companies") controlled by the Muir
Family in Zimbabwe through E.W.B. Properties (Private) Limited (Matabeleland
Minerals (Private) Limited, Greenhorn Mines (Private) Limited, Morven Mining
(Private) Limited, Motapa Minerals (Private) Limited and Turk Mines (Private)
Limited. The Acquired Companies own mining claims controlling gold and silver
mineral rights covering approximately 1,200 hectares (approximately 2,965 acres)
on properties that lie within the Bubi Greenstone Belt, which is one of the
largest greenstone formations in Zimbabwe and include numerous shafts, mining
equipment and mineral processing mills with a total capacity of 1,000 tonnes per
day. The Company estimates that the overall gold resources at the Turk Mines
are 5,000,000 ounces. Independent engineering studies are currently underway
which may cause this estimate to change. The company believes that sustainable
production from the mines can be significantly increased through the application
of improved mining and processing management and technologies. The Company
believes that reserves will support a mine life in excess of 10 years.
The total consideration for this acquisition was approximately U.S. $4,071,415
(Zim $37,986,300) cash plus applicable taxes of U.S. $1,017,854 (Zim $9,496,575)
to be paid upon assessment subject to certain adjustments. The funds used to
conclude this acquisition were obtained from Company bank accounts, those funds
originated from a combination of private placements of Company Common Stock and
from proceeds of a convertible debenture.
Also on January 31, 1996, Casmyn Corp. purchased the assets of the Dawn Mine
property in Zimbabwe from Olympus Gold Mines Limited for approximately U.S.
$455,000 (Zim $4,250,000). The Dawn Mine is located in close proximity to the
Turk mine and mill and will be operated under a mine plan which includes the
Turk mine and mining properties in the area owned by the Company.
The combined Muir and Dawn properties have been producing gold since the early
1900's.
The Company, as part of its diamond and gold exploration activities in South
Africa, regularly acquires and divests options on mineral properties. While
certain of these properties may be thought to have strategic importance, none of
the
23
<PAGE>
properties acquired during the year ended September 30, 1995, or since then
to the date hereof, is considered to be financially material.
In October 1994, Vector Manufacturing Corp., a second tier subsidiary of VETI,
discontinued its custom metal fabrication business.
MINERAL RESOURCE DEVELOPMENT
INDUSTRY OVERVIEW AND CERTAIN FACTORS RELATING TO THE COMPANY'S PROPERTIES
COMPETITION
Competition comes from large established mining companies having substantial
capabilities and greater financial and technical resources than the Company.
Therefore, the Company may be unable to acquire future potential mining
properties on terms it considers acceptable. The Company also competes with
other mining companies in the recruitment and retention of qualified employees.
The Company's smaller size and broad strategic objectives, however, may provide
the Company with increased flexibility and certain strategic advantages over its
competitors in developing countries.
GOVERNMENT APPROVAL/REGULATIONS
The mining operations of the Company, through its wholly-owned subsidiaries
Casmyn Mining Corporation and Casmyn Zimbabwe [Private] Ltd., are conducted
primarily through its offices located in South Africa and Zimbabwe. Casmyn
Mining Corporation is qualified to do business in South Africa and, as such, is
subject to the laws of that country, which includes permits to allow the Company
to conduct exploration activities on optioned properties.
COMPLIANCE WITH ENVIRONMENTAL LAWS
The mining operations of the Company are directed at determining the presence of
economically viable mineral resource deposits on properties under option in
South Africa. It is the Company's intention, once such mineral resource
deposits are discovered, to identify a joint venture partner to develop and
operate the mining properties. Under the South Africa Minerals Act, 1991, the
Company and/or its joint venture partner are responsible for development of an
environmental impact assessment and an environmental management program for the
proposed mining venture which must be approved prior to the start of exploration
and/or mining operations. The cost of environmental compliance relating to
mineral development is estimated by management to be immaterial as of September
30, 1995 due to the nature of the Company's exploration activities. At September
30, 1995, the Company was not actively involved in mining. On February 1, 1996,
the Company acquired various gold mining properties and processing facilities in
Zimbabwe and has begun mining and processing gold at those facilities. The
Company is in compliance with environmental laws of Zimbabwe.
The operations of VETI are not subject to specific governmental approval or
regulation. The products of VETI are, however, significantly impacted by
environmental, health and import/export related government regulations and
programs. In many instances these regulations and programs provide strength to
VETI's marketing efforts. VETI's water purification systems help rural
communities in developing countries, as well as others, meet World Health
Organization and governmental standards for drinking water quality. Anticipated
costs relating to government approval and regulation, other than those
encountered in the normal course of business, are considered minimal.
RISK OF DEVELOPMENT, CONSTRUCTION AND MINING OPERATIONS
Should the Company, alone or with a joint venture partner, decide to proceed
with development of a mineral resource property, the ability to meet cost
estimates and construction and production time estimates cannot be assured.
Technical considerations, delay in obtaining governmental approvals, inability
to obtain financing or other factors could cause delays in developing mineral
resource properties.
24
<PAGE>
The businesses of gold and/or diamond mining are subject to a variety of risks
and hazards, including environmental hazards, industrial accidents, flooding and
the discharge of toxic chemicals. The Company (and its joint venture partners,
when identified) intend to obtain insurance in amounts the Company considers to
be adequate to protect itself against certain of these risks of mining and
processing. However, the Company may become subject to liability for certain
hazards for which it cannot obtain insurance or which it may elect not to obtain
insurance against because of premium costs or other reasons.
EXPLORATION PROGRAMS
A major part of the Company's business is the exploration of its existing
properties and the evaluation and pursuit of potential new prospects in the
exploration stage or of interests in companies which own such properties.
Substantial expenditures may be incurred in an attempt to establish the economic
feasibility of mining operations by identifying mineral deposits and
establishing reserves through drilling and other techniques, designing
facilities and planning mining operations. The economic feasibility of a
project depends on numerous factors, including the cost of mining and production
facilities required to extract the desired minerals, the total mineral deposits
that can be mined using a given facility, the proximity of the mineral deposits
to a user of the minerals, and the market price of the minerals at the time of
sale. There is no assurance that existing or future exploration programs or
acquisitions will result in the identification of deposits that can be mined
profitably.
The Company generally acquires the rights to explore for mineral resources on
various parcels of land through option payments and nomination agreements
negotiated with the property owner. The agreements have a term of 1 year with
the right to extend on a year to year basis. The Company is in the process of
determining the potential for economically viable mineral resources on
properties under option and will either renew or cancel options based upon this
determination.
CASMYN MINING CORPORATION, SOUTH AFRICA
Casmyn Mining Corporation, South Africa is conducting mineral exploration
programs in various areas of South Africa, primarily the Schweizer Property,
described in more detail below.
Schweizer Property
The Company has acquired a 50% interest in options on certain mineral
properties located in the Schweizer-Reneke area of South Africa. These
options cover an area in excess of 300 square kilimeters approximately
90 miles from the Kimberly diamond mining area. Auromar owns the option to
acquire the remaining 50% interest in any of the properties located in the
Schweizer-Reneke region.
Diamond Exploration Activities
There has been significant mining of diamonds in the alluvial gravels in the
area currently under option by the Company. The Company has conducted extensive
research on indicator minerals that are normally found in such diamond
operations. These indicator minerals suggest the potential presence of a
diamondiferous kimberlite pipe or a cluster of pipes within close proximity.
The Company has commenced an exploration program in this area directed at
identifying potential locations of kimberlite pipes. The exploration program
consists of geophysical studies which include gravity and magnetic surveys and
soil sampling. To date no kimberlite pipe(s) have been discovered and there is
no assurance that such pipe(s) will be discovered.
Gold Mining Activities
In addition to the diamond exploration activities discussed above, a core
drilling gold exploration program began on a portion of the Schweizer property
in which the Company holds a 50% interest in options, during March 1995. The
purpose of the drilling is to test a geologic model which suggests the presence
of gold bearing reefs representing an
25
<PAGE>
extension of the Witwatersrand Basin, an area that has produced almost 40% of
the world's gold. The model, which was developed by independent experts
specializing in Witwatersrand gold deposits, utilizes the interpretation of
geological sequences mapped in the Schweizer area based upon local
outcropping of Witwatersrand structures. Gravity surveys performed by
independent consultants identified a structure consistent with
the model where potential gold bearing reefs could occur at relatively
shallow depths. The ultimate goal of the core drilling is to determine
whether the Ventersdorp Contact Reef, which is historically a major source of
gold in the Witwatersrand, is present on the Company's properties.
CASMYN MINING ZIMBABWE [PRIVATE] LTD.
Casmyn Mining Zimbabwe [Private] Ltd. was organized and incorporated in Zimbabwe
to acquire mineral properties and mining operations as described below.
ZIMBABWE GOLD PROPERTIES
On January 31, 1996, the Company acquired 100% of the shares of a group of five
(5) private mining companies (the "Acquired Companies") controlled by the Muir
Family in Zimbabwe through E.W.B. Properties (Private) Limited (Matabeleland
Minerals (Private) Limited, Greenhorn Mines (Private) Limited, Morven Mining
(Private) Limited, Motapa Minerals (Private) Limited and Turk Mines (Private)
Limited. The Acquired Companies own mining claims controlling gold and silver
mineral rights on properties that lie within the Bubi Greenstone Belt, which is
one of the largest greenstone formations in Zimbabwe and include numerous
shafts, mining equipment and mineral processing mills with a total capacity of
1,000 tonnes per day. The Company estimates that the overall gold resources at
the Turk Mines are 5,000,000 ounces. Independent engineering studies are
currently underway which may cause this estimate to change. The company
believes that sustainable production from the mines can be significantly
increased through the application of improved mining and processing management
and technologies.
The total consideration for this acquisition was approximately U.S. $4,071,415
(Zim $37,986,300) cash plus applicable taxes of U.S. $1,017,854 (Zim $9,496,575)
to be paid upon assessment of said taxes as defined in the terms of the
Memorandum of Agreement. The amount of consideration is subject to certain
adjustments. The funds used to conclude this acquisition were obtained from
Company bank accounts, those funds originated from a combination of private
placements of Company Common Stock and from proceeds of a convertible debenture.
26
<PAGE>
The aforementioned consideration was determined as a result of arm's length
negotiations between E.W.B. Properties (Private) Limited and the Company. The
principal factors considered in the determination of the consideration given for
the Acquired Companies include (a) the tangible and intangible asset values of
the businesses acquired including primarily gold reserves, (b) the potential for
increasing gold production of the Acquired Companies and (c) the expected future
operations and related contributions that the companies are expected to make to
the total value of the Company. The shafts, mining equipment and mineral
processing mills acquired in this transaction were used by the Acquired
Companies for the purpose of mining and processing gold, it is the intention of
the Company to continue such use.
Also on January 31, 1996, Casmyn Corp. purchased the assets of the Dawn Mine
property in Zimbabwe from Olympus Gold Mines Limited for approximately U.S.
$455,000 (Zim $4,250,000). The Dawn Mine is located in close proximity to the
Turk mine and mill and will be operated under a mine plan which includes the
Turk mine and mining properties in the area owned by the Company.
The combined Muir and Dawn properties have been producing gold since the early
1900's.
On August 1, 1996 an option agreement on gold mining properties in Zimbabwe was
concluded, on the "Elumba and Up To Date" properties which are within 5
kilometers of the Turk Mine and Mill and were past producers of gold and
silver.
CASMYN GOLD CORPORATION
Casmyn Gold Corporation was organized (subsequent to September 30, 1995) and
incorporated in the Bahamas to act as an agent for the purpose of converting raw
gold ore to refined ore.
RELIEF CANYON MINE
On May 7, 1996, the Company entered into a 50:50 joint venture with Newgold
Incorporated ("Newgold"), a private company based in Reno, Nevada, for the
development of the Relief Canyon Mine located in Pershing County, Nevada.
The Relief Canyon Mine was operated during the period 1984 to 1990 producing
in excess of 130,000 ounces of gold. Newgold acquired the mine in 1995 and
completed additional geological studies establishing a preliminary resource
estimate of 8.6 million tons at an average grade of .022 ounces of gold per
ton. Newgold has substantially completed a program to upgrade the mine and
processing facilities to a capacity of 12,700 tons per day. The Company
contributed or accrued approximately $1,400,000 for its 50% interest in the
venture.
MARKET FACTORS AND VOLATILITY
Active international markets exist for both gold and diamonds, minerals which
are of a commodity nature, as such the Company anticipates no barriers to the
sale of these minerals. However, the marketability of natural resources which
may be acquired or discovered by the Company will be affected by numerous
factors beyond the control of the Company. These factors include market
fluctuations and the proximity and capacity of natural resource markets and
processing equipment. Prices of certain minerals have fluctuated widely,
particularly in recent years, and are affected by numerous factors beyond the
control of the Company. Future mineral prices cannot be accurately predicted.
A decline in the price of a mineral being produced or expected to be produced by
the Company could have a material adverse effect on the Company.
NEED FOR ADDITIONAL FINANCING
Continued exploration, development and production on the Company's mineral
properties, including the purchase of additional properties, the
exercise/extension of options on properties and construction of mining
facilities is likely to
27
<PAGE>
require substantial additional financing, and there is no assurance that the
Company will be able to secure such financing on acceptable terms.
PATENTS, COPYRIGHTS AND LICENSES
The Company holds patents on a continuous grind-leach process for gold ore grade
evaluation.
EMPLOYEES
The Company and its subsidiaries currently have three-hundred-fifty (350)
employees. These employees are primarily management and professional staff and
are not subject to any collective bargaining agreements or union affiliations.
Relations between management and employees are considered good.
GLOSSARY OF MINING TERMS AND DEFINITIONS
Presented below are the definitions of various mining terms that were gathered
from Securities and Exchange Commission rules and regulations and/or mining
industry literature.
KIMBERLITE PIPES - geologic structures containing diamond bearing material.
INDICATOR MINERALS - minerals such as garnets, ilmenites, chromites and chrome
diopside that are found in soil sampling that are indicative of the presence of
kimberlitic materials.
MINERALIZED DEPOSIT - a mineralized body which has been physically delineated by
drilling, underground work, surface trenching and other workings or drill holes
to contain a sufficient amount of mineralized material with an average grade
sufficient to warrant further evaluation. Such deposit does not qualify as a
commercially mineable (or viable) ore body until technical, economic and legal
factors have been sufficiently satisfied to classify the mineralized material as
a reserve.
RESOURCE - the estimated quantity and grade of mineralization that is of
potential economic merit. A resource does not require specific mining,
metallurgical, environmental, price, and cost data, but the nature and
continuity of mineralization must be understood.
28
<PAGE>
WATER TREATMENT AND PURIFICATION
VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
The Company holds 100% of the issued and outstanding Series A Preferred
shares of Vector Environmental Technologies, Inc. (VETI), which represents
56.25% of the total votes and gives the Company effective voting control.
Preferred shares are entitled to vote with Common Shares with the further
provision that each preferred share is entitled to the equivalent of four (4)
common share votes. Preferred Shares are convertible into Common Shares at
the Company's option and share equally with Common Shares with respect to
dividends, results of operation and assets of VETI. Through its ownership of
Preferred shares the Company holds a 24.3% equity interest in VETI.
Effective June 19, 1995, VETI acquired 94% of the outstanding shares of
Vector Venture Corporation (VVC), a Canadian company, through a tender offer
providing for an exchange of one share of VETI for each share of VVG. The
acquisition of VVG has been accounted for as a combination of entities under
common control, which is a method similar to a pooling of interests.
VETI's principal business is to develop or acquire leading edge environmental
technologies for rapidly expanding global markets in water treatment,
purification and depollution. The corporate goal is to build VETI into a
major multinational corporation with a strong technical foundation, capable
of providing lasting solutions which address short, medium and long-term
water related environmental issues.
VETI's current focus is primarily in the area of water treatment and
purification. The company's Diamond Rain-TM- water purification systems are
designed to purify water from rivers, lakes and other water sources using a
combination of filtration, adsorption and microbial destruction processes to
produce safe and healthy drinking water, with technical and economic
efficiency that is required for conditions which exist in developing nations.
The MCV process, used in many Diamond Rain-TM- systems, was the recipient of
the NASA Invention of the Year and Commercial Invention of the Year Awards in
April, 1994.
During 1995, VETI's primary market focus was in Vietnam, however, the company
is in the process of developing programs in India, Ghana, South Africa,
Mexico and the United States.
In Vietnam, VETI, through its wholly-owned subsidiary Vector Vietnam Ltd.
(VVL) (as described below), is actively marketing the full range of VETI
water related products and services.
In India, VETI is currently in negotiations with one of the largest
manufacturers of home appliances in India, which has several thousand
distribution outlets across India. VETI's products have passed the testing
and certification requirements for distribution in India. VETI expects to
begin marketing its complete line of products in India in the fourth calendar
quarter of 1996.
In Ghana, VETI is currently negotiating with the Ghanaian Government on the
supply of 85 Community Scale water supply plants, valued at approximately
$11,000,000. Diamond Rain-TM- products have passed the testing and
certification requirements of Ghana.
In South Africa, at the invitation of the South African government, VETI has
submitted a proposal regarding a nationwide water purification program for
the supply of safe water to the rural and semi-urban townships covering the
government's Reconstruction and Development Program. If negotiations are
successful, the first phase of the program contemplates the sale of
approximately $50,000,000 over a two year period with a subsequent five-year
rollout of $250,000,000. A Community Scale Diamond Rain-TM- system installed
at the Umgeni River has successfully passed on-site testing by a leading
South African Water Board.
In Mexico, VETI has shipped an initial order of consumer products for the
Mexican market valued at approximately $40,000.
29
<PAGE>
In North America, prompted by growing water quality concerns, VETI plans to
introduce a line of consumer-based products to combat Cryptosporidium and
Giardia, as well as reduce chlorine, lead and turbidity. The Company has taken
steps to penetrate this market by recently employing additional sales and
marketing personnel, engaging a national sales representative organization
currently covering most national mass merchandisers, retaining the services of a
major national advertising agency and opening a North American sales office in
Dallas, Texas. Plans for 1996 call for the expansion of the Dallas office to
include a distribution and assembly center to cover NAFTA related sales.
OPERATING SUBSIDIARIES OF VETI
VETI currently operates through 7 (seven) subsidiaries:
<TABLE>
<CAPTION>
ENTITY LOCATION BUSINESS PURPOSE
<S> <C> <C>
Vector Vietnam, Ltd. Vietnam Holds and manages Vietnamese operations
Vector Venture Corp. * Canadian Holds certain technologies and licenses
Vector India * Nevada Business development in India
Vector Manufacturing, Corp. Nevada Provides purchasing and manufacturing services
STOX Systems, Inc. Canadian Markets hazardous materials storage systems
CGL Technologies, Inc. * Nevada Research and development water purification
Alpine Water Purification, Inc. Colorado Markets consumer water treatment equipment
</TABLE>
* Inactive or no significant activity, assets or liabilities
Other than Vector Venture Corp. (VVC), all of the above named corporations
are wholly-owned by the Company. The Company owns approximately 94% of the
outstanding shares of VVC.
VECTOR VIETNAM LTD. ("VVL")
VVL markets the full range of VETI's water treatment and purification equipment,
products and services throughout the country of Vietnam. The primary markets
currently addressed by VVL include: the sale of personal and household water
purification systems to both the retail and wholesale markets; the sale and
lease of water purification systems to schools and hospitals; the sale of
purified water and water products through company and operator owned retail
water stores, the development and operation of water bottling plants and sale of
bottled water; and the installation and management of water supply plants for
rural and semi-urban communities. To date, VVL has experienced strong market
demand in Vietnam for its products and services and has devoted substantial
resources to the development of in-country support systems and staff. During
1995, sales growth was primarily in the sale of personal and household systems
and the sale or lease of systems to schools and hospitals. VVL has installed and
commissioned its first bottling plant and its first community water supply plant
in April and May 1996.
The installation and management of community water treatment facilities is
anticipated to represent a major contributor to future results. Rural water
agreements have been signed with over 50 provinces under a Build Operate and
Transfer (BOT) framework. The first semi-urban water supply plant was
commissioned in April 1996 with an additional 6 plants of similar size expected
to be completed by September 30, 1996, with a total of 50 plants targeted for
installation during calendar 1996. The scope of the BOT program requires the
supply of approximately 10,000 community sized systems over a five year period.
The program has the current support of the Vietnamese Government and is
contingent on the substantial financial commitment and guarantee of the
Government. The proposal provides that daily operations and maintenance of water
plants will be performed under contract by a government owned company or
companies coordinated through the Ministry of Construction, which has country
wide responsibility for ground water resources. This program anticipates VETI's
ability to finance between 20% to 40% of the capital cost of this program
through international financial sources, however, there is no assurance that
such funds will be available in the amounts necessary or under acceptable terms.
30
<PAGE>
Water purification systems have been installed in schools in Southern,
Central, and Northern Vietnam providing safe drinking water to students on a
daily basis. To date VVL has installed a total of 60 school systems. For
1996, an estimated 1,000 school installations are targeted. According to the
Nationwide BOT Program, VVL has undertaken with the Vietnamese Government to
install 15,000 school water purification systems over the next five years.
Water purification systems have been installed in several hospitals in
Southern, Central, and Northern Vietnam. For 1996, an estimated 500 hospital
installations are targeted. VVL has further undertaken with the Vietnamese
government to provide safe drinking and utility water to 11,000 hospitals
over a five (5) year period.
On October 5, 1995, VVL commissioned a Diamond Rain-TM- water purification
system under a contract with Vietnam Airlines at the Hanoi Noi Bai
International Airport. The system currently supplies purified water to all
Vietnam Airlines local and international flights from Hanoi. Similar
contracts are under negotiation for the Ho Chi Minh and Da Nang Airports.
As of April 30, 1996, VVL had opened 5 Diamond Rain-TM- Water Stores in the
North, Central, and Southern regions of Vietnam. These stores provide bulk
purified water to customers in the urban areas, on a cash sale basis. VVL is
currently working with owner-operators throughout Vietnam under a specially
prepared program.
Construction of the VVL's first Diamond Rain-TM- water bottling plant was
completed and commissioned in May 1996 and will have an initial annual
capacity of 8 million liters, with provision to increase the throughput to 16
million liters per year. VVL expects this plant to generate revenues of
approximately $4 million per annum with ramp up commencing in the second
calendar quarter 1996. Nationwide distribution agreements for Diamond
Rain-TM- bottled water have been negotiated with a major beverage distributor
in Vietnam.
To date, in excess of 5,000 Diamond Rain-TM- household water purifiers had
been sold in Vietnam.
VECTOR MANUFACTURING CORPORATION ("VMC")
VMC is a wholly owned subsidiary of VVC that provides purchasing and
manufacturing services relating to VETI's water purification product lines.
VMC sells water purification products to distributors as well as its
subsidiary companies Alpine Water Purification, Inc. and VVL.
ALPINE WATER PURIFICATION, INC. ("ALPINE")
VETI markets a line of water treatment products under the Alpine name,
primarily directed toward personal and household markets, involving water
treatment cartridge technologies. These products are designed primarily for
the North American market to improve taste.
STOX SYSTEMS, INC. ("STOX")
STOX has historically been involved in the design, engineering and
installation of a broad range of hazardous materials storage and
transportation systems. STOX has developed a diverse product line which
consists primarily of prefabricated relocatable buildings or containers for
storage of most classes of hazardous materials. These systems are designed to
safely handle or store hazardous raw materials, reagents, explosives,
products, and effluents from a broad spectrum of industries. The manufacture
of these systems has been subcontracted to various other companies.
There is a growing worldwide concern over the health and safety implications
of improper storage and handling of hazardous materials. The market for these
products has not developed to the extent anticipated. VETI remains committed
to the long term viability of this product line, but has no plans to actively
market this product in 1996.
31
<PAGE>
COMPETITION
VETI's marketing strategy for water purification systems is to utilize
exclusive agreements with individuals, corporations, or organizations which
management believes provide contacts and expertise necessary to penetrate
target markets. Initial market focus has been directed primarily to
developing nations, where the need for purified drinking water is most
critical and where VETI's technology and its commitment to developing the
infrastructure necessary to assure long term water quality, has an advantage
over competitive systems.
With the exception of large infrastructure projects involving municipal
systems for large cities, competition relating to water treatment equipment
and services in developing countries is weak and fragmented with most
competitors offering only a limited capacity in terms of technology and
product diversification. VETI maintains a broad product line using a wide
variety of technologies with a strategy of matching the product and
technology to the problem or situation. VETI's products are competitively
priced in all of its target markets.
PURCHASING AND PRINCIPAL SUPPLIERS
The raw materials used in VETI's products include primarily filters, filter
housings, treatment media, treatment chemicals, fiberglass tanks, aluminum
sheets and various plumbing supplies. Most of these components are of a
standard or commodity nature and widely available.
VETI maintains relationships with several principal suppliers and
subcontractors due to quality considerations and in order to avail itself of
volume pricing. No supplier is currently considered a sole source.
Alternative suppliers with acceptable technology and quality have been
identified for all critical components.
PATENTS, COPYRIGHTS AND LICENSES
Alpine holds a patent relating to the design of its countertop water
purification cartridge.
Technologies relating to water purification and treatment and hazardous
material storage, while proprietary, are based on know-how and trade secrets
and are not patented. VETI does not intend to patent these technologies due
to the nature of the technologies and the level of public disclosure involved
in the patent process.
GOVERNMENT APPROVAL/REGULATIONS
The operations of VETI are not subject to specific governmental approval or
regulation. The products of VETI are, however, significantly impacted by
environmental, health and import/export related government regulations and
programs. In many instances these regulations and programs provide strength
to the VETI's marketing efforts. The Diamond RainTM water purification
systems help rural communities in developing countries, as well as others,
meet World Health Organization and governmental standards for drinking water
quality. Anticipated costs relating to government approval regulation, other
than those encountered in the normal course of business, are considered
minimal.
RESEARCH AND DEVELOPMENT
VETI is committed to ongoing research and development. The nature of
environmental issues provides a constant supply of challenges and
opportunities for technology based solutions. VETI estimates that it spent
$185,053, $410,754 and $186,805 on research and development activities during
fiscal years ended September 30, 1995 and June 30, 1994 and the three months
ended September 30, 1994, respectively (these amounts are before elimination
of intercompany amounts). During the past year VETI devoted substantially all
of its research and development efforts toward the review and development of
water purification systems and technologies. While a broad line of water
purification systems has been developed, continued research and development
in this area is ongoing. This research is expected to produce additional
product offerings, address new problem areas, reduce the capital cost and
maintenance of equipment and improve efficiency. Research and development is
conducted or coordinated primarily through contracts with the Company.
32
<PAGE>
The Company employs qualified scientists, technologists and engineers
experienced in the fields of environmental protection, water purification,
treatment of effluents from mineral processing operations, and pollution
control of water. The Company established its United States operations in
1991; it occupies a 6,500 square foot building that is fully equipped with
offices, laboratories, pilot testing and storage areas. The Company provides
research and development services to VETI to develop commercial applications
for water purification technologies. In addition, the Company provides
technical staff to VETI as required. The Company bills VETI for these at
rates approximating cost recovery.
FACILITIES
The Company is located in Sparks, Nevada in office space which is currently
occupied under a month-to- month lease at a cost of approximately $4,100 per
month. These operations occupy a portion of a 6,500 square foot unit which
includes office and laboratory facilities which are shared with certain
related companies. Those companies reimburse the Company for a portion of the
monthly rent. These facilities are adequate for the current level of
operations and sufficient office and laboratory space is conveniently located
to support future growth.
Casmyn Mining Corporation, South Africa is located in Pretoria, South Africa
in office space which is currently occupied on a month-to-month basis at a
cost of approximately $1,700 per month. Casmyn Zimbabwe [Private] Ltd., is
located near Bulawayo Zimbabwe in office space and facilities owned by Casmyn
Zimbabwe [Private] Ltd.
Effective December 1995, VVL occupies office space in Ho Chi Minh City and
Hanoi under 36 month leases at an approximate cost of $5,000 per month. These
facilities include offices, temporary living quarters and product show rooms.
VVL also operates two retail water stores, one in Ho Chi Minh City and one in
Hanoi. VVL has constructed a water bottling plant in the Nam Ha Province of
Vietnam which began operations in June 1996.
EMPLOYEES
VETI and the Company currently have in excess of three-hundred-fifty (350)
employees. These employees include management and professional staff and mine
workers in Zimbabwe and are not subject to any collective bargaining
agreements or union affiliations. Relations between management and employees
are considered excellent.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Effective December 12, 1994, the Company dismissed its prior certifying
accountants, Albright, Persing & Associates, Ltd. ("Albright") and retained
as its new certifying accountants, Deloitte & Touche LLP. Albright's report
on the Company's financial statements during the two most recent fiscal years
preceding the date hereof (periods ended September 30, 1993 and September 30,
1992) contained no adverse opinion or a disclaimer of opinion, and was not
qualified as to uncertainty, audit scope or accounting principles. The
decision to change accountants was approved by the Company's Board of
Directors.
During the last two fiscal years and the subsequent interim period to the
date of this Prospectus, there were no disagreements between the Company and
Albright on any matters of accounting principles or practices, financials
statement disclosures, or auditing scope or procedures, which disagreements,
if not resolved to the satisfaction of Albright, would have caused it to make
a reference to the subject matter of the disagreements in connection with its
reports.
33
<PAGE>
MANAGEMENT
The following is a list of the directors and officers of the Company:
NAME AND ADDRESS POSITION(S) HELD
Amyn Dahya Chairman of the Board,
1335 Greg Street #104 Chief Executive Officer and
Sparks, NV 89431 President
Hanif Dahya Vice Chairman of the Board of
1335 Greg Street #104 Directors
Sparks, NV 89431
Vijay J. Fozdar Director, Managing Director
1335 Greg Street #104 Finance & Corporate Development
Sparks, NV 89431
Sandro Kunzle Director
Tenuta Aia Vecchia
58029 Sassafortino (GR)
Italy
Mehdi Nimjee Director, Vice President Metallurgy
Unit #1 - 6645 Tomken Rd.
Mississauga, Ontario
Canada L5T 2C3
Douglas C. Washburn Vice-President, Treasurer and
1335 Greg Street #104 Secretary
Sparks, NV 89431
Dr. Gregory J. Gosson Vice President Geology and Mining
Suite 201, United Bank Bldg.
Heuwel Ave / Heuwelstraat
Verwoerdburg, R.S.A.
Dennis E. Welling Controller
1335 Greg Street #104
Sparks, NV 89431
BACKGROUND OF OFFICERS AND DIRECTORS OF THE COMPANY
AMYN S. DAHYA. Mr. Dahya has extensive international experience in project
development, engineering, joint ventures, and finance. Prior to joining the
Company in 1993, he has held senior positions with Davy McKee, an
international engineering firm and in 1987 he founded Casmyn Group of
Companies specializing in mineral and environmental engineering, which he has
developed for the last seven (7) years. Mr. Dahya serves on the Board of
Directors of several companies, including Diamond Fontein International,
Vector Venture Corp., and VETI where he also holds executive management
positions.
HANIF DAHYA. Mr. Dahya is a graduate from Harvard Business School (MBA) with
an undergraduate degree in (BSc) in Production Engineering from Loughborough
University, UK. He has built a distinguished career on the Wall Street and
has held senior positions with high profile investment banks including E F
Hutton, L F Rothschild Mortgage Corp. (CEO) and Union Bank of Switzerland
(managing Director -- UBS Securities). He is currently a partner at Sandler,
34
<PAGE>
O'Neil, a Wall Street investment bank. His experience includes multi-million
dollar financings and bond issues. As an advisor to the Board of Vector, he
provides strategic direction with respect to the Company's financial planning
and growth, which is primarily focused on expansion of operations and
acquisitions of other cash flow generating companies in the environmental
industry.
VIJAY J. FOZDAR. Prior to joining VETI as President, Mr. Fozdar was a founder
and Managing Director of Bristol International, Ltd., a Dallas-based merchant
banking firm, and the Managing Director of Bristol WorldSource, Inc. Before
Bristol, he founded and was General Manager for First RepublicBank Trade. Prior
to returning to the U.S. in 1978, Mr. Fozdar spent over fifteen years working
with several major trading companies operating in the Far East where he helped
to establish distribution systems for a number of U.S. consumer and industrial
products companies. Mr. Fozdar was formerly a member of the Export Trading
Company Committee of Bankers Association for Foreign Trade (BAFT) and served on
the Dallas Mayor's Trade and Investment Task Force. He is currently a member of
the Advisory Board for the Center for International Business Studies at Texas
A & M University. In addition, Mr. Fozdar is a frequent guest lecturer on
international trade issues and has addressed market intelligence, structured
trade finance, international marketing, and specific country seminars and their
related issues. Mr. Fozdar has served on various international trade committees
in the U.S.
SANDRO KUNZLE. Mr. Kunzle has over 23 years of international banking and finance
experience. During his career, Mr. Kunzle has held senior positions with several
Swiss banks and financial institutions. He currently holds the position of
Managing Director of Witra Inc., an investment firm based in Switzerland. His
expertise in international finance and venture capital adds significant
experience to the Company's international business development efforts.
MEHDI C. NIMJEE. Mr. Nimjee brings to the Company twenty years of project
management experience in the field of analytical chemistry and its applications
to exploration, mining, agriculture, hazardous materials handling and the
environment. He has also had experience in designing and setting up project
specific laboratories internationally. Mr. Nimjee currently holds executive and
board positions with the Casmyn Canadian organization.
DOUGLAS C. WASHBURN. Mr. Washburn holds a MBA/CPA and brings twenty-four (24)
years of financial management experience to the Company. Prior to joining the
Company in 1993 he was a principal at Washburn Partners, a financial consulting
firm, from 1990 to 1993. Between 1980 and 1990, he was Vice President and
Controller of Armco Financial Corporation, a $1 billion multinational merchant
bank and its successor Glenfed Financial Corporation. Through his background he
brings to the Company expertise in areas of international finance, planning,
taxation, accounting and management information systems.
DR. GREGORY G. GOSSON. Dr. Gosson is the Chief Geologist for Casmyn Mining
Corporation and is overseeing the Company's exploration activities from the
Pretoria, South Africa office. Dr. Gosson has been involved in the mining
industry since 1977 and has managed projects in Canada, the U.S.A., the
Caribbean, South East Asia, New Zealand, and most recently in South Africa.
Prior to joining Casmyn, Dr. Gosson was Chief Geologist for Plexus Resources
in the U.S.A. He is a graduate of Queen's University, Canada and obtained his
Ph. D. in Geology from Victoria University, New Zealand. Dr. Gosson has been
managing Casmyn's property acquisitions and exploration efforts in South
Africa for the past three and one-half years. His experience in base and
precious metal deposits, precious stones, coal, and the oil and gas industry
will be instrumental in identifying and developing mining opportunities for
Casmyn worldwide.
DENNIS E. WELLING. Mr. Welling, a CPA, currently serves as Controller. He has
twenty-four (24) years internal and external audit and controlling
experience, including positions with Deloitte & Touche, Armco Steel
Corporation and Glenfed Financial Corporation. He has significant management
information systems experience in the mining, manufacturing and financial
services sectors.
EXECUTIVE COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
In 1994, upon Mr. Dahya's acquisition of a controlling interest in the
Company, the organizational structure of the Company was reconstituted to
implement the development of mineral resources and environmental
technologies. Prior to 1995 there was no compensation paid to any of the
officers or directors. On April 14, 1995, the Company hired an
35
<PAGE>
entirely new management team, all of whom had previously maintained
consulting relationships with the Company and/or are officers of the
Company's subsidiary Vector Environmental Technologies, Inc.
Since the Company has no compensation committee, or other board committee
performing equivalent functions, the Company's full Board of Directors
participates in and approves all deliberations concerning executive officer
compensation.
On December 31, 1993, the Company's subsidiary, Vector Environmental
Technologies, Inc., entered into a ten-year employment contract with Amyn
Dahya, Chairman of the Board, President and Chief Executive Officer. Pursuant
to the terms of the contract, Mr. Dahya will earn an annual base salary of
$150,000, which increases by no less than 10% per year if such an increase is
approved by the Board of Directors. Under this contract, Mr. Dahya also
receives reimbursement for business expenses and normal group benefits
available to other executives of the VETI This contract also provides Mr.
Dahya with 5-year, non-qualified, stock options to purchase shares of Common
Stock of the VETI at an exercise price of $1.00 per share, The issuance of
these shares is not intended or anticipated to significantly dilute the
equity of the Company. (See "CERTAIN TRANSACTIONS.")
36
<PAGE>
Under the terms of the employment contract, Mr. Dahya has been granted options
to purchase shares of VETI's Common Stock pursuant to the schedule and LTIP
table:
NO. OF SHARES TIME OF VESTING
- ------------- ---------------
250,000 Immediately upon execution of the Employment Agreement
250,000 When gross sales of VETI reach $2,500,000
250,000 When gross sales of VETI reach $5,000,000
250,000 When gross sales of VETI reach $7,500,000
The following is a Summary Compensation Table disclosing annual compensation
over $100,000 paid to the executive officers of Registration and/or Option/SAR
Grants during the last fiscal year:
SUMMARY COMPENSATION TABLE
(INCLUDES COMPENSATION PAID BY THE COMPANY AND VETI)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------------------------------------------
AWARDS PAYOUTS
- ------------------------------------------------------------------------------------------------------------
ALL
FISCAL OTHER RESTRICTED OTHER
NAME AND YEAR ANNUAL STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION ENDING SALARY BONUS COMP. AWARD(S) SAR'S PAYOUTS SATION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amyn Dahya, 1995 $150,000 None None 0 0
President 1994 $150,000 None None 0 0
and CEO 1993 $100,000 None None $718,750 250,000(2) None None
(1)
- ------------------------------------------------------------------------------------------------------------
Vijay Fozdar, 1995 $60,000* None $60,000 (4) (4) None None
Managing Director (3)
Finance & Corporate
Development
- ------------------------------------------------------------------------------------------------------------
Mehdi Nimjee, 1995 $60,000 None None (4) (4) None None
Director and VP 1994 $60,000 None None
1993 $60,000 None None
- ------------------------------------------------------------------------------------------------------------
Douglas Washburn, 1995 $60,000* None None (4) (4) None None
VP, Treasurer and 1994 $60,000* None None
Secretary 1993 $60,000* None None
-----------------------------------------------------------------------------------------------------------
Dennis Welling, 1995 $60,000* None None (4) (4) None None
Controller 1994 $54,162* None None
1993 $50,000* None None
- ------------------------------------------------------------------------------------------------------------
Duane Dunk, 1995 $75,600* None None (4) (4) None None
EVP of VETI 1994 $73,000* None None
1993 $60,000 None None
- ------------------------------------------------------------------------------------------------------------
David Chase, 1995 $72,000* None None (4) (4) None None
VP of VETI 1994 $72,000* None None
1993 $72,000* None None $431,250 150,000
(1)
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Paid by VETI.
(1) Calculations are based on $3.875 per share, the market value of stock on
December 31, 1993 the date the Options were granted, less the option price
of $1.00 per share.
(2) Immediately upon execution of his employment contract, on December 31,
1993, Mr. Dahya was granted an option to purchase 250,000 shares of VETI's
Common Stock at an exercise price of $1.00 per share for a period
of 5 years,
37
<PAGE>
expiring on December 31, 1998. As of the date of this Prospectus, none of
these Options have been exercised. (See "CERTAIN TRANSACTIONS.")
(3) Paid to Bristol World Source ("Bristol") for international marketing and
management consulting services, Mr. Fozdar is a princpal with Bristol.
(4) During 1995, the Company and VETI adopted stock option plans for key
officers and employees. All options granted by the Company during 1995 were
granted on June 28, 1995; options to purchase 660,000 Common Shares were
granted with an option price equal to the then market price of $5.00 per
share and options to purchase 246,000 shares were granted at $.04 per
share. All options granted during 1995 by VETI were granted on June 20,
1995 with an option price equal to the market price of $1.00 per share
on the grant date. See EMPLOYEE STOCK OPTION PLANS for additional
information on plans. The following tables summarize the number and value
of options to purchase stock granted under these plans:
THE COMPANY
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
Securities underlying
Restricted Stock Award (s) Options / SARs
Name ($) (#)
Exercisable/Unexercisable Exercisable/Unexercisable
----------------------------------------------------------------------------------------------
<S> <C> <C>
Amyn S. Dahya $0 / $0 0/0
Vijay Fozdar $248,000 / $0 50,000/150,000
Douglas C. Washburn $62,000 / $62,000 12,500/62,500
Dennis E. Welling $24,800 / $24,800 5,000/35,000
Duane Dunk $24,800 / $24,800 5,000/35,000
David Chase $124,000 / $124,000 25,000/75,000
----------------------------------------------------------------------------------------------
</TABLE>
* Options are subject to vesting period of up to four years.
VETI
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
Securities underlying
Restricted Stock Award (s) Options / SARs
Name ($) (#)
Exercisable/Unexercisable Exercisable/Unexercisable
----------------------------------------------------------------------------------------------
<S> <C> <C>
Vijay Fozdar $49,500 / $0 99,500/100,500
Douglas C. Washburn $0 / $0 13,200/26,800
Dennis E. Welling $0 / $0 13,200/26,800
Duane Dunk $0 / $0 16,500/33,500
David Chase $0 / $0 16,500/33,500
----------------------------------------------------------------------------------------------
</TABLE>
* Options are subject to vesting period of up to four years.
No compensation is currently paid to non-employee directors.
All other executive officers of the Company listed above received a combined
annual cash compensation of $156,000 for the fiscal year ended September 30,
1995. In addition, the Company pays a portion of each employee's health
insurance premium.
There are no employment contracts, other than with Mr. Amyn Dahya outlined
below, proposed termination of employment or change-in-control arrangements
between the Company and any of its directors or executive officers.
38
<PAGE>
The following table lists the Options granted to employees of the Company,
excluding those granted to Mr. Dahya in his employment contract, during the
last fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
THE COMPANY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
INDIVIDUAL GRANTS STOCK PRICE
APPRECIATION FOR
OPTION TERM
- -----------------------------------------------------------------------------------------------------------------------------------
NO. OF SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SAR'S
OPTION/SAR'S GRANTED TO EXERCISE OF
NAME AND POSITION GRANTED EMPLOYEES BASE PRICE EXPIRATION
IN FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Vijay Fozdar, 50,000 6% $.04 6/2000 $316,518 $399,406
Director 150,000 18% $5.00 12/2003
- -----------------------------------------------------------------------------------------------------------------------------------
Mehdi Nimjee, 50,000 6% $.04 6/2001 $324,431 $419,377
Director and VP
- -----------------------------------------------------------------------------------------------------------------------------------
Douglas Washburn, 25,000 3% $.04 6/2001 $162,215 $209,689
VP, Treasurer and Secretary 50,000 6% $5.00 12/2003 $20,500 $48,000
- -----------------------------------------------------------------------------------------------------------------------------------
Dennis Welling, 10,000 1% $.04 6/2001 $64,900 $83,900
Controller 30,000 4% $5.00 12/2003 $12,300 $28,800
- -----------------------------------------------------------------------------------------------------------------------------------
Duane Dunk, 10,000 1% $.04 6/2001 $64,900 $83,900
EVP of VETI 30,000 4% $5.00 12/2003 $12,300 $28,800
- -----------------------------------------------------------------------------------------------------------------------------------
David Chase, 50,000 6% $.04 6/2001 $324,431 $419,377
VP of VETI 50,000 6% $5.00 12/2003 $20,500 $48,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
VETI
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
INDIVIDUAL GRANTS STOCK PRICE
APPRECIATION FOR
OPTION TERM
- -----------------------------------------------------------------------------------------------------------------------------------
NO. OF SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SAR'S
OPTION/SAR'S GRANTED TO EXERCISE OF
NAME AND POSITION GRANTED EMPLOYEES BASE PRICE EXPIRATION
IN FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Vijay Fozdar, 50,000 7% $.01 6/2000 $63,176 $79,720
Managing Director 150,000 22% $1.00 6/2001 $47,850 $108,150
Finance & Corporate
Development of VETI
- -----------------------------------------------------------------------------------------------------------------------------------
Mehdi Nimjee, 50,000 7% $1.00 6/2001 $15,950 $36,050
Director and VP
- -----------------------------------------------------------------------------------------------------------------------------------
Douglas Washburn, 40,000 6% $1.00 6/2001 $12,760 $28,840
VP, Treasurer and
Secretary
- -----------------------------------------------------------------------------------------------------------------------------------
Dennis Welling, 40,000 6% $1.00 6/2001 $12,760 $28,840
Controller
- -----------------------------------------------------------------------------------------------------------------------------------
Duane Dunk, 50,000 7% $1.00 6/2001 $15,950 $36,050
EVP of VETI
- -----------------------------------------------------------------------------------------------------------------------------------
David Chase, 50,000 7% $1.00 6/2001 $15,950 $36,050
VP of VETI
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
No other benefits, salaries, bonuses, stock options, grants, SAR's or
compensation have been paid or given to executive officers during the last
fiscal year and it is not anticipated that any will be in the foreseeable
future.
40
<PAGE>
The following table lists the aggregated Option/SAR exercises during the last
fiscal year by directors and officers of the Company and the fiscal year end
Option/SAR values of both the exercised and unexercised Option/SAR Grants:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
THE COMPANY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised In-
Unexercised options at Sept. the-Money options
30, 1995 Exercisable / at Sept. 30, 1995
Shares Value Unexercisable Exercisable / Unexercisable
Name Acquired Realized
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amyn S. Dahya 0 0 0/0 $0/$0
Vijay Fozdar 0 0 50,000/150,000 $448,000/$600,000
Douglas C. Washburn 0 0 12,500/62,500 $112,000/$312,000
Dennis E. Welling 0 0 5,000/35,000 $44,800/$164,800
Duane Dunk 0 0 5,000/35,000 $44,800/$164,800
David Chase 0 0 25,000/75,000 $224,000/$424,000
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
VETI
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised In
Unexercised options at Sept. the-Money options at
Shares Value 30, 1995 Exercisable / Sept. 30, 1995
Name Acquired Realized Unexercisable Exercisable / Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amyn S. Dahya 0 0 250,000/750,000 $437,500/$1,312,500
Vijay Fozdar 0 0 99,500/100,500 $223,625/$175,875
Douglas C. Washburn 0 0 13,200/26,800 $23,100/$46,900
Dennis E. Welling 0 0 13,200/26,800 $23,100/$46,900
Duane Dunk 0 0 16,500/33,500 $28,875/$58,625
David Chase 0 0 16,500/33,500 $28,875/$58,625
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
To date, none of the foregoing options have been exercised.
None of the other directors or executive officers of the Company hold options to
purchase shares of the Company's Common Stock.
EMPLOYEE STOCK OPTION PLAN
During 1995, the Company adopted an Incentive Stock Option Plan (ISOP) which
provides that a maximum of 800,000 options to purchase the Company's common
stock may be granted to officers and employees of the Company. Options
41
<PAGE>
granted under the ISOP are intended to qualify as incentive stock options under
the Economic Recovery Tax Act of 1981 (the "1981 Act") as amended by the Tax
Reform Act of 1986.
The ISOP is administered by the Board of Directors through a committee presently
consisting of two members of the Board (Committee). The Committee determines
which persons receive options, the number of shares that may be purchased under
each option, vesting provisions, option terms and exercise price. Options
granted under the ISOP are require to have an exercise price equal to or greater
than the market price of the Company's Common Shares at the grant date. In the
event an optionee voluntarily terminates his relationship with the Company, he
has the right to exercise his accrued options within 3 months of such
termination. However, the Company may redeem any accrued options held by an
optionee by paying the difference between the option price and the then fair
market value. If an optionee's relationship is involuntarily terminated, other
than because of death, he also has the right to exercise the accrued options
within thirty (30) days of such termination. Upon death, his estate or heirs
have one year to exercise his accrued options.
Options granted under the ISOP are not transferable other than by will or by
the laws of descent and distribution. The ISOP provides that the number of
shares and the option price will be adjusted on a pro-rata basis for stock
splits and stock dividends.
Options must be granted within five (5) years from the effective date of the
ISOP. As of September 30, 1995, options to purchase up to 660,000 shares of
common stock were granted under the ISOP. All options granted under the ISOP
are valid for a term of five (5) years from the date of vesting and vest 25%
per year over a period of four years. All options granted to date under the
ISOP have a exercise price of $5.00 per share which represents the market
price per share on the date of grant
The Company also adopted a non-qualified Stock Option Plan (SOP), which
grants five year options to purchase a maximum of 250,000 shares of the
Company's common stock at a price of $0.04 per share to officers and key
employees of the Company. Options granted under the Plan are not-intended to
qualify as incentive stock options under the Economic Recovery Tax Act of
1981 (the "1981 Act") as amended by the Tax Reform Act of 1986.
The Plan is administered by the Board of Directors through a committee
presently consisting of all three members of the Board which determines which
persons receive options under the SOP, the number of shares that may be
purchased under each option and the vesting period. The term of all options
is five (5) years and all options must be granted within five (5) years from
the effective date of the Plan.
Options granted under the Plan are not transferable other than by will or by
the laws of descent and distribution. The Option Plan provides that the
number of shares and the option price will be adjusted on a pro-rata basis
for stock splits and stock dividends.
As of September 30, 1995, options to purchase up to 246,000 shares of common
stock were granted under the SOP. With the exception of Mr. Vijay Fozdar,
who's options vest 100% on the grant date, the options vest to the optionee
over a one (1) year period with 50% vesting at the grant date and 50% on the
first anniversary of the grant date. Options granted under the SOP are
compensatory in nature and result in total compensation expense of
approximately $1,220,160, of which $855,600 was recorded as compensation
expense during 1995 and $364,560 will be recorded as expense for the year
ended September 30, 1996.
During 1995 VETI adopted a qualified Incentive Stock Option Plan (V-ISOP)
which provides that a maximum of 700,000 options to purchase the VETI's
common stock may be granted to officers and employees and advisors of VETI.
Options granted under the V-ISOP are intended to qualify as incentive stock
options under the 1981 Act. As of September 30, 1995, options to purchase up
to 606,000 shares of common stock were granted under the V-ISOP. All options
granted to date under the V-ISOP have a exercise price of $1.00 per share
which represents the market price per share on the date of grant.
The only other benefit plan offered at the present or during 1995 involves a
major medical plan which is made available to all employees on a
non-discriminatory basis, the Company currently maintains no other stock
option plans, no plan which would termed a "Long-Term Incentive Plan" as
explained in Item 402 (a)(6)(iii) of the U.S. Securities and
42
<PAGE>
Exchange Act, nor any benefit plan which would give rise to "Long Term
Compensation" as defined in Item 402(b)(iv) of the U.S. Securities and
Exchange Act, except as described above.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
Pursuant to the By-Laws of the corporation, the Company has agreed to
indemnify an officer or director who is made a party to any proceeding,
including a law suit, because of his/her position, if he/she acted in good
faith and in a manner he/she reasonably believed to be in the best interest
of the corporation and, in certain cases, may advance expenses incurred in
defending any such proceeding. To the extent that the officer or director is
successful on the merits in any such proceeding as to which such person is to
be indemnified, the Company must indemnify him/her against all expenses
incurred, including attorney's fees. With respect to a derivative action,
indemnity may be made only for expenses actually and reasonably incurred in
defending the proceeding, and if the officer or director is judged liable,
only by a court order. The indemnification is intended to be to the fullest
extent permitted by Colorado law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to officers, directors or persons
controlling the Company, pursuant to the foregoing provisions, the Company
has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in
said Act and is, therefore, unenforceable.
43
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table lists the shares of Common Stock of the Company owned,
directly or indirectly, by each director of the Company, and each executive
officer of the Company named in the Summary Compensation Table, affiliates of
the directors and executive officers, the directors and executive officers as
a group, and shareholders who hold 5% or more of the Company's Common Stock
at June 30, 1996:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS (1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AMYN DAHYA
1335 GREG ST. #104 (2) --
SPARKS, NV. 89431
- ---------------------------------------------------------------------------------------------------------------
HANIF DAHYA NIL --
5 BEECHWOOD ROAD
ALLENDALE, NEW JERSEY 07401
- ---------------------------------------------------------------------------------------------------------------
SANDRO KUNZLE NIL --
TENUTA AIA VECCHIA
58029 SASSOFORTINO (GR)
ITALY
- ---------------------------------------------------------------------------------------------------------------
NIL --
VIJAY J. FOZDAR
1335 GREG STREET #104
SPARKS, NV 89431
- ---------------------------------------------------------------------------------------------------------------
1,807,750 (3) 19%
BISMILLAH CHILDREN'S
FOUNDATION LTD.
1335 GREG ST. #104
SPARKS, NV. 89431
- ---------------------------------------------------------------------------------------------------------------
877,580 8.8%
SOCIETE GENERALE
17 COURS VALNEY
LA DEFENSE
CEDEX
PARIS, FRANCE 89431
- ---------------------------------------------------------------------------------------------------------------
606,061 6.1%
WESTAMERICA CORP.
4141 N. SCOTTSDALE RD.
SUITE #100
SCOTTSDALE, AZ 85251
- ---------------------------------------------------------------------------------------------------------------
ALL OFFICERS AND
DIRECTORS OF THE -- --
COMPANY AS A GROUP
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These percentages and totals are calculated based upon the total
number of shares of common stock issued and outstanding as of the date of
this Prospectus plus, in the case of persons holding presently exercisable
options, the number of shares subject to such options.
(2) At September 30, 1995, Mr. Amyn Dahya held 1,982,000 common shares of
the Company, in addition 725,000 common shares of the Company were owned or
controlled by Dahya Holdings, Inc., a Bahamiam corporation, of which Mr.
Amyn Dahya is an officer and director. Mr. Mansoor Dahya, an uncle to Mr.
Amyn Dahya, is the majority shareholder of Dahya Holdings, Inc. and holds
91% of the outstanding voting stock of Dahya Holdings, Inc. As indirect
shareholders, Messrs. Amyn Dahya and Mansoor Dahya have shared voting and
investment power in and to these shares. On October 3, 1995, these shares
were converted into 2,707,000 Series A preferred shares and are entitled to
vote with common shares with the further provision that each preferred
share will be entitled to the equivalent of five (5) common share votes.
(3) Bismillah Children's Foundation Ltd. is a nop-profit/charitable Nevada
Corporation of which Mr. Amyn Dahya is a Trustee and Director. Bismillah is
managed by a five (5) member Board of Trustees. Mr. Dahya and his wife
44
<PAGE>
are two of the five Trustees. A majority vote is required for the Board to
take any actions on behalf of the Foundation.
LEGAL PROCEEDINGS
STOX has commenced an action in Ontario, Canada against Orillia Steel Works,
Inc. ("OSW") entitled STOX Systems, Inc. v. Orillia Steel Works, Inc. for
$550,000 Cdn ($414,094 U.S.) for breach of contract or, in the alternative,
for conversion of intellectual property. OSW has defended the action and
launched a counterclaim for $450,000 Cdn. ($339,623 U.S.) for breach of
contract. There is also a claim for recovery of related interest and costs.
STOX entered into a contract with OSW pursuant to which OSW was to fabricate
a hazardous material storage facility (the "Facility"), designed by STOX. The
contract included an express term regarding confidentiality (the
"Confidentiality Clause"). STOX claims that OSW violated the Confidentiality
Clause with respect to the intellectual property used to fabricate the
facility and, as a result, STOX suffered damages. OSW claims that it did not
violate the Confidentiality Clause because it actually owns the intellectual
property used to fabricate the Facility. Rather, OSW alleges that STOX
breached a verbal understanding that OSW would have the exclusive right to
fabricate the facilities marketed and sold by STOX. AS a result of STOX's
alleged breach of the verbal understanding, OSW claims that it suffered
damages. STOX denies that there was any verbal understanding with OSW and, if
there was, that OSW itself breached a fundamental term of that understanding
and, therefore, STOX cannot be held liable.
While the Company cannot yet determine the full impact of these actions, it
believes that they will not have a material adverse effect on the financial
condition or results of operations of the Company.
The Company is not aware of any other material litigation, whether pending or
threatened, to which it is or may become a party.
CERTAIN TRANSACTIONS
On December 31, 1993, VETI entered into a ten-year employment contract with
Amyn Dahya, Chairman of the Board, President and Chief Executive Officer of
Casmyn and now Chairman of the Board and CEO of VETI. Pursuant to the terms
of the contract, Mr. Dahya will earn an annual base salary of $150,000, which
increases by no less than 10% per year of such an increase is approved by the
Board of Directors. Under this contract, Mr. Dahya also receives
reimbursement for business expenses and normal group benefits available to
other executives of VETI. This contract also provides Mr. Dahya with 5-year,
non-qualified, stock options to purchase shares of Common Stock of VETI at an
exercise price of $1 .00 per share. The issuance of these shares is not
intended or anticipated to significantly dilute the equity off VETI.
Under the terms of the employment contract, Mr. Dahya has been granted
options to purchase shares of VETI Common Stock pursuant to the following
schedule:
- --------------------------------------------------------------------------------
NO. OF SHARES TIME OF VESTING
- ------------- ---------------
250,000 Immediately upon execution of the Employment Agreement
250,000 When gross sales of VETI reach $2,500,000
250,000 When gross sales of VETI reach $5,000,000
250,000 When gross sales of VETI reach $7,500,000
- --------------------------------------------------------------------------------
As of the date of this Prospectus, none of the options have been exercised
(See Executive Compensation of Directors and Executive Officers of the
Company").
On January 31, 1994, Ace Capital Inc., a privately-held Nevada corporation of
which David Chase, an executive officer of VETI, is an officer, director and
shareholder, entered into a Promissory Note with VETI for the purchase of
25,000 shares of Common Stock, in the amount of $75,000, payable to VETI on
demand, at 6% interest. (See "VECTOR ENVIRONMENTAL TECHNOLOGIES, Shares of
Common Stock of VETI Held by Directors, Executive Officers, Affiliates and/or
5% shareholders.")
45
<PAGE>
On January 31, 1994, Taj Mohamed, a director of Auromar, entered into a
Promissory Note with VETI for the purchase of 25,000 shares of Common Stock,
in the amount of $75,000, payable to VETI on demand, at 6% interest. (See
"CASMYN CORP. Shares of Common Stock of VETI Held by Directors, Executive
Officers, Affiliates and/or 5% shareholders.")
Amyn Dahya, an officer, director, promoter and principal shareholder of the
Company was also a director of Auromar from June 29, 1993 to March 13, 1995.
In connection with the acquisition of Casmyn Desalco, Ltd. from Dahya
Holdings, Ltd., the Company will pay Dahya Holdings a six percent royalty on
gross sales recognized from the commercial application of certain water
desalination technology. In addition, the Company will issue 250,000 shares
of restricted common stock upon the successful completion of a prototype
desalination system. In addition, 250,000 restricted Common Shares will be
issued upon the Company's achieving each of $5,000,000, $25,000,000 and
$50,000,000 in gross sales from the desalination system or related
technology. As of June 30, 1996, the Company had advances outstanding to Amyn
Dahya of approximately $500,000 primarily relating to relocation expenses.
DESCRIPTION OF THE COMPANY'S SECURITIES
COMMON STOCK
The Company is authorized to issue 320,000,000 shares, of which 20,000,000
are Preferred Shares, par value $.10 per share and 300,000,000 are Common
Stock, par value $.04 per share. Each share of Common Stock is entitled to
one vote at all meetings of shareholders. The Articles of Incorporation of
the Company prohibit cumulative voting in the election of directors. All
shares of Common stock are equal to each other with respect to liquidation
rights and dividend rights. In the event of liquidation, dissolution or
winding up of the Company, holders of the Common Stock will be entitled to
receive, on a pro rata basis, all assets of the Company remaining after
satisfaction of all liabilities and all liquidation preferences, if any,
granted to holders of the preferred shares of the Company. There are no
preemptive rights to purchase additional shares of Common Stock.
Holders of shares of Common Stock are entitled to receive dividends if, as
and when declared by the Board of Directors out of funds legally available
therefor, subject to the dividend and liquidation rights of any preferred
shares that may be issued.
PREFERRED SHARES
The Certificate of Incorporation of the Company authorizes issuance of a
maximum of 20,000,000 preferred shares, par value $.10 per share. The
Articles of Incorporation vest the Board of Directors of the Company with
authority to divide the class of preferred shares into series and to fix and
determine the relative rights and preferences of the shares of any such
series so established to the full extent permitted by the laws of the State
of Colorado and the Certificate of Incorporation with respect to, among other
things: (a) the number of preferred shares to constitute such series and the
distinctive designations thereof; (b) the rate and preference of dividends,
if any, the time of payment of dividends, whether dividends are cumulative
and the date from which any dividend shall accrue; (c) whether preferred
shares may be redeemed and, if so, the redemption price and the terms and
conditions of redemption; (d) the liquidation preferences payable on
preferred shares in the event of involuntary of voluntary liquidation; (e)
sinking fund or other provisions, if any, for redemption or purchase of
preferred shares; (f) the terms and conditions by which preferred shares may
be converted, if the preferred shares of any series are issued with the
privilege of conversion; and (g) voting rights, if any.
There are 2,707,000 Series A preferred shares issued and outstanding. Series
A preferred shares have no preference with respect to dividends or
liquidation and vote with Common Shares with each Series A Preferred share
having a voting right equal to five Common Shares.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Securities
Transfer Corporation, 938 Quail Street, Suite 101, Lakewood, CO 80215-5513.
46
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus relates to 4,371,267 shares of Common Stock that may be
offered and sold from time to time by certain shareholders of the Company,
all of whom have been accorded certain registration rights by the Company
that permit such holders to include such shares in this Prospectus. Such
shares consist of (i) 2,805,791 shares of common stock that were issued in
private placements, (ii) 833,333 shares of common stock issuable in
connection with the conversion of a $5,000,000 convertible debenture, and
(iii) 732,143 shares of common stock issuable upon the exercise of warrants.
Set forth below is information, as of May 29, 1996, regarding the beneficial
ownership of the Company's Common Stock by each Selling Shareholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING (1) NUMBER OF AFTER OFFERING (2)
------------------------------ SHARES ----------------------------
NUMBER PERCENT OFFERED NUMBER PERCENT
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SOCIETE GENERALE - ORVALOR (3) 2,144,762 22.0% 2,144,762 2,144,762 22.0%
- ----------------------------------------------------------------------------------------------------------------------------------
REG "S" OFFERING (4)
- ----------------------------------------------------------------------------------------------------------------------------------
CNCA/SCT BRUNDY 33,000 * 33,000 33,000 *
- ----------------------------------------------------------------------------------------------------------------------------------
S.E. BANKEN LUXEMBOURGE S.A. 12,000 * 12,000 12,000 *
- ----------------------------------------------------------------------------------------------------------------------------------
LA COMPAGNIE FINANCIERE 15,000 * 15,000 15,000 *
(ROTHSCHILD BANQUE)
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITABLE LIFE ASSURANCE 450,000 3.2% 450,000 450,000 3.2%
- ----------------------------------------------------------------------------------------------------------------------------------
CEDEF FINANCE 15,000 * 15,000 15,000 *
TORBAY COMPANY 45,000 * 45,000 45,000 *
- ----------------------------------------------------------------------------------------------------------------------------------
GFM INTERNATIONAL INVESTORS 60,000 * 60,000 60,000 *
- ----------------------------------------------------------------------------------------------------------------------------------
THE PRUDENTIAL INSURANCE CO. 45,000 * 45,000 45,000 *
- ----------------------------------------------------------------------------------------------------------------------------------
EXECUTRONICS LTD. 15,000 * 15,000 15,000 *
- ----------------------------------------------------------------------------------------------------------------------------------
CM INVESTMENT NOMINEES LTD. 30,000 * 30,000 30,000 *
- ----------------------------------------------------------------------------------------------------------------------------------
NUTRACO NOMINEES LTD. 150,000 1.1% 150,000 150,000 1.1%
- ----------------------------------------------------------------------------------------------------------------------------------
WOODBRIDGE CAPITAL CORPORATION 15,000 * 15,000 15,000 *
- ----------------------------------------------------------------------------------------------------------------------------------
MARTINDALE INC. 378,055 4.0% 378,055 378,055 4.0%
- ----------------------------------------------------------------------------------------------------------------------------------
DIAMOND FONTEIN INTERNATIONAL, LTD. 300,000 3.2% 300,000 300,000 3.2%
- ----------------------------------------------------------------------------------------------------------------------------------
COVENTRY SECURITIES, LTD. 115,000 1.2% 115,000 115,000 1.2%
- ----------------------------------------------------------------------------------------------------------------------------------
NORDIC RESOURCES, CORP. 25,000 * 25,000 25,000 *
- ----------------------------------------------------------------------------------------------------------------------------------
ROTH INVESTOR RELATIONS, INC. 10,000 * 10,000 10,000 *
- ----------------------------------------------------------------------------------------------------------------------------------
MARSHALL AUERBACK 126,200 1.3% 126,200 126,200 1.3%
- ----------------------------------------------------------------------------------------------------------------------------------
T/A PACIFIC SELECT INVESTMENTS LTD. 48,800 * 48,800 48,800 *
- ----------------------------------------------------------------------------------------------------------------------------------
NABAT RAJAN 338,450 3.6% 338,450 338,450 3.6%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) Represents less than 1% of outstanding Common Stock.
(1) Unless otherwise indicated, the persons named in the table have sole
voting and sole investment power with respect to all shares
beneficially owned subject to community property laws where
applicable.
(2) Assumes that all of the shares offered hereby are actually sold.
(3) Consists of shares, warrants and conversion of shares under a
convertible debenture.
(4) Consists of shares and warrants.
47
<PAGE>
The Company has been advised by the Selling Shareholders that they intend to
sell all or a portion of the shares of Common Stock offered by this
Prospectus from time to time (I) in the over-the-counter market at prices
reasonably related to the prices of the Common Stock prevailing at the time
of such sales, (ii) otherwise than in the over-the-counter market in
negotiated transactions (which may include the pledge or hypothecation of
some of all the shares), at fixed prices which may be changed, at market
prices prevailing at the time of sale or at prices reasonably related thereto
or at negotiated prices, or (iii) by a combination of the foregoing methods
of sale. The Selling Shareholders may effect such transactions by selling the
shares of Common Stock to or through broker-dealers, and such broker-dealers
may receive compensation in the form of discounts, concessions or commissions
from the Selling Shareholders and/or the purchasers of the shares of Common
Stock for which such broker-dealers may act as agent or to whom they may sell
as principal, or both. The Selling Shareholders and any broker, dealer or
other agent executing sell orders on behalf of the Selling Shareholders may
be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended (the "1933 Act") in which event commissions received by any
such broker, dealer or agent and profit on any resale of shares of Common
Stock of principal may be deemed to be underwriting commissions under the
1933 Act. Such commissions received by a broker, dealer or agent may be in
excess of customary compensation. Such shares of Common Stock may also be
sold in accordance with Rule 144 and Rule 145 under the 1933 Act.
The Company will pay all the costs, expenses and fees incident to the
offering and sale of the shares to the public, other than commissions and
discounts of underwriters, brokers, dealers or agents not paid by the
purchasers of the shares. In addition, the Company has agreed to indemnify
the Selling Shareholders against certain liabilities, including liabilities
arising under the 1933 Act.
EXPERTS
The consolidated financial statements of the Company at September 30, 1995
and 1994 and for each of the three years in the period ended September 30,
1995, appearing in this Prospectus and Registration Statement, have been
audited by Deloitte & Touche LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of WestAmerica Corporation at March 31,
1995 and 1996 and for each of the three years in the period ended March 31,
1996, appearing in this Prospectus and Registration Statement, have been
audited by Tullius Taylor Sartain & Sartain, independent auditors, as set
forth in their report thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of WestAmerica Investment Company at March 31, 1996,
and December 31, 1994 and for the fifteen month period ended March 31, 1996
and each of the two years in the period ended December 31, 1994 (not
separately appearing in this Prospectus and Registration Statement), included
in the consolidated financial statements of WestAmerica Corporation have been
audited by George Brenner, C.P.A., independent auditor, as set forth in his
report thereon appearing elsewhere herein and in the Registration Statement,
and are included in the consolidated financial statements of WestAmerica
Corporation in reliance upon such report given upon the authority of such
firm as an expert in accounting and auditing.
The financial statements of Auromar Development Corporation as of and for the
years ended March 31, 1996 and 1995, appearing in this Prospectus and
Registration Statement, have been audited by Deloitte & Touche, Chartered
Accountants, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The financial statements of Auromar Development Corporation as of and for the
year ended March 31, 1994, appearing in this Prospectus and Registration
Statement, have been audited by Dennis N. Wong, Inc. Chartered Accountant,
48
<PAGE>
independent auditor, as set forth in his report thereon appearing elsewhere
herein and in the Registration Statement, and are included in reliance upon
such report given upon the authority of such firm as an expert in accounting
and auditing.
None of the named experts listed herein have any security interest in the
Company
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Selling Shareholders by Jenkens & Gilchrist, a Professional Corporation.
49
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
I. Consolidated Financial Statements of Casmyn Corp.
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheets - September 30, 1994 and 1995 and
June 30, 1996 (unaudited). . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Operations for the Years Ended
September 30, 1993, 1994 and 1995 and the Nine Months
Ended June 30, 1995 and 1996 (unaudited).. . . . . . . . . . . . F-5
Consolidated Statements of Stockholders' Equity (Deficiency) for the
Years Ended September 30, 1993, 1994 and 1995 and the Nine Months
Ended June 30, 1996 (unaudited). . . . . . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1993, 1994 and 1995 and the Nine Months Ended
June 30, 1995 and 1996 (unaudited) . . . . . . . . . . . . . . . F-7
Notes to the Consolidated Financial Statements . . . . . . . . . . F-9
II. Pro Forma Consolidated Financial Statements of Casmyn Corp.
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Pro Forma Consolidated Balance Sheet - June 30, 1996
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . 16
Pro Forma Consolidated Statement of Operations for the Year Ended
September 30, 1995 (unaudited) . . . . . . . . . . . . . . . . . 17
Pro Forma Consolidated Statement of Operations for the Nine Months
Ended June 30, 1996 (unaudited) . . . . . . . . . . . . . . . . 18
Notes to Pro Forma Consolidated Financial Statements . . . . . . . 19
III. Consolidated Financial Statements of WestAmerica Corporation
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . F-22
Consolidated Balance Sheets - March 31, 1995 and 1996 and June 30,
1996 (unaudited). . . . . . . . . . . . . . . . . . . . . . . . . F-24
Consolidated Statements of Operations for the Years Ended
March 31, 1994, 1995 and 1996 and the Three Months Ended June 30,
1995 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . F-26
Consolidated Statements of Stockholders' Equity for the
Years Ended March 31, 1994, 1995 and 1996 and the Three Months
Ended June 30, 1995 and 1996 (unaudited) . . . . . . . . . . . . . F-27
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1994, 1995 and 1996 and the Three Months Ended June 30,
1995 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . F-28
Notes to the Consolidated Financial Statements . . . . . . . . . . F-29
IV. Financial Statements of Auromar Development Corporation
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . F-40
Balance Sheets - March 31, 1995 and 1996 and June 30, 1996
(unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . . . F-42
Statements of Operations and Deficit for the Years Ended
March 31, 1994, 1995 and 1996 and cumulative from inception
to March 31, 1996 and the Three Months Ended June 30, 1995 and
1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . F-43
Statements of Cash Flows for the Years Ended
March 31, 1994, 1995 and 1996 and cumulative from
inception to March 31, 1996 and the Three Months Ended June 30,
1995 and 1996 (unaudited). . . . . . . . . . . . . . . . . . . . F-44
Notes to the Financial Statements. . . . . . . . . . . . . . . . . F-45
V. Financial Statements of Auromar Development Corporation
Independent Auditor's Report. . . . . . . . . . . . . . . . . . . . . F-52
F-1
<PAGE>
Balance Sheet - March 31, 1994 . . . . . . . . . . . . . . . . . . F-53
Statement of Operations and Deficit for the Year Ended
March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . F-54
Statements of Changes in Financial Position for the Year Ended
March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . F-55
Notes to the Financial Statements. . . . . . . . . . . . . . . . . F-56
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Casmyn Corp.
We have audited the accompanying consolidated balance sheets of Casmyn Corp. and
subsidiaries as of September 30, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity (deficiency), and cash flows for
each of the three years in the period ended September 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Casmyn Corp. and subsidiaries as of
September 30, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended September 30, 1995 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Reno, Nevada
June 28, 1996
F-3
<PAGE>
CASMYN CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, JUNE 30, 1996
1994 1995 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 1,075,876 $ 4,938,945 $ 5,473,211
Common stock subscriptions receivable 808,000 7,125,002 -
Accounts receivable, net of allowance
of $ 0, $80,614 and $106,819 respectively 136,706 593,658 225,702
Inventories 452,529 312,069 1,749,845
Prepaid expenses and other assets 14,253 93,732 135,090
------------------------------------------------------------
Total current assets 2,487,364 13,063,406 7,583,848
------------------------------------------------------------
INVESTMENT IN RELATED PARTY 275,352 204,227 204,227
INVESTMENT IN AFFILIATES - - 8,367,702
MINERAL PROPERTIES 197,227 197,227 6,712,458
EQUIPMENT AND IMPROVEMENTS, NET 311,682 313,694 2,945,392
DUE FROM RELATED PARTIES, NET - 58,451 67,066
OTHER ASSETS 97,030 478,656 1,622,807
------------------------------------------------------------
TOTAL ASSETS $ 3,368,655 $ 14,315,661 $ 27,503,500
------------------------------------------------------------
------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 591,737 $ 574,642 $ 2,931,895
Current portion of long-term debt 58,335 27,462 -
Due to Related Parties, net 394,870 - -
------------------------------------------------------------
Total current liabilities 1,044,942 602,104 2,931,895
------------------------------------------------------------
LONG-TERM DEBT 109,766 71,298 -
------------------------------------------------------------
CONVERTIBLE DEBT - 5,000,000 5,000,000
------------------------------------------------------------
Total Liabilities 1,154,708 5,673,402 7,931,895
------------------------------------------------------------
MINORITY INTEREST - 498,663 -
------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value; 20,000,000 shares
authorized; 0, 0, and 2,707,000 shares outstanding - - 270,700
Common stock, $.04 par value; 300,000,000 shares
authorized; 7,447,351, 8,604,637 and 7,285,492 shares
issued and outstanding 297,887 344,185 291,480
Additional paid-in capital 2,941,415 11,859,844 27,854,536
Accumulated deficit (1,025,355) (4,067,783) (8,501,094)
Foreign currency translation adjustment - 7,350 (319,017)
Treasury stock, 1500 shares at cost - - (25,000)
------------------------------------------------------------
Total stockholders' equity 2,213,947 8,143,596 19,571,605
------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,368,655 $ 14,315,661 $ 27,503,500
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
F-4
<PAGE>
CASMYN CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
(UNAUDITED)
-----------------------------------------------------------------------
1993 1994 1995 1995 1996
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALES $ 75,421 $ 600,714 $ 382,158 $ 375,270 $ 1,065,538
COST OF GOODS SOLD 661 602,678 489,589 270,195 756,732
-----------------------------------------------------------------------
GROSS PROFIT (LOSS) 74,760 (1,964) (107,431) 105,075 308,806
-----------------------------------------------------------------------
COSTS AND EXPENSES:
Selling, general and administrative expense 1,076,518 3,224,625 4,997,948 3,296,155 4,695,678
Depreciation, depletion and amortization 79,958 38,563 98,805 167,174 100,778
Mineral exploration expense - - 1,010,334 769,473 447,647
Research and development 85,000 15,294 185,053 150,768 204,113
Abandonment of mineral properties 190,470 150,000 - - -
Write down of assets 209,000 758,059 - - -
-----------------------------------------------------------------------
Total costs and expenses 1,640,946 4,186,541 6,292,140 4,383,570 5,448,216
-----------------------------------------------------------------------
LOSS FROM OPERATIONS (1,566,186) (4,188,505) (6,399,571) (4,278,495) (5,139,410)
-----------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Minority interest in net loss of consolidated
subsidiary 1,301,804 4,580,694 3,502,401 1,991,189 498,663
Gain (loss) on sale of investments in related
parties
- 253,218 (150,000) - -
Other (29,843) 45,420 (27,687) 76,091 207,436
-----------------------------------------------------------------------
Other income, net 1,271,961 4,879,332 3,324,714 2,067,280 706,099
-----------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (294,225) 690,827 (3,074,857) (2,211,251) (4,433,311)
-----------------------------------------------------------------------
DISCONTINUED OPERATIONS:
Loss from discontinued operations (291,812) (643,767) (77,354) (77,354) -
Gain on disposal of discontinued operations - - 109,783 109,783 -
-----------------------------------------------------------------------
GAIN (LOSS) FROM DISCONTINUED OPERATIONS (291,812) (643,767) 32,429 32,429 -
-----------------------------------------------------------------------
NET INCOME (LOSS) $ (586,037) $ 47,060 $ (3,042,428) $ (2,178,786) $ (4,433,311)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) PER COMMON SHARE:
Income (Loss) from Continuing Operations $ (0.09) $ 0.14 $ (0.40) $ (0.29) $ (0.71)
Income (Loss) from Discontinued Operations (0.09) (0.13) - - -
-----------------------------------------------------------------------
NET INCOME (LOSS) $ (0.18) $ 0.01 $ (0.40) $ (0.29) $ (0.71)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,244,296 4,946,454 7,651,336 7,574,827 6,270,719
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
F-5
<PAGE>
CASMYN CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995 AND THE NINE MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
NUMBER COMMON PREFERRED PAID-IN
OF COMMON STOCK STOCK CAPITAL
SHARES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCES AT SEPTEMBER 30, 1992 3,244,296 $ 129,765 $ - $ 435,876
Net loss - - - -
---------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1993 3,244,296 129,765 - 435,876
---------------------------------------------------------------------------
Adjustment to reflect acquisition
of Casmyn USA, Inc., under
accounting for companies
under common control - - - (149,990)
Issuance of shares in exchange
for investment in related party 3,500,000 140,000 - 10,000
Issuance of shares in exchange
for options to purchase
mineral rights 325,000 13,000 - 184,227
Private placement 378,055 15,122 - 1,892,878
Gain on sale of investment in
related party - - - 568,424
Net Income - - - -
--------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1994 7,447,351 297,887 - 2,941,415
--------------------------------------------------------------------------
Issuance of shares for consulting
services 38,000 1,520 - 188,480
Private placements 405,000 16,200 - 2,236,650
Private placement of units 714,286 28,578 - 4,721,431
Gain on sale of investment in
related party - - - 916,268
Issuance of compensatory stock
options - - - 1,220,160
Less: deferred compensation - - - (364,560)
Foreign currency translation
adjustment - - - -
Net loss - - - -
--------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1995 8,604,637 344,185 - 11,859,844
--------------------------------------------------------------------------
NINE MONTHS ENDED JUNE 30, 1996
(UNAUDITED):
Conversion to preferred (2,707,000) (108,280) 270,700 (162,420)
Private placement 750,000 30,000 - 8,779,862
Shares issued in lieu of interest 3,294 132 - 58,431
Deferred compensation - - - 364,560
Exercise of stock options 30,000 1,200 - 198,800
Shares issued for acquisition of affiliate 606,061 24,243 - 6,755,459
Purchase of treasury stock (1,500) - - -
Foreign currency translation adjustment - - - -
Net loss - - - -
--------------------------------------------------------------------------
BALANCES AT JUNE 30, 1996
(UNAUDITED) 7,285,492 $ 291,480 $ 270,700 $ 27,854,536
--------------------------------------------------------------------------
--------------------------------------------------------------------------
<CAPTION>
FOREIGN TOTAL
CURRENCY STOCKHOLDERS'
ACCUMULATED TRANSLATION TREASURY EQUITY
DEFICIT ADJUSTMENT STOCK (DEFICIENCY)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCES AT SEPTEMBER 30, 1992 $ (486,378) $ - - 79,263
Net loss (586,037) - - (586,037)
--------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1993 (1,072,415) - - (506,774)
--------------------------------------------------------------------------
Adjustment to reflect acquisition
of Casmyn USA, Inc., under
accounting for companies
under common control - - - (149,990)
Issuance of shares in exchange
for investment in related party - - - 150,000
Issuance of shares in exchange
for options to purchase
mineral rights - - - 197,227
Private placement - - - 1,908,000
Gain on sale of investment in
related party - - - 568,424
Net Income 47,060 - - 47,060
-----------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1994 (1,025,355) - - 2,213,947
-----------------------------------------------------------------------
Issuance of shares for consulting
services - - - 190,000
Private placements - - - 2,252,850
Private placement of units - - - 4,750,009
Gain on sale of investment in
related party - - - 916,268
Issuance of compensatory stock
options - - - 1,220,160
Less: deferred compensation - - - (364,560)
Foreign currency translation
adjustment - 7,350 - 7,350
Net loss (3,042,428) - - (3,042,428)
- -----------------------------------------------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1995 (4,067,783) 7,350 - 8,143,596
-------------------------------------------------------------------------
NINE MONTHS ENDED JUNE 30, 1996
(UNAUDITED):
Conversion to preferred - - - -
Private placement - - - 8,809,862
Shares issued in lieu of interest - - - 58,563
Deferred compensation - - - 364,560
Exercise of stock options - - - 200,000
Shares issued for acquisition of affiliate - - - 6,779,702
Purchase of treasury stock - - (25,000) (25,000)
Foreign currency translation adjustment - (326,367) - (326,367)
Net loss (4,433,311)) - - (4,433,311)
----------------------------------------------------------------------------
BALANCES AT JUNE 30, 1996
(UNAUDITED) $ (8,501,094) $ (319,017) $(25,000) $19,571,605
----------------------------------------------------------------------------
----------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE>
CASMYN CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------
1993 1994 1995
--------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (586,037) $ 47,060 $ (3,042,428)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO
NET CASH USED IN OPERATING ACTIVITIES:
Depreciation, depletion and amortization 79,958 71,290 101,555
Minority interest in net loss of consolidated subsidiary (1,301,804) (4,580,694) (3,502,401)
(Gain) loss on sale of investments in related parties - (253,218) 150,000
(Gain) loss on sale of assets 14,053 - (109,783)
Loss on abandonment of mineral properties 190,470 150,000 -
Loss on write-down of assets 209,000 758,059 -
Compensation expense from stock options - - 955,100
Amortization of debt issue costs - - 10,000
Other non-cash expense - 2,617 390,000
(Increase) decrease in accounts receivable (409,510) (54,309) (456,952)
(Increase) decrease in inventories (510,878) 58,349 140,460
(Increase) decrease in prepaid expenses and other asset (139,242) (273,941) (171,105)
Increase (decrease) in accounts payable and
accrued liabilities 243,926 162,273 (17,095)
Increase (decrease) in amounts due to related parties 13,498 (564,071) (443,412)
----------------------------------------------------------
Net cash used in operating activities (2,196,566) (4,476,585) (5,996,061)
----------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments in related parties (251,302) (212,897) (650,000)
Investment in mining properties - - -
Proceeds from sale of investments in related parties 346,904 1,366,220 1,487,538
Proceeds from sale of assets - 2,000 209,324
Investment in and advances to related party - (413,223) -
Purchase of equipment and improvements (147,262) (142,530) (239,749)
Investment in affiliate - - -
----------------------------------------------------------
Net cash provided by (used in) investing activities (51,660) 599,570 807,113
----------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Company common stock - 1,100,000 3,060,712
Issuance of VETI and VVC common stock 3,269,577 3,080,820 1,326,564
Proceeds from convertible debt - - 5,000,000
Repayments of long-term debt (178,661) (107,003) (42,609)
Payment of debt issue costs - - (300,000)
Purchase of treasury shares - - -
----------------------------------------------------------
Net cash provided by financing activities 3,090,916 4,073,817 9,044,667
----------------------------------------------------------
Foreign currency translation adjustment - - 7,350
----------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 842,690 $ 196,802 $ 3,863,069
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 36,384 879,074 1,075,876
----------------------------------------------------------
CASH AND EQUIVALENTS, END OF PERIOD $ 879,074 $ 1,075,876 $ 4,938,945
----------------------------------------------------------
----------------------------------------------------------
<CAPTION>
NINE MONTHS ENDED
JUNE 30
(UNAUDITED)
----------------------------------------
1995 1996
----------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (2,178,786) $ (4,433,311)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO
NET CASH USED IN OPERATING ACTIVITIES:
Depreciation, depletion and amortization 167,174 100,778
Minority interest in net loss of consolidated subsidiary (1,991,189) (498,663)
(Gain) loss on sale of investments in related parties - -
(Gain) loss on sale of assets - -
Loss on abandonment of mineral properties - -
Loss on write-down of assets - -
Compensation expense from stock options 620,000 364,560
Amortization of debt issue costs - 45,000
Other non-cash expense 190,000 58,563
(Increase) decrease in accounts receivable (9,668) 367,956
(Increase) decrease in inventories (59,038) (1,437,775)
Increase in prepaid expenses and other asset (247,066) (1,077,425)
Increase (decrease) in accounts payable and
accrued liabilities 87,560 2,357,253
Increase (decrease) in amounts due to related parties (1,126,776) (8,615)
---------------------------------------
Net cash used in operating activities (4,547,789) (4,161,707)
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments in related parties - -
Investment in mining properties - (6,515,231)
Proceeds from sale of investments in related parties 557,196 -
Proceeds from sale of assets 209,324 -
Investment in and advances to related party - -
Purchase of equipment and improvements (161,502) (2,732,476)
Investment in affiliate - (1,398,000)
----------------------------------------
Net cash provided by (used in) investing activities 605,018 (10,645,707)
----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Company common stock 2,571,852 15,791,780
Issuance of VETI and VVC common stock 325,660 -
Proceeds from convertible debt - -
Repayments of long-term debt (33,114) (8,760)
Payment of debt issue costs - -
Purchase of treasury shares - (25,000)
---------------------------------------
Net cash provided by financing activities 2,864,398 15,668,020
---------------------------------------
Foreign currency translation adjustment 9,972 (326,367)
---------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS $(1,068,401) $534,266
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 1,075,876 4,938,945
---------------------------------------
CASH AND EQUIVALENTS, END OF PERIOD $7,475 $5,473,211
---------------------------------------
---------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS
F-7
<PAGE>
CASMYN CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30
YEAR ENDED SEPTEMBER 30, (UNAUDITED)
-----------------------------------------------------------------------
1993 1994 1995 1995 1996
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH PAID FOR INTEREST $ 24,521 $ 22,521 $ 12,605 $ 6,101 $ 3,155
----------------------------------------------------------------------
----------------------------------------------------------------------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for subscriptions receivable - $ 808,000 $7,125,002 - -
Transfer of equipment to related parties - - (36,641) - -
Issuance of common stock for services - - 390,000 190,000 -
Issuance of common stock for payment of interest - - - - 58,563
Issuance of common stock for mineral properties - 197,227 - - -
Increase in due to related parties and decrease in
additional paid-in capital for acquisition of
Casmyn USA, Inc. - 149,990 - - -
Investment in related party received for repayment
of debt 188,386 173,046 - - -
Issuance of common stock for investment in
related party - 150,000 - - -
Acquisition of equipment with notes payable - 24,302 - - -
Issuance of common stock for investment
in affiliate - - - - 6,779,702
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-8
<PAGE>
CASMYN CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Casmyn Corp. (formerly Summa Metals Corporation) ("Casmyn") was incorporated in
Colorado on December 4, 1984. Casmyn was in the development stage from its
inception through August 1994 when it purchased for approximately $150,000 all
of the common stock of Casmyn USA Inc. ("Casmyn USA") from Dahya Holdings, Inc.,
a related party. Casmyn USA's principal business is performing contract
research and development services, primarily for related parties.
The acquisition of Casmyn USA has been accounted for as a combination of
entities under common control, which is a method similar to a pooling of
interests. Therefore, the accompanying consolidated financial statements
include assets and liabilities of Casmyn USA at their historical cost and
operations of Casmyn USA for all years presented.
Casmyn also has the following wholly owned subsidiaries which are incorporated
in Nevada: Casmyn Mining Corporation which serves as a holding company for the
Company's mining operations; Casmyn Mining Corporation, South Africa which is
actively exploring for mineral resources in South Africa; Casmyn Zimbabwe
(Private) Ltd. to acquire and conduct mining operations in Zimbabwe; Casmyn
Technologies to conduct research and development of water purification
technology; Casmyn Desalco to conduct research and development on desalinization
projects; and Vector South Africa which is licensed in South Africa to sell
water purification systems.
On June 29, 1995, the Company acquired a voting controlling interest in Vector
Environmental Technologies, Inc. and subsidiaries ("VETI") through the
acquisition of 3,000,000 5%, cumulative, convertible, voting preferred shares of
VETI ("Preferred Shares"), in exchange for approximately $2,300,000 in debts
owing to the Company. On September 29,1995, Casmyn purchased an additional
1,000,000 preferred shares of VETI at $2.00 per share. Each preferred share is
convertible, at Casmyn's option, into one share of VETI common stock. Preferred
shares are entitled to vote with common shares with the further provision that
each preferred share will be entitled to the equivalent of four (4) common share
votes with the result that Casmyn has effective voting control of VETI with a
56.25% voting majority. VETI is also related to Casmyn through the existence of
certain common officers, directors and significant stockholders. Therefore, the
investment in VETI has been accounted for as a combination of entities under
common control, which is a method similar to a pooling of interests. Therefore,
the accompanying consolidated financial statements include assets and
liabilities of VETI at their historical cost and operations of VETI for all
periods presented. The common stockholders' interest in VETI has been recorded
as minority interest.
VETI operates through its 95% owned subsidiary, Vector Venture Corp. ("VVC"),
and various wholly owned subsidiaries: Vector Venture Corp. which holds certain
technologies and licenses; Vector Manufacturing Corp. ("VMC") which provides
purchasing and manufacturing services; Vector Vietnam, Ltd., which holds and
manages Vietnamese operations; Alpine Water Purification, Inc., which markets
consumer water treatment equipment; STOX Systems, Inc., which markets hazardous
materials storage systems; CGL Technologies, Inc., which performs research and
development of water purification technologies; and Vector India which was
formed to develop business in India
F-9
<PAGE>
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Casmyn and its
wholly owned and controlled subsidiaries (collectively, the "Company"). All
intercompany transactions and balances have been eliminated in consolidation.
DISCONTINUED OPERATIONS
In 1995, VMC discontinued its metal fabrication segment. The results of the
metal fabrication segment have been reported separately as discontinued
operations in the accompanying consolidated statements of operations for the
years ended September 30, 1993, 1994 and 1995. Sales for the metal
fabrication segment were $90,543, $519,167 and $12,379 during the years ended
September 30, 1993, 1994 and 1995.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company considers
all short-term investments with a maturity of three months or less at the date
of purchase to be cash equivalents. As of September 30, 1994 and 1995, bank
balances held in excess of Federally insured limits were $898,353 and $1,085,516
respectively.
INVESTMENT IN RELATED PARTY
Investments consisting of common shares of a related party (see Note 3) are
recorded at the lower of cost or market value.
MINERAL PROPERTIES
Exploration and development costs are expensed until the mineral property to
which they relate is determined to have proven reserves for which recovery is
commercially feasible. Costs are then capitalized until the mineral property to
which they relate is placed into production, sold, abandoned or written down
where there is an impairment in value. Capitalized costs are to be charged to
future operations on a unit-of-production basis following commencement of
production using estimated recoverable reserves of the principal property as a
base, or written off if the property is sold, abandoned or where there is an
impairment in value. Proceeds received on options for mineral properties are
credited against exploration and development costs of the related mineral
properties.
When the Company enters into agreements for the acquisition of interests in
mineral properties that provide for periodic payments such amounts are not
recorded as a liability since they are payable entirely at the Company's
discretion. Such payments, when made, are recorded as mineral exploration
expense. If payments are not made, such non-payment will result in the write-
off of the related investment in mineral properties.
EQUIPMENT AND IMPROVEMENTS
Equipment and improvements are recorded at cost and are depreciated or amortized
on a straight-line basis over their estimated useful lives of five to seven
years.
REVENUE RECOGNITION
Revenues from sale of water purification equipment are recognized when goods are
shipped to customers.
INCOME (LOSS) PER SHARE
Income (loss) per common share is computed on the basis of the weighted average
number of shares outstanding during the year.
F-10
<PAGE>
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method. Cost includes material, labor and manufacturing
overhead costs.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of the Company's foreign
subsidiaries are measured using local currency as the functional currency.
Assets and liabilities of these subsidiaries are translated at the exchange rate
in effect at each year end. Income statement accounts are translated at the
average rate of exchange prevailing during the year. Translation adjustments
arising from differences in exchange rates from period to period are included in
the accumulated foreign currency translation adjustments account in
stockholders' equity.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") issued SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" in March 1995. This statement, effective for the Company's
fiscal year ending September 30, 1997, requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Management believes that if
SFAS No. 121 had been adopted at September 30, 1995, it would not have had a
significant effect on the financial position or results of operations of the
Company.
The FASB issued in October, 1995 SFAS No. 123 "Accounting for Awards of Stock-
Based Compensation to Employees." This statement, effective for the Company's
fiscal year ending September 30, 1997, establishes financial accounting and
reporting standards for stock-based employee compensation plans and for
transactions where equity securities are issued for goods and services. This
Statement defines a fair value based method of accounting for an employee stock
option or similar equity instrument and encourages all entities to adopt that
method of accounting for all of their employee stock compensation plans.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees." Management's
current intention is to continue to follow APB Opinion No. 25 and therefore
believes that if SFAS No. 123 had been adopted at September 30, 1995, it would
not have had a significant effect on the financial position or results of
operations of the Company.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
The interim consolidated financial statements are unaudited; however, in the
opinion of management, such statements include all adjustments (which are of a
normal, recurring nature) necessary for a fair statement of the results for the
interim periods. The financial statements included herein have been prepared by
Casmyn Corp. (the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures included herein are adequate to make the information not misleading.
2. BUSINESS SEGMENTS
After discontinuing its metal fabrication segment, the Company has operated
principally in two business segments during the years ended September 30, 1994
and 1995, mineral resource development: ("mining") and
F-11
<PAGE>
development and sale of environmental technologies, principally water
purification systems ("water purification"). Prior to 1994, the Company's
principal business was conducted in one segment, contract research and
development services.
Year Ended Year Ended
September 30, September 30,
1994 1995
---------------- --------------
SALES
Water purification $ 566,331 $ 382,158
Mining - -
Corporate & other 34,383 -
------------------------------------
Total $ 600,714 $ 382,158
------------------------------------
------------------------------------
LOSS FROM OPERATIONS
Water purification $ 3,171,956 $ 3,268,388
Mining 67,571 1,314,487
Corporate & other 948,978 1,816,696
------------------------------------
Total $ 4,188,505 $ 6,399,571
------------------------------------
------------------------------------
IDENTIFIABLE ASSETS
Water purification $ 1,242,868 $ 5,486,459
Mining 216,348 4,258,756
Corporate & other 1,909,439 4,570,446
------------------------------------
Total $ 3,368,655 $ 14,315,661
------------------------------------
------------------------------------
CAPITAL EXPENDITURES
Water purification $ 96,291 $ 90,710
Mining 208,365 137,512
Corporate & other 59,403 11,527
------------------------------------
Total $ 364,059 $ 239,749
------------------------------------
------------------------------------
DEPRECIATION AND AMORTIZATION
Water purification $ 9,244 $ 35,022
Mining - 27,548
Corporate & other 29,319 36,235
------------------------------------
Total $ 38,563 $ 98,805
------------------------------------
------------------------------------
The Company has operations based in North America, Asia and Africa. The table
below presents information as to the Company's operations by geographic region.
Prior to 1994, the Company operated principally in North America.
Year Ended Year Ended
September 30, September 30,
1994 1995
------------------------------------
SALES
North America $ 600,714 $ 236,533
Asia - 145,625
Africa - -
------------------------------------
Total $ 600,714 $ 382,158
------------------------------------
------------------------------------
LOSS FROM OPERATIONS
North America $ 4,062,008 $ 4,962,800
Asia 58,926 122,284
Africa 67,571 1,314,487
------------------------------------
Total $ 4,188,505 $ 6,399,571
------------------------------------
------------------------------------
IDENTIFIABLE ASSETS
North America $ 3,141,768 $ 9,752,523
Asia 10,539 304,382
Africa 216,348 4,258,756
------------------------------------
Total $ 3,368,655 $ 14,315,661
------------------------------------
------------------------------------
F-12
<PAGE>
3. INVESTMENT IN RELATED PARTY
On April 25, 1994, the Company purchased from certain individuals 1,000,000
shares of common stock of Auromar Development Corporation ("Auromar"), a related
party, in exchange for 3,500,000 restricted common shares of the Company. The
investment was valued at $150,000 based upon the Company's approximately 21%
share of the historical cost basis of the net assets of Auromar. The Company
has announced an agreement in principle to merge with Auromar (see Note 12).
From April 25, 1994 through September 30, 1994, the Company purchased in the
open market an additional 44,600 shares of Auromar common stock and sold 152,500
shares of Auromar common stock in the open market at a gain of $568,424. During
the fiscal year ended September 30, 1995, the Company sold 466,350 shares of
Auromar common stock in the open market at a gain of $916,268. Because of the
intent to merge with Auromar, the gain on sale of Auromar stock has been
recorded as an increase to additional paid-in capital. As of September 30, 1994
and 1995, the Company held 892,100 and 425,750 common shares of Auromar common
stock with a current market value of approximately $2,005,200 and $1,490,000,
respectively, based on quoted market prices.
4. MINERAL PROPERTIES
On November 29, 1991, the Company purchased mineral properties in exchange for
2,400,000 of its restricted common shares. The purchase was recorded at
$150,000, which represented the estimated predecessor cost of such properties.
The Company did not develop these properties, and per the purchase agreement,
the mineral properties reverted back to the original owners on April 1, 1994.
Accordingly, the Company has written off the $150,000 as loss on abandonment of
mineral properties in 1994.
On April 24, 1994, the Company entered into an agreement to acquire a three-year
option to purchase certain mineral rights in South Africa from Diamond Fontein
International, Ltd., ("DFI"), a related party. Consideration for the option was
the issuance of 25,000 common shares at par value ($.04) or $1,000.
On August 4, 1994 and August 8, 1994, the Company entered into agreements with
DFI to acquire a 50% interest in certain mineral properties located in the
Schweizer-Reneke region of South Africa and a 100% interest in certain
properties located in the Schweizer-Reneke and Northern Transvaal regions of
South Africa from DFI by the issue of 300,000 common shares valued at $196,227,
which is the historical cost incurred by DFI relative to acquisition of the
mineral rights. Auromar Development Corporation, a related party (see Note 12),
owns the option to acquire the remaining 50% interest in certain of the
properties located in the Schweizer-Reneke region. The Company further agreed
to pay DFI a $5,000 fee and a three percent royalty on gross revenues derived
from the properties. In addition, the Company will issue to DFI 1,000 shares of
the Company's restricted common stock for each $1,000,000 of the mineral
properties' proven reserves, to a maximum of 2,500,000 shares.
On January 20, 1995, the Company acquired from DFI all of DFI's rights, titles
and interests in and to a prospecting and joint venture contract between Rangold
& Exploration Company Limited ("Rangold") and DFI. The contract involves the
formation of a joint venture to conduct prospecting activities in the Republic
of South Africa on certain mineral properties encompassing approximately 16,009
hectares for which Rangold is the registered holder of the mineral rights.
Under the terms of the contract the Company will carry out, manage and fund the
exploration program on the mineral properties. Upon completion of a three phase
exploration program which must be completed by November 10, 1999, the Company
will earn a 50% interest in any mining venture which arises on a mineral
property as a result of its work. The total dollar expenditures under this
program have not yet been determined.
F-13
<PAGE>
5. EQUIPMENT AND IMPROVEMENTS
Equipment and improvements consist of the following at September 30:
1994 1995
--------------------------------
Equipment $ 287,496 $ 257,385
Leasehold improvements 67,404 36,207
Automotive equipment 101,320 115,604
--------------------------------
Total 456,220 409,196
Accumulated depreciation and amortization (144,538) (147,959)
--------------------------------
Net equipment and improvements 311,682 261,237
Construction in progress - 52,457
--------------------------------
Total Equipment and Improvements $ 311,682 $ 313,694
--------------------------------
--------------------------------
6. RELATED PARTY TRANSACTIONS
The Company conducts business with various companies that are related through
the existence of certain common officers, directors and significant
stockholders. These related parties include: Diamond Fontein International
Limited; Auromar Development Corporation; Dahya Holdings, Inc.; Casmyn
Research and Engineering, Ltd. and Consolidated Goldstack International
Resources, Inc. ("Goldstack").
As a result of these related party transactions, cash advances from and to
the Company and other transactions, the Company had a net amount due from
(to) related parties at September 30, 1994 and 1995 of $(394,870) and
$58,451. These amounts are non-interest bearing and contain no formal
repayment terms.
In connection with the acquisition of Casmyn Desalco, Ltd. from Dahya Holdings,
Ltd., the Company will pay Dahya Holdings a six percent royalty on gross sales
recognized from the commercial application of certain water desalination
technology. In addition, the Company will issue 250,000 shares of restricted
common stock upon the successful completion of a prototype desalination system.
In addition, 250,000 restricted common shares will be issued upon the Company's
achieving each of $5,000,000, $25,000,000 and $50,000,000 in gross sales from
the desalination system or related technology.
During 1995, the Company sold 250,000 shares of VETI common stock at a loss of
$150,000.
Substantially all of the gains on sales of investments in marketable securities
in the year ended September 30, 1994 arose from the sale of securities of
related parties to unrelated third parties.
In fiscal 1993, Casmyn U.S.A. received 531,554 common shares of Consolidated
Goldstack International Resources, Inc., a related party, as a settlement of
$188,386 of debt in lieu of cash. These shares were sold during fiscal 1993.
F-14
<PAGE>
7. LONG-TERM AND CONVERTIBLE DEBT
Long-term debt consists of the following at September 30:
<TABLE>
1994 1995
----------------------------------------------
<S> <C> <C>
Three finance contracts payable, secured by automotive equipment, $ 41,080 $ -
payments totaling $1,427 monthly, due from November 1995 to
November 1998 at interest rates ranging from 7.5% to 10%
Small business loan, payable at $3,011 per month, interest at prime 127,021 97,695
plus 2.25% (11.5% at September 30, 1995), secured by equipment,
leasehold improvements and a personal guarantee by an officer and
director, due May, 1997
Other - 1,065
---------------------------------------
Total 168,101 98,760
Less current portion 58,335 27,462
---------------------------------------
Long-term portion $ 109,766 $ 71,298
---------------------------------------
---------------------------------------
</TABLE>
The scheduled maturities of long-term debt are as follows:
Year ending
September 30, Amount
-------------- ----------
1996 $ 27,462
1997 29,449
1998 33,018
1999 8,831
----------
$ 98,760
----------
----------
On July 19, 1995 the Company placed a $5,000,000 2.5% unsecured convertible
debenture due July 31, 2000 ("Debenture") with Societe Generale, Paris, France
("Holder"). Interest is payable semi-annually commencing January 31, 1996,
which, at the election of the Company, may be paid through the issuance of
common shares of the Company. The Debenture provides for conversion to common
stock of the Company at $6.00 per share for the first two years after issuance,
increasing to $6.50 during the third year, $7.00 during the fourth year and
$7.50 during the fifth year. If the Company merges with Auromar Development
Corp. ("Auromar") on terms described in Note 12, or such other terms pursuant to
which the Company issues shares of its common stock in exchange for a
controlling interest in Auromar, then the Company is obligated to issue to the
Holder, within 30 days after the effective date of such merger, a number of
shares of its common stock, at no cost, such that upon conversion, the Holder
shall be entitled to receive the number and kind of shares which, together with
the shares issued to the Holder following the merger, would be equal to the same
percentage of the issued and outstanding common shares the Holder would have
held if the then outstanding Debenture had been converted immediately prior to
the effective date of the merger. At September 30, 1995, the number of
additional shares that the Company would be required to issue in relation to the
proposed merger with Auromar would have been approximately 211,000. The net
proceeds from this debenture were $4,700,000 after deducting $300,000 in costs
relating to the placement.
8. STOCKHOLDERS' EQUITY
COMMON STOCK
On September 14, 1994, the Company completed a private placement of 378,055
shares of common stock for net proceeds of $1,908,000. During the year ended
September 30, 1995, the Company completed private placements for a total of
405,000 shares of common stock for net proceeds of $2,252,850. On September 29,
1995, the
F-15
<PAGE>
Company completed a private placement of 714,286 units for net proceeds of
$4,750,009. Each unit consists of one common share of the Company plus one
warrant; two warrants plus $8.50 will entitle the holder to purchase one share
of the Company's common stock. All warrants expire on October 1, 1997. VETI
completed a private placement of 1,000,000 units in September 1995 for net
proceeds of $2,375,000 (see Note 14). At September 30, 1995 these amounts were
included in common stock subscriptions receivable. The subscriptions receivable
were collected subsequent to September 30, 1995.
PREFERRED STOCK
The Company has authorized 20,000,000 shares of $.10 par value preferred stock.
The Board of Directors is vested with the authority to divide the preferred
shares into series and determine the relative rights and preferences at the time
of issuance of the series.
On October 3, 1995, the Company converted 2,707,000 of its common shares held
directly or beneficially by the Company's President, Chief Executive Officer and
Chairman of the Board, into 2,707,000 Series A preferred shares. Each Series A
preferred share is convertible, at the holder's option, into one share of the
Company's common stock and is entitled to receive dividends equal to that of
common shares, without preference. Preferred shares are entitled to vote with
common shares with the further provision that each preferred share will be
entitled to the equivalent of five (5) common share votes.
COMPANY STOCK OPTIONS
During 1995, the Company adopted an Incentive Stock Option Plan (ISOP) which
provides that a maximum of 800,000 options to purchase the Company's common
stock may be granted to officers, employees and advisors of the Company.
Options granted under the ISOP are intended to qualify as incentive stock
options under the Economic Recovery Tax Act of 1981 (the "1981 Act") as amended
by the Tax Reform Act of 1986.
As of September 30, 1995, options to purchase 660,000 shares of common stock
were granted under the ISOP. All options granted under the ISOP through
September 30, 1995 have a exercise price of $5.00 per share which was equal to
the market price per share on the date of grant. All options granted under the
ISOP are exercisable for a term of five (5) years from the date of vesting and
vest at the rate of 25% per year over a period of four years.
During 1995, the Company also adopted a non-qualified Stock Option Plan (SOP),
which grants options to purchase a maximum of 250,000 shares of the Company's
common stock at a price of $0.04 per share to officers, employees and advisors
of the Company. Options granted under the Plan are not intended to qualify as
incentive stock options under the 1981 Act.
As of September 30, 1995, options to purchase 246,000 shares of common stock
were granted under the SOP. All options granted under the SOP in fiscal 1995
were compensatory and resulted in total compensation of $1,220,160, of which
$855,600 was recorded as compensation expense during 1995, and $364,560 was
deferred and will be recorded as compensation expense for the year ending
September 30, 1996. With the exception of 50,000 options that completely vested
on the date of grant, the options vest over a one (1) year period with 50%
vesting at the grant date and 50% on the first anniversary of the grant date.
F-16
<PAGE>
A summary of stock option activity under these plans follows:
Number Option Price
of Shares Per Share
--------- ------------
Granted 906,000 $0.04 to $5.00
Canceled 0 0
Exercised 0 0
--------- --------------
Outstanding at September 30, 1995 906,000 $0.04 to $5.00
--------- --------------
--------- --------------
Exercisable at September 30, 1995 148,000 $0.04
--------- --------------
--------- --------------
In October 1995, options to purchase 1,000,000 shares of the Company's common
stock at $7.00 per share were granted to the Company's president.
VETI STOCK OPTIONS
During 1995, VETI adopted a qualified Incentive Stock Option Plan (V-ISOP) which
provides that a maximum of 700,000 options to purchase VETI's common stock may
be granted to officers, employees and advisors of VETI. Options granted under
the V-ISOP are intended to qualify as incentive stock options under the 1981
Act.
As of September 30, 1995, options to purchase 606,000 shares of common stock
were granted under the V-ISOP. All options granted through September 30, 1995
under the V-ISOP have an exercise price of $1.00 per share which represents the
market price per share on the date of grant. All options granted are
exercisable for a period of ten (10) years and vest 33 1/3% on the date of
grant, 33 1/3% on December 31, 1995 and 33 1/3% on December 31, 1996.
VETI also adopted a non-qualified Stock Option Plan (V-SOP), which grants
options to purchase a maximum of 500,000 shares of VETI's common stock to
officers, key employees and advisors of the Company. Options granted under the
Plan are not intended to qualify as incentive stock options under the 1981 Act.
As of September 30, 1995, options to purchase 480,000 shares of common stock at
a price of $.01 to $3.00 per share were granted under the V-SOP. Certain of
these options are compensatory in nature and resulted in total compensation
expense of $99,500 during 1995.
Prior to September 30, 1994, VETI had granted options to purchase up to a total
of 1,350,000 shares of its common stock. These options are not intended to
qualify as incentive stock options under the 1981 Act. Included in these options
are options to purchase up to 1,000,000 shares at $1.00 granted to the Chief
Executive Officer of VETI and the Company, under an employment agreement. This
agreement provides that 25% of such options were vested immediately with the
remaining 75% to vest based on the achievement of defined sales goals.
F-17
<PAGE>
A summary of stock option activity under VETI plans follows:
Number Option Price
of Shares Per Share
--------- -------------
Outstanding at September 30, 1992 and 1993 0 0
Granted 1,350,000 $1.00
Canceled 0 0
Exercised 0 0
--------- -------------
Outstanding at September 30, 1994 1,350,000 $1.00
Granted 1,086,000 $.01 to $3.00
Canceled 0 0
Exercised 0 0
--------- -------------
Outstanding at September 30, 1995 2,436,000 $.01 to $3.00
--------- -------------
--------- -------------
Exercisable at September 30, 1995 1,099,080 $.01 to $3.00
--------- -------------
--------- -------------
9. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," ("FAS 109") effective October 1, 1993. The
statement requires that deferred income taxes reflect the tax consequences on
future years of differences between the tax bases of assets and liabilities and
their bases for financial reporting purposes. In addition, FAS 109 requires the
recognition of future tax benefits, such as net operating loss carryforwards, to
the extent that realization of such benefits are more likely than not. There
was no cumulative effect of this accounting change at the time of adoption.
A reconciliation of the income tax benefit (provision) with amounts determined
by applying the statutory U.S. Federal income tax rate to the consolidated
income (loss) before income taxes is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------------------------------------------
<S> <C> <C> <C>
Tax benefit (provision) at U.S. statutory rate $ 199,253 $ (16,471) $ 1,064,850
Effect of graduated rates - 9,412 -
Operating losses with no current tax benefit (199,253) - (1,016,968)
Other - 7,059 (47,882)
------------------------------------------
Total $ - $ - $ -
------------------------------------------
------------------------------------------
</TABLE>
The Company's deferred tax items as of September 30 are as follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
DEFERRED TAX ASSETS:
Difference between book and tax basis of property $ 2,987 $ 15,248
Net operating loss carryforwards 792,539 2,828,344
Capitalized organization costs 38,445 36,311
Capitalized exploration costs - 74,987
Other - 5,787
---------- ----------
Total deferred tax assets 833,971 2,960,677
DEFERRED TAX LIABILITIES (619) -
VALUATION ALLOWANCE (833,352) (2,960,677)
---------- ----------
NET DEFERRED TAX ASSETS $ - $ -
---------- ----------
---------- ----------
</TABLE>
F-18
<PAGE>
The Company and certain of its subsidiaries do not file consolidated tax
returns. The various subsidiaries have losses that may be carried forward to
reduce future years' taxable income; however, these losses may not qualify for
use under the current Internal Revenue Code due to tax rules concerning
ownership changes. Such operating loss carryforwards amounted to approximately
$8,081,000 at September 30, 1995 and expire in various years through 2010.
10. WRITE DOWN OF ASSETS
VETI through its subsidiary, Vector Venture Corporation ("VVC"), sought to
acquire PERM Pelican, Inc. ("PERM") under an agreement dated March 10, 1993,
however VVC's relationship with the seller of PERM deteriorated to the point
where the VVC was unable to complete the acquisition. Consequently, on August
25, 1994 VVC commenced legal proceedings against PERM, the seller and certain
principals of PERM. Due to the uncertainty regarding the ability of the Company
to recover its investment in and advances to PERM, VETI wrote off $758,059 in
the fiscal year ended September 30, 1994.
11. OPERATING LEASES
The Company has obligations under operating leases for offices and facilities.
Minimum annual lease payments are as follows:
1996 $75,478
1997 73,952
1998 56,526
1999 56,526
Related rental expense was $94,999, $85,938 and $93,197 for the years ended
September 30, 1993, 1994 and 1995 respectively.
12. PROPOSED AUROMAR MERGER
On March 29, 1995, the Company announced that it had reached an agreement in
principle to effect a merger with Auromar Development Corporation. Under the
terms of the agreement, as amended October 11, 1995, shareholders of Auromar
would receive one (1) share of Casmyn Corp. common stock for two and six tenths
(2.6) shares of Auromar common stock. The merger has been approved by the
shareholders of Auromar Development Corp. The agreement is subject to a Plan of
Arrangement by the British Columbia (Canada) Supreme Court.
13. ZIMBABWE OPTION AGREEMENT
In August 1995 the Company concluded a firm purchase agreement with the Muir
Group in Bulawayo, Zimbabwe to acquire 100% of the shares of Matabeland
Minerals, Private Limited ("MMPL") a Zimbabwe company controlled by the Muir
Family. MMPL owns mining claims controlling gold and silver mineral rights on
several producing gold mining properties covering an area of approximately 1,200
hectares (approximately 2,965 acres) in the Bubi Greentstone Gold Belt of
Zimbabwe. The acquisition price of approximately $4.5 million plus applicable
taxes is subject to approval of the Zimbabwe government. The Muir Group
properties include infrastructure, mining and milling equipment. The Company is
developing its mine plan and has begun a series of drill programs to delineate
mineable reserves in order to facilitate efficient mining processing and
operating schedules.
F-19
<PAGE>
14. MINORITY INTEREST
Activity in the minority interest for the years ended September 30, 1993, 1994
and 1995 is as follows:
BALANCE SEPTEMBER 30, 1992 $ 308,611
Minority interest in net loss (1,301,804)
Private placements - VVC 1,347,967
Option and warrant exercise - VVC 1,071,520
Common shares issued for assets 73,580
-----------
BALANCE SEPTEMBER 30, 1993 1,499,874
Minority interest in net loss (4,580,694)
Private placement - VETI 1,062,443
Warrant exercise - VVC 312,250
Private placement - VVC 1,706,127
-----------
BALANCE SEPTEMBER 30, 1994 -
Minority interest in net loss (3,502,401)
Common shares issued for services - VETI 200,000
Private placements - VETI (Note 8) 3,375,000
Compensatory stock options (Note 8) 99,500
Warrant exercise - VVC 326,564
-----------
BALANCE SEPTEMBER 30, 1995 $ 498,663
-----------
-----------
On September 29,1995, VETI completed a private placement of 1,000,000 units with
each unit consisting of one common share of VETI plus one warrant; two warrants
plus $3.00 will entitle the holder to purchase one share of VETI's common stock.
The warrants expire on October 1, 1997.
15. SUBSEQUENT EVENTS
ZIMBABWE ACQUISITION
Effective January 31, 1996, in accordance with the terms and conditions of a
formal Purchase Agreement concluded in August 1995, the Company completed the
acquisition of 100% of the shares of a group of five (5) private mining
companies controlled by the Muir Family in Zimbabwe through E.W.B. Properties
(Private) Limited ("EWB"). The total consideration for this acquisition was
$4,071,415 plus applicable taxes which are currently estimated at $1,017,854.
The acquisition includes mining claims on several producing gold mining
properties covering approximately 1,200 hectares (approximately 2,965 acres) in
the Bubi Greenstone Gold Belt of Zimbabwe. These properties include
infrastructure, mining and milling equipment. This acquisition was accounted
for using the purchase method. The purchase price has been allocated to mineral
properties.
DAWN MINE ACQUSIITION
On January 31, 1996, the Company completed the acquisition of a 100% interest in
the Dawn Mine property from Olympus Gold Mines Ltd. in Zimbabwe for
approximately $455,000. The Dawn Mine is adjacent to the mines acquired in the
EWB transaction. The acquisition was accounted for using the purchase method.
The purchase price has been allocated to mineral properties.
RELIEF CANYON JOINT VENTURE
On May 7, 1996, the Company entered into a 50:50 joint venture with Newgold
Incorporated, a private company based in Reno, Nevada, for the development of
the Relief Canyon Mine located in Pershing County, Nevada. The Company will
contribute approximately $1,400,000 for its 50% interest in the venture, which
will be accounted for using the equity method.
F-20
<PAGE>
WESTAMERICA TRANSACTION
On May 24, 1996 the Company issued 606,061 common shares in exchange for
5,680,514 common shares of WestAmerica Corporation ("WestAmerica"),
approximately a 65% interest. The Company has accounted for the transaction
using the equity method since the shares acquired are subject to a repurchase
agreement by WestAmerica and have been placed in a voting trust controlled by
an officer and director of WestAmerica. As such the Company exercises no
effective control over the operations or management of WestAmerica, however,
the Company has the power to appoint two out of five board members. The
transaction has been valued at approximately $6,970,000, which was calculated
based upon an $11.50 per common share value for the Company's common stock.
This value reflects a discount from recent similar sized transactions to
compensate for the restricted nature of the shares issued in the transaction.
PRIVATE PLACEMENT
On March 29, 1996, the Company completed a private placement of 750,000 units
for net proceeds of $8,815,555. Each unit consists of one share of the
Company's restricted common stock plus one warrant, two warrants plus $13.00
will entitle the holder to purchase one share of the the Company's common stock.
PROPOSED AUROMAR MERGER
The offer to exchange described in Note 12 above was approved by the
shareholders of Auromar at the Extraordinary General Meeting held March 12, 1996
pursuant to Sections 276-279 of the British Columbia Company Act and has been
approved by the Supreme Court of British Columbia.
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
WestAmerica Corporation
We have audited the accompanying consolidated balance sheets of WestAmerica
Corporation as of March 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended March 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the financial statements of WestAmerica Investment Company, a subsidiary owned
100% by WestAmerica Corporation. WestAmerica Investment Company's statements
reflect total assets and revenues constituting 15% and 69%, respectively, of the
related consolidated totals for the year ended March 31, 1996. WestAmerica
Investment Company's statements were audited by another auditor whose reports
have been furnished to us, and our opinion, insofar as it relates to the amounts
included for WestAmerica Investment Company, is based solely on the reports of
the other auditor.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other auditor provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of another auditor, the
financial statements referred to above present fairly, in all material respects,
the financial position of WestAmerica Corporation as of March 31, 1996 and 1995,
and the results of its operations and its cash flows for each of the three years
in the period ended March 31, 1996 in conformity with generally accepted
accounting principles.
As explained in Note 1 to the consolidated financial statements, effective April
1, 1995, WestAmerica Corporation changed its method of accounting for the
consolidation of WestAmerica Investment Company.
TULLIUS TAYLOR SARTAIN & SARTAIN
Tulsa, Oklahoma
June 18, 1996
F-22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANT
Board of Directors
WestAmerica Investment Company
Scottsdale, Arizona
I have audited the accompanying statements of financial condition of WestAmerica
Investment Company (DBA WestAmerica Investment Group) as of March 31, 1996 and
December 31, 1994 and the related statements of income, cash flows, and changes
in stockholder's equity for the fifteen months ended March 31, 1996 and the
years ended December 31, 1994 and 1993. These financial statements are the
responsibility of WestAmerica Investment Company's management. My
responsibility is to express an opinion on these financial statements based upon
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, such financial statements referred to above present fairly, in
all material respects, the financial condition of WestAmerica Investment Company
as of March 31, 1996 and December 31, 1994 and the results of its operations,
cash flows, and changes in stockholder's equity for the fifteen months ended
March 31, 1996 and the years ended December 31, 1994 and 1993 in conformity with
generally accepted accounting principles.
GEORGE BRENNER
Beverly Hills, California
May 3, 1996
F-23
<PAGE>
WESTAMERICA CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30,
March 31, 1996
1995 1996 (Unaudited)
----------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 574 $ 1,025 $ 541
Marketable securities 13 70 109
Accounts receivable:
Trade 214 368 345
Related party 74 151 162
Other 52 11 135
Notes receivable 44 89 89
Inventories 208 230 285
----------------------------------------
Total current assets 1,179 1,944 1,666
Property and equipment:
Oil and gas properties, successful
efforts method 3,170 3,831 4,125
Transportation, drilling and other equipment 580 599 607
Land and buildings 950 950 950
Less accumulated depreciation, depletion,
and amortization (3,473) (3,449) (3,479)
----------------------------------------
1,227 1,931 2,203
Goodwill 401 387 383
Investment in Casmyn Corp. - - 6,970
Other assets 281 250 245
----------------------------------------
Total assets $ 3,088 $ 4,512 $11,467
----------------------------------------
----------------------------------------
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE>
WESTAMERICA CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30,
March 31, 1996
1995 1996 (Unaudited)
-----------------------------------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - banks $ 13 $ 398 $ 426
Notes payable - stockholder - 45 -
Accounts payable 170 424 427
Accrued expenses 86 270 176
Prepaid drilling and well recompletion contracts 577 407 399
-----------------------------------------
Total current liabilities 846 1,544 1,428
Deferred income 37 29 35
Notes payable - banks 386 88 132
Notes payable - stockholder 99 146 191
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized:
Series A convertible preferred stock, redeemable
and cumulative, 100,000 shares outstanding
$1,000,000 liquidation preference 1 1 1
Series B preferred stock, redeemable and cumulative,
97,700 shares outstanding at March 31, 1996,
and June 30, 1996, $879,300 liquidation preference - 1 1
Common stock, $.01 par value, 10,000,000 shares authorized;
issued 3,007,291, outstanding 2,936,490 and 3,005,361 March 31,
1995 and 1996, issued 8,687,805 outstanding 8,685,875 at June 30,
1996 29 30 87
Additional paid-in capital 5,602 6,326 13,192
Deficit (3,893) (3,651) (3,598)
Treasury stock, at cost - 19,808 shares in 1995
and 1,930 shares in 1996 (19) (2) (2)
-----------------------------------------
Total stockholders' equity 1,720 2,705 9,681
-----------------------------------------
Total liabilities and stockholders' equity $ 3,088 $ 4,512 $11,467
-----------------------------------------
-----------------------------------------
</TABLE>
See notes to consolidated financial statements.
F-25
<PAGE>
WESTAMERICA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three months ended
Year ended March 31, June 30,(unaudited)
1994 1995 1996 1995 1996
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Commission income $ 444 $2,173 $3,358 $ 500 $1,074
Oil and gas sales 327 204 192 50 71
Drilling, recompletion and service income 69 256 1,258 33 123
Interest and other 111 113 64 5 2
---------------------------------------------------------------------
951 2,746 4,872 588 1,270
Costs and expenses:
Brokers commissions and clearing brokers charges 204 1,050 1,950 342 668
Brokerage operating expenses 388 1,162 1,316 252 305
Oil and gas operations 271 381 639 82 132
Expired and surrendered leases - - 65 - -
Selling, general and administrative 296 255 338 55 62
Depreciation, depletion and amortization 212 153 160 21 33
Interest 59 51 52 12 17
Other (37) 12 16 - -
---------------------------------------------------------------------
1,393 3,064 4,536 764 1,217
---------------------------------------------------------------------
Income (loss) from continuing operations before
cumulative effect of an accounting change (442) (318) 336 (176) 53
Discontinued operations:
Loss from operations of discontinued business (214) - - - -
Loss on disposal of business (68) (101) - - -
---------------------------------------------------------------------
Income (loss) before cumulative effect of an
accounting change (724) (419) 336 (176) 53
Cumulative effect of an accounting change - - (94) - -
---------------------------------------------------------------------
Net income (loss) $(724) $(419) $ 242 $(176) $53
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings (loss) per common share:
Income (loss) from continuing operations
before cumulative effect of an
accounting change $(.17) $(.11) $.07 $(.06) $.01
---------------------------------------------------------------------
---------------------------------------------------------------------
Income (loss) before cumulative effect of
an accounting change $(.27) $(.14) $.07 $(.06) $.01
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income (loss) $(.27) $(.14) $.04 $(.06) $.01
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted average shares outstanding 2,273,339 2,936,490 2,967,523 2,936,490 5,315,020
---------------------------------------------------------------------
---------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
F-26
<PAGE>
WESTAMERICA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additional Retained
Preferred Common Paid-in Earnings Treasury
Stock Stock Capital (Deficit) Stock Total
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1993 $- $23 $4,093 $(2,750) $(45) $1,321
Issuance of stock 1 6 1,520 - - 1,527
Retirement of treasury stock - - (1) - 1 -
Preferred stock dividends - - (8) - - (8)
Net loss - - - (724) - (724)
--------------------------------------------------------------------------------------
Balance, March 31, 1994 1 29 5,604 (3,474) (44) 2,116
Issuance of preferred stock - - 87 - - 87
Issuance of treasury stock - - (1) - 26 25
Repurchase of common stock - - - - (1) (1)
Preferred stock dividend - - (88) - - (88)
Net loss - - - (419) - (419)
--------------------------------------------------------------------------------------
Balance, March 31, 1995 1 29 5,602 (3,893) (19) 1,720
Issuance of preferred stock 1 - 808 - - 809
Issuance of common stock - 1 50 - - 51
Retirement of treasury stock - - (17) - 17 -
Preferred stock dividends - - (117) - - (117)
Net income - - - 242 - 242
--------------------------------------------------------------------------------------
Balance, March 31, 1996 2 30 6,326 (3,651) (2) 2,705
--------------------------------------------------------------------------------------
Three Months Ended June 30,
1996 (unaudited)
Issuance of common stock - 57 6,913 - - 6,970
Preferred stock dividends - - (47) - - (47)
Net income 53 53
--------------------------------------------------------------------------------------
Balance June 30, 1996 $2 $87 $13,192 $(3,598) $(2) $9,681
(unaudited) --------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
F-27
<PAGE>
WESTAMERICA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three months ended
Year ended March 31, June 30,
1994 1995 1996 1995 1996
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(724) $(419) $ 242 $(176) $ 53
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation, depletion and amortization 212 153 160 21 33
(Gain) loss on sales of assets 21 (23) 59 - (101)
Increase in receivables (85) (212) (235) (62) (111)
Decrease (increase) in other assets 495 (71) 9 (1) 5
Increase in accounts payable, drilling and well
completion advances and accrued expenses 49 546 268 6 (99)
Other (3) 13 - 50 (49)
-----------------------------------------------------------------------
Net cash provided by (used in) operating activities (35) (13) 503 (162) (269)
CASH FLOWS FROM INVESTING ACTIVITIES
WestAmerica Investment Company cash acquired
through issuance of stock 233 - - - -
Purchases of marketable securities (174) (604) (68) - (39)
Proceeds from sales of marketable securities - 760 13 - -
Expenditures for property and equipment (106) (369) (946) (50) (321)
Proceeds from sales of property and equipment 22 45 119 73 120
Other (3) - - - -
-----------------------------------------------------------------------
Net cash used in investing activities (28) (168) (882) 23 (240)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of bank borrowings (85) (2) (21) (18) (13)
Proceeds from bank borrowings - - 108 - 85
Decrease in notes payable to stockholder (36) (4) - (5) -
Proceeds from preferred stock offering 854 87 860 - -
Dividends paid (8) (88) (117) (22) (47)
-----------------------------------------------------------------------
Net cash provided by (used in) financing activities 725 (7) 830 (45) 25
-----------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 662 (188) 451 (184) (484)
Cash and cash equivalents, beginning of year 100 762 574 574 1,025
-----------------------------------------------------------------------
Cash and cash equivalents, end of year $ 762 $ 574 $1,025 $ 390 $ 541
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
F-28
<PAGE>
WESTAMERICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND ACCOUNTING CHANGE
The consolidated financial statements include the accounts of WestAmerica
Corporation (the "Company"), its wholly owned subsidiaries and its general
partner interests in oil and gas producing partnerships.
The Company owns 100% of WestAmerica Investment Group, Inc., which owns 100% of
the outstanding stock of WestAmerica Investment Company ("WIC"), an investment
brokerage business headquartered in Scottsdale, Arizona. The consolidated
financial statements for the year ended March 31, 1995 include WIC's results of
operations and cash flows for its year ended December 31, 1994. Effective April
1, 1995, the Company changed the year end of WIC to March 31, the Company's year
end. WIC's net loss for the three months ended March 31, 1995 of $94,279 is
included in the statement of operations for the year ended March 31, 1996 as the
cumulative effect of an accounting change. If the accounting change had been
applied effective April 1, 1994, the consolidated net loss for the fiscal year
ended March 31, 1995 would have been $492,000.
All significant intercompany transactions and balances have been eliminated.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
INVENTORIES
Inventories consist of oil field supplies and are carried at the lower of
average cost or market.
OIL AND GAS PROPERTIES
The Company follows the successful efforts method of accounting for oil and gas
producing activities. Under this method, proved property acquisition costs,
costs of productive exploratory wells and all development costs (including lease
acquisition, tangible and intangible costs) are capitalized. The costs of
drilling exploratory wells are initially capitalized as wells in progress and
are expensed if the wells are determined to be nonproductive. Upon the sale of
property, the cost of the property and accumulated depreciation, depletion and
amortization are removed from the accounts and any gain or loss is recognized.
Depreciation, depletion and amortization of oil and gas properties is computed
on a property-by-property basis using the unit-of-production method based
upon estimated proved oil and gas reserve quantities determined by a petroleum
engineer. Valuation allowances are provided if the net capitalized costs of oil
and gas properties exceed their estimated realizable values based on the
undiscounted future net revenues.
LAND, BUILDINGS AND EQUIPMENT
Land, buildings and equipment are stated at cost. Depreciation of buildings and
non-oil and gas producing equipment is determined using the straight-line and
accelerated methods over their estimated useful lives.
INTANGIBLE ASSETS
Intangible assets, consisting primarily of goodwill, are amortized using the
straight-line method over 30 years.
F-29
<PAGE>
REVENUE RECOGNITION FOR DRILLING AND RECOMPLETION CONTRACTS
Revenues from fixed-price drilling contracts are recognized on the percentage of
completion method commencing when progress reaches a point where experience is
sufficient to reasonably estimate final results. Percentage-of-completion is
measured by the percentage of costs incurred to date to estimated total costs
for each contract. The Company sells gas producing properties subject to the
obligation to recomplete the wells located thereon. Revenue is recognized when
the wells have been successfully recompleted and are ready to produce.
COMMISSION INCOME
Commission income is reported on a settlement date basis.
INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Deferred income
taxes are provided for differences between the basis of assets and liabilities
for financial statement and income tax purposes. These differences result
primarily from the capitalization of intangible drilling costs only for
financial statement purposes, and differences between depreciation, depletion
and amortization recorded in the financial statements and in the tax return.
The Company will recognize the benefits of net operating loss and investment tax
credit carryforwards in the year the tax benefits are realized unless
realization is determined to be probable in an earlier year.
STATEMENT OF CASH FLOWS
For the purposes of the statement of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents.
Amounts paid for interest were $52,000, $51,000 and $59,000 for the years ended
March 31, 1994, 1995 and 1996, respectively.
During 1996, the Company exchanged a vehicle with a stockholder for a reduction,
equal to the cost of the vehicle, in the Company's note payable to the
stockholder. In addition, oil and gas property additions of $96,700 were
financed through a note payable to the stockholder.
In January 1994, the Company sold oil and gas properties with a book value of
$90,000 for $17,750 in cash and a note receivable of $118,816. The Company also
accepted a note receivable for $47,000 in exchange for the obligation to provide
consulting services to the buyer over the next three years, recorded in deferred
income.
EARNINGS (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed based on the weighted average
number of common and common equivalent shares outstanding. Net income (loss) is
adjusted by the aggregate amount of dividends paid on the Company's preferred
stock. The effects of warrants and convertible preferred stock would be
antidilutive and therefore are not considered in the computations.
ACCOUNTING STANDARDS RECENTLY ISSUED BY THE FINANCIAL ACCOUNTING STANDARDS
BOARD
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," is
effective for the Company's fiscal year ending March 31, 1997. It requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Management has not determined the effect of SFAS No. 121 had it been adopted at
March 31, 1996.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
The accompanying unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. In the opinion of management, all adjustments
(consisting of normal, recurring adjustments) necessary for a fair
presentation have been included. Results for interim periods are not
necessarily indicative of the results to be expected for a full year.
F-30
<PAGE>
NOTE 2 - NOTES PAYABLE
Notes payable consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
1995 1996
-------------------------
<S> <C> <C>
Floating rate (10.5% at March 31, 1996) bank note payable in monthly
installments of $3,785 including interest, due March 1997,
collateralized by the Company's real estate and 341,466 shares
of the Company's common stock owned by the Company's president $381 $376
Bank note payable in installments of $2,129, including interest
at 10%, due April 1, 2000, collateralized by equipment - 83
Other 18 27
-------------------------
399 486
Less amount due in one year 13 398
-------------------------
Notes payable - noncurrent $386 $ 88
-------------------------
-------------------------
Notes payable - stockholder consist of the following (dollars in thousands):
<CAPTION>
1995 1996
-------------------------
<S> <C> <C>
Note due January 2, 1998 requiring monthly payments of
$4,465 including interest at 9%, collateralized by
equipment $ - $ 97
Note bearing interest at 10% without stated repayment
terms, classified as noncurrent 99 94
-------------------------
99 191
Less amount due in one year - 45
-------------------------
Notes payable to stockholder - noncurrent $ 99 $146
-------------------------
-------------------------
</TABLE>
Annual maturities are (in thousands): 1997 - $443; 1998 - $179; 1999 - $25;
2000 - $30.
NOTE 3 - INCOME TAXES
At March 31, 1996, tax net operating loss carryforwards of approximately
$3,000,000 expiring in 2002 through 2011, percentage depletion carryforwards of
approximately $670,000 and approximately $83,000 of investment tax credit
carryforward are available to reduce income taxes in future years.
Approximately $755,000 of the net operating loss carryforward is subject to
separate return limitation rules.
F-31
<PAGE>
For financial reporting purposes, net operating losses not utilized to reverse
previously provided deferred taxes are approximately $4,025,000. The percentage
depletion and investment tax credit carryforwards available for income tax
purposes will also reduce the financial tax provision when they are realized.
Any deferred tax asset resulting form these tax carryforwards would be
eliminated by a valuation allowance since realization does not meet the "more
probable than not" criteria of Statement of Financial Accounting Standards No.
109.
NOTE 4 - CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash equivalents and accounts receivable.
Uninsured, interest bearing cash deposits with a brokerage firm are $626,332 at
March 31, 1996. Approximately $243,000 of accounts receivable result from WIC
customers' securities transactions. WIC closely monitors the credit worthiness
of its customers. For the year ended March 31, 1996, WIC's bad debt expenses
were less than 2% of brokerage operating expenses.
NOTE 5 - STOCKHOLDERS' EQUITY
During 1996, the Company issued 97.7 Stock Units and 93.7 Partnership Units in a
private placement. Each stock unit consists of 1,000 shares of $.90 cumulative
non-convertible Series B Preferred Stock and 1,000 Series A Conditional Common
Stock Purchase Warrants. Each Partnership Unit is comprised of a general
partner interest in WestAmerica Production Partnership. Proceeds of the Stock
Units were $824,882, net of commissions and offering expenses. Proceeds of the
Partnership Units were $87,141, net of expenses.
The Series B preferred shares have a liquidation preference of $9 per share and
are redeemable at the option of the Company, commencing December 1, 1996, in
whole or in part, initially at a redemption price of $10 per share and
thereafter at prices declining to $9 per share, on or after December 1, 2006.
The Common Stock Purchase Warrants entitle the holder, conditioned upon
compliance with applicable securities laws at the time of exercise, to purchase
common shares for $3 per share, subject to adjustment in certain circumstances,
through December 31, 1998.
The Series A convertible preferred shares have a liquidation preference of $10
per share and are convertible at any time, unless previously redeemed, into
common shares of the Company at the rate of 5.6 common shares for each
convertible preferred share. The Series A preferred shares are redeemable at
the option of the Company, at any time, in whole or in part, initially at a
redemption price of $11 per share and thereafter at prices declining to $10 per
share, on or after January 1, 2004.
Dividends on the shares of Series A and Series B preferred stock are cumulative
and payable quarterly at an annual rate of $.90 per share.
NOTE 6 - NET CAPITAL REQUIREMENT
Pursuant to the net capital provisions of Rule 15c3-1 of the Securities and
Exchange Act of 1934, WIC is required to maintain a minimum net capital as
defined under such provisions, in the amount of $100,000 at March 31, 1996. WIC
was in compliance with such requirements at March 31, 1996.
NOTE 7 - OIL AND GAS PARTNERSHIPS
During 1995, Oklahoma Resources General Partnership (the Partnership) was formed
with Oklahoma Resources Corporation (ORC), a wholly owned subsidiary of
WestAmerica, as the Managing General Partner. Under the Partnership agreement,
the Managing General Partner bears the cost of all leasehold and equipment while
the Additional General Partners bear the intangible development costs. ORC
contributed leasehold and equipment costing approximately $180,000 to the
Partnership in exchange for its 50% Partnership interest. Additional General
Partners contributed $407,500 for their 50% Partnership interests and loaned the
Partnership $407,500. The notes bear interest at 10.25% per annum, are
repayable in quarterly installments over three years, and are guaranteed by the
Managing General Partner. ORC will be reimbursed for administrative costs and
overhead expenses directly related to management and operations of the
Partnership, up to 3% of total gross revenue of the Partnership.
F-32
<PAGE>
The Partnership has entered into a drilling contract with WestAmerica to drill
26 wells for the Partnership for $769,000. In 1995 and 1996, WestAmerica
recorded drilling contract revenue of $192,000 and $509,000 and drilling costs
of $118,000 and $298,000 respectively, exclusive of indirect costs.
During 1996, most of the Partnership's gas wells were shut-in awaiting pipeline
connection, and the Partnership had insufficient cash flow to make the
additional General Partner loan payments. The Company advanced the Partnership
approximately $121,000, included in accounts receivable - related parties, to
meet the additional General Partner loan obligations. The advances are
recoupable from future Partnership cash flow.
The objective of the WestAmerica Production Partnership (see Note 5) is to
invest in producing natural gas properties, production from which qualifies for
federal income tax credits for the production of coal seam gas pursuant to
Section 29.
NOTE 8 - SECTION 29 INCOME TAX CREDIT PROGRAM
During 1996, the Company began a program of leasing properties upon which
existing non-producing wells are located, the gas production from which is "coal
seam gas" qualifying for tax credits under Section 29 of the Internal Revenue
Code. The Company sells the working interests in these properties for cash and
the right to retain a portion of the proceeds from the gas produced from the
property. The Company is obligated to recomplete the wells into the coal seam.
After recompletion and testing to determine the production capability of the
well, the Company records the revenue on the property sale, net of well
recompletion costs. In 1996, the Company recorded $754,000 of revenue from the
sales of Section 29 tax credit properties. In addition, the current liability
for prepaid drilling and well completion contracts includes $242,000 of proceeds
from such sales for which the recompletion obligations had not been met as of
March 31, 1996.
NOTE 9 - BUSINESS COMBINATION
On April 1, 1993, the Company owned 25.8% of the outstanding common stock of
WestAmerica Investment Group, Inc. (WIG). In June and September 1993, the
Company entered into separate stock exchange agreements with certain
shareholders of WIG. The Company issued 598,763 shares of its stock in
exchange for common shares of WIG, thereby increasing the Company's ownership of
WIG to 96%. The Company accounted for this transaction using the purchase
method. The purchases were recorded based on the trading price of Company stock
during the time of the transactions, $1.125 per share, an aggregate of $673,608.
The excess of the purchase price over the value of the net assets acquired was
approximately $420,000 and is being amortized over 30 years using the straight-
line method. The Company purchased the remaining 4% interest for $10,000 in
April 1994.
WIC's operations for the three months ended December 31, 1993 and the year ended
December 31, 1994 have been included in the accompanying consolidated financial
statements. The Company's equity in WIC's net loss for WIC's year ended
December 31, 1993 is $105,000, as compared to WIC's actual net loss of $46,000,
due to accounting for the acquisition on a step-by-step basis.
Results of operations for the year ended March 31, 1994 as though the
acquisition had taken place at the beginning of the year are as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Pro Pro
As forma forma
Reported WIC Adjustments Balance
----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 951 $1,660 $ - $2,611
Income (loss) from continuing
operations (442) 97 (46) (391)
Net loss (724) 97 (46) (673)
Net loss per share (.27) .03 (.01) (.25)
</TABLE>
The pro forma adjustments relate to eliminating the equity method of accounting
and recording amortization of goodwill related to the acquisition.
F-33
<PAGE>
NOTE 10 - DISCONTINUED OPERATIONS
In December, 1993, the Company assigned all trademarks, trade names, copyrights
and inventories of Impulse Gifts and Accessories, Inc. a wholly owned
subsidiary, (Impulse), to an unrelated party. The Company received $108,000
cash proceeds and a royalty of 3.5% of sales revenue derived from the sale of
Impulse products for a five year period. In fiscal 1995, the carrying value of
Impulse's remaining net assets was further reduced by $101,000 to estimated
realizable value.
Loss per share information is as follows:
1994 1995
----------------------------------
Loss from operations of Impulse $(.08) $ -
Loss from disposal of Impulse $(.03) $(.03)
NOTE 11 - COMMITMENTS
At March 31, 1996 the Company was committed for office leases requiring minimum
annual rentals as follows:
Years ending March 31,
- ----------------------
1997 $199,000
1998 192,000
1999 80,000
-----------------
$471,000
-----------------
-----------------
F-34
<PAGE>
NOTE 12 - BUSINESS SEGMENT INFORMATION
The Company operates primarily in the oil and gas producing and investment
brokerage businesses in the United States. The oil and gas producing segment
information below includes drilling, recompletion and service income and
expenses, related general and administrative expenses, and identifiable assets
not included in Note 13 - Oil and Gas Information. As discussed in Note 9, the
Company increased its ownership of WIC from 25.8% to 96% in two separate
transactions during the year ended March 31, 1994. Prior to acquiring control,
the Company accounted for its investment in WIC using the equity method of
accounting. The Business Segment Information for the investment brokerage
segment for 1994 includes only the three months ended December 31, 1993.
Revenue, operating income, identifiable assets, capital expenditures, and
depreciation and amortization pertaining to the Company's two business segments
are presented below (dollars in thousands):
Year ended March 31,
1994 1995 1996
---------------------------------------
Revenue:
Investment brokerage segment $ 449 $ 2,208 $ 3,358
Oil and gas producing segment 502 538 1,514
---------------------------------------
$ 951 $ 2,746 $ 4,872
---------------------------------------
Operating income (loss):
Investment brokerage segment $ (105) $ (34) $ (45)
Oil and gas producing segment (337) (284) 381
---------------------------------------
$ (442) $ (318) $ 336
---------------------------------------
---------------------------------------
Capital expenditures:
Investment brokerage segment $ - $ 17 $ 11
Oil and gas producing segment 106 352 935
---------------------------------------
$ 106 $ 369 $ 946
---------------------------------------
---------------------------------------
Depreciation and amortization:
Investment brokerage segment $ 7 $ 14 $ 14
Oil and gas producing segment 204 139 146
---------------------------------------
$ 211 $ 153 $ 160
---------------------------------------
---------------------------------------
Identifiable assets:
Investment brokerage segment $ 865 $ 1,039
Oil and gas producing segment 2,223 3,473
-----------------------
$ 3,088 $ 4,512
-----------------------
-----------------------
F-35
<PAGE>
NOTE 13 - OIL AND GAS INFORMATION
Capitalized costs relating to oil and gas producing activities are as follows
(dollars in thousands):
March 31,
1994 1995 1996
-------------------------------------
Proved oil and gas properties $2,927 $3,146 $3,821
Less accumulated depreciation,
depletion and amortization 2,282 2,276 2,189
-------------------------------------
Net capitalized costs $ 645 $ 870 $1,632
-------------------------------------
-------------------------------------
Costs incurred in oil and gas producing activities are as follows (dollars in
thousands):
Year ended March 31,
1994 1995 1996
-------------------------------------
Exploration and development costs $105 $188 $935
Property acquisition costs $ - $150 $ -
Results of operations for oil and gas producing activities are as follows
(dollars in thousands):
Year ended March 31,
1994 1995 1996
-------------------------------------
Oil and gas sales $ 327 $ 204 $ 192
Lease operating costs (116) (127) (212)
Production taxes (18) (13) (9)
Depreciation, depletion, and
amortization (154) (73) (80)
-------------------------------------
Results of operations for oil and
gas producing activities
(excluding overhead and
financing costs) $ 39 $(9) $(109)
-------------------------------------
-------------------------------------
F-36
<PAGE>
NOTE 14 - OIL AND GAS RESERVES INFORMATION (UNAUDITED)
Following are the Company's estimates of proved oil and gas reserves. All
reserves are located in the United States and were estimated in accordance with
guidelines established by the Securities and Exchange Commission which requires
that reserve estimates be prepared under existing economic and operating
conditions with no provision for price and cost escalations except by
contractual arrangements.
Company management emphasizes that reserve estimates are inherently imprecise
and that estimates of new discoveries are more imprecise than those of producing
oil and gas properties. Accordingly, the estimates are expected to change as
additional information becomes available in the future.
The following table sets forth the Company's proved oil and gas reserves at
March 31, 1995 and 1996 together with the changes therein:
<TABLE>
<CAPTION>
Changes in Proved Reserves (Unaudited)
1994 1995 1996
----------------------------------------------------------------
Oil Gas Oil Gas Oil Gas
(Bbl) (Mcf) (Bbl) (Mcf) (Bbl) (Mcf)
----------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Proved reserves, beginning of year 105 537 96 274 93 1,594
Revisions of previous estimates 3 20 5 (29) (24) (48)
Extensions and discoveries - - - 1,044 - 5,100
Purchases of minerals in place - - - 378 - -
Production (12) (55) (8) (73) (7) (75)
Sales of minerals in place - (228) - - - (20)
----------------------------------------------------------------
Proved reserves, end of year 96 274 93 1,594 62 6,551
----------------------------------------------------------------
----------------------------------------------------------------
Proved developed reserves:
Beginning of year 105 537 96 274 93 617
End of year 96 274 93 617 62 6,551
</TABLE>
F-37
<PAGE>
<TABLE>
<CAPTION>
Standardized Measure of Discounted Future Net Cash Flows
Relating to Proved Reserves (Unaudited)
1994 1995 1996
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Future cash inflows $ 1,719 $ 3,420 $11,229
Future production and development costs (1,050) (1,962) (3,858)
Future income tax expense - - -
---------------------------------------------
Future net cash flows 669 1,458 7,371
Annual discount (10%) for
estimated timing of cash flows (217) (530) (3,139)
---------------------------------------------
Standardized measure of discounted
future net cash flows $ (452) $ 928 $ 4,232
---------------------------------------------
---------------------------------------------
</TABLE>
Changes in Standardized Measure of Discounted Future Net Cash
Flows from Proved Reserves (Unaudited)
<TABLE>
<CAPTION>
Year ended March 31,
1994 1995 1996
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Sales of oil and gas produced,
net of production costs $(152) $ (51) $ (55)
Net changes in price and
production costs (111) 57 297
Revisions of quantity estimates 25 4 (84)
Extensions and discoveries - 413 3,163
Net changes from purchases and
sales of minerals in place (123) 39 (2)
Accretion of discount 75 45 93
Other (11) (31) (108)
---------------------------------------------
Changes in standardized measure (297) 476 3,304
Standardized measure, beginning
of period 749 452 928
---------------------------------------------
Standardized measure, end of
period $ 452 $928 $4,232
---------------------------------------------
---------------------------------------------
</TABLE>
F-38
<PAGE>
The standardized measure of discounted future net cash flows from proved
reserves is computed by applying year-end prices of oil and gas (with
consideration of price changes only to the extent provided by contractual
arrangements) to the estimated future production of proved oil and gas reserves.
Estimated future expenditures to be incurred in producing the reserves are based
on year-end costs. Estimated future income tax expenses to be incurred on
pretax net cash flows less tax basis of the properties and available
carryforwards and credits are based on end of period statutory tax rates. The
estimated future net cash flows are discounted at ten percent a year to reflect
estimated timing of future cash flows.
NOTE 15 - SUBSEQUENT EVENTS
On May 24, 1996, the Company issued 5,680,514 common shares (approximately 65%
of the outstanding common shares) in exchange for 606,061 common shares of
Casmyn Corp. ("Casmyn"). The shares issued are restricted from trading and are
subject to a repurchase agreement whereby the Company may, until May 24, 1997,
repurchase the common shares it issued by returning the Casmyn shares. The
Company and Casmyn have also executed a proxy agreement whereby the Company's
president may vote the shares owned by Casmyn.
The Company's investment in Casmyn, representing approximately seven percent of
Casmyn's outstanding common stock, is valued at approximately $6,970,000,
representing $1.23 per share of the Company's common stock. This value reflects
a discount from the recent average trading price of the Company's common stock
due to the restricted nature of the shares issued in the transaction.
In 1996, the Company invested an immaterial amount for a 51% interest in a newly
formed corporation which is the general partner in a limited partnership it
formed to construct restaurant facilities. The Company has invested $77,000 as
a limited partner in the partnership. On May 26, 1996, the Company guaranteed
$1,268,000 of limited partnership indebtedness, which is also secured by
partnership property appraised at $1,800,000.
F-39
<PAGE>
AUDITORS' REPORT
To the Directors of
Auromar Development Corporation
(A development stage company)
We have audited the balance sheets of Auromar Development Corporation (a
development stage company) as at March 31, 1996 and 1995, and the statements of
operations and deficit and cash flow for the years then ended and cumulative
from inception to March 31, 1996. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Corporation as at March 31, 1996 and
1995 and the results of its operations and its cash flow for the years then
ended and cumulative from inception to March 31, 1996 in accordance with
generally accepted accounting principles applied on a consistent basis.
The financial statements for the year ended March 31, 1994 were audited by
another auditor who expressed an opinion without reservation on those statements
in his report dated July 27, 1994.
DELOITTE & TOUCHE
Chartered Accountants
Vancouver, British Columbia
June 28, 1996
F-40
<PAGE>
COMMENTS BY AUDITORS FOR U.S. READERS ON
CANADA-U.S. REPORTING CONFLICT
To the Directors of
Auromar Development Corporation
(A development stage company)
In the United States, reporting standards for auditors require the addition
of an explanatory paragraph (following the opinion paragraph) when the
auditor concludes that there is substantial doubt about the entity's ability
to continue as a going concern, such as described in Note 1 of the financial
statements. Our report to the directors dated June 28, 1996 is expressed in
accordance with Canadian reporting standards, which do not permit a reference
to such an uncertainty in the auditors' report when the uncertainty is
adequately disclosed in the financial statements.
DELOITTE & TOUCHE
Chartered Accountants
Vancouver, British Columbia
June 28, 1996
F-41
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
(A development stage company)
BALANCE SHEETS
as at March 31
<TABLE>
<CAPTION>
JUNE 30, 1996
NOTES MARCH 31, 1995 MARCH 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 89,654 $ 8,163 $ 27,968
Accounts receivable 3,204 2,623 2,524
Prepaid expenses 1,055 - -
- --------------------------------------------------------------------------------------------------------------
93,913 10,786 30,492
- --------------------------------------------------------------------------------------------------------------
Mineral properties (Schedule) 3 3,543,977 5,814,535 5,814,535
Petroleum and natural gas properties 4 1 1 1
- --------------------------------------------------------------------------------------------------------------
3,543,978 5,814,536 5,814,536
- --------------------------------------------------------------------------------------------------------------
Equipment 5 3,245 2,203 1,989
- --------------------------------------------------------------------------------------------------------------
$ 3,641,136 $ 5,827,525 $ 5,847,017
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable $219,259 $239,145 $ 195,647
- --------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 6
Authorized
100,000,000 common shares without par value
Issued and fully paid
6,441,104 common shares
(March 31, 1996-6,419,104
March 31, 1995-5,694,104) 5,281,364 7,556,114 7,631,216
Deficit accumulated during the development stage (1,859,487) (1,967,734) (1,979,846)
- --------------------------------------------------------------------------------------------------------------
3,421,877 5,588,380 5,651,370
- --------------------------------------------------------------------------------------------------------------
$ 3,641,136 $ 5,827,525 $ 5,847,017
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Continuing operations 1
Subsequent events 9
</TABLE>
F-42
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
(A development stage company)
STATEMENTS OF OPERATIONS AND DEFICIT
<TABLE>
<CAPTION>
INCORPORATION THREE MONTHS ENDED JUNE 30,
TO MARCH 31, (UNAUDITED)
1994 1995 1996 1996 1995 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Interest and other income $ 3,365 $ 5,448 $ 1,540 $ 27,272 $ 871 $ 93
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Accounting and legal 30,343 29,713 41,205 230,090 8,257 556
Administrative and office 29,808 48,667 46,507 175,732 13,299 2,038
Depreciation 185 855 1,042 2,678 185 214
Exchange (gains) losses (10,079) 9,451 (8,260) 1,625 23 740
Financial costs 22,413 - 5,443 68,563 - -
Management and consulting 31,743 32,000 30,000 387,905 10,443 7,500
Oil and gas expenses - - - 12,437 - -
Transfer agency and filing fees 15,411 6,767 4,572 77,387 841 320
Travel and promotion 242,621 70,388 (10,722) 335,270 5,551 837
Write-down of receivables 1,019 - - 38,402 - -
Write-down of mineral property interests 24,867 21,408 - 664,917 - -
- -----------------------------------------------------------------------------------------------------------------------------------
388,331 219,249 109,787 1,995,006 38,599 12,205
- -----------------------------------------------------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD (384,966) (213,801) (108,247) (1,967,734) (37,728) (12,112)
DEFICIT ACCUMULATED DURING THE
DEVELOPMENT STAGE,
BEGINNING OF PERIOD (1,260,720) (1,645,686) (1,859,487) - (1,859,487) (1,967,734)
- ------------------------------------------------------------------------------------------------------------------------------------
DEFICIT ACCUMULATED DURING THE
DEVELOPMENT STAGE,
END OF PERIOD $ (1,645,686) $(1,859,487) $ (1,967,734) $ (1,967,734) $(1,897,215) $(1,979,846)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Loss per share $ (0.11) $ (0.04) $ (0.02) $ (0.01) $ -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares 3,538,717 5,656,812 6,025,354 5,802,437 6,426,437
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-43
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
(A development stage company)
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
INCORPORATION THREE MONTHS ENDED JUNE 30,
TO MARCH 31, (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
1994 1995 1996 1996 1995 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACVITITIES:
OPERATING
Net loss for the period $ (384,966) $ (213,801) $ (108,247) (1,967,734) $ (37,728) $ (12,112)
Items not involving cash
Mineral property interests written-down 24,867 21,408 - 664,917 - -
Depreciation 185 855 1,042 2,678 185 214
Gain on sale of investments - - - (1,384) - -
- -----------------------------------------------------------------------------------------------------------------------------------
(359,914) (191,538) (107,205) (1,301,523) (37,543) (11,898)
Changes in non-cash operating
working capital
Accounts receivable (163,246) 168,270 581 (2,623) (2,406) 99
Prepaid expenses - (1,055) 1,055 - 301 -
Accounts payable (175,499) 196,042 19,886 239,145 20,730 (43,498)
Loans Payable (227,225) - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
(925,884) 171,719 (85,683) (1,065,001) (18,918) (55,297)
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCING
Issuance of shares for mineral property 2,400,000 - 2,200,000 4,932,010 - -
acquisitions
Issuance of shares for cash 1,436,027 109,097 74,750 2,104,232 74,750 75,102
Sales of mineral property interests - - - 197,220 - -
Issuance of shares for other non-cash items 446,545 - - 519,872 - -
- -----------------------------------------------------------------------------------------------------------------------------------
4,282,572 109,097 2,274,750 7,753,334 74,750 75,102
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTING
Mineral property acquisitions (2,513,638) (72,522) (2,188,536) (4,935,565) - -
Equipment purchases (3,708) (577) - (4,881) - -
Investment in shares - - - (173,130) - -
Deferred exploration costs (543,452) (414,365) (82,022) (1,566,594) (107,199) -
- -----------------------------------------------------------------------------------------------------------------------------------
(3,060,798) (487,464) (2,270,558) (6,680,170) (107,199) -
- -----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH 295,890 (206,648) (81,491) 8,163 (51,367) 19,805
CASH AT BEGINNING OF PERIOD 412 296,302 89,654 - 89,654 8,163
- -----------------------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 296,302 $ 89,654 $ 8,163 $ 8,163 $ 38,287 $ 27,968
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-44
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
(A development stage company)
NOTES TO THE FINANCIAL STATEMENTS
for the years ended March 31
1. GOING CONCERN
The Corporation is a development stage company at March 31, 1996 since it
is in the exploration stage on all of its mineral properties and has not,
as yet, achieved commercial production on any of its properties.
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern which assume
that the Corporation will realize its assets and discharge its liabilities
in the normal course of business. Realization values may be substantially
different from the carrying values as shown in these financial statements
should the Corporation be unable to continue as a going concern.
The Corporation's ability to meet its obligations and maintain its
operations is contingent upon successful completion of additional financing
arrangements currently being considered, the continuing support of its
creditors and or the completion of a business combination with a company
which would assist in obtaining necessary financing.
The Corporation's emergence from the development stage and the
recoverability of the amounts shown for mineral and petroleum and natural
gas properties and deferred exploration costs is dependent upon the
quantity of economically recoverable reserves, on the ability of the
Corporation to obtain financing to complete exploration and development of
the properties, on the timing of legislative or regulatory developments
relating to environmental protection, and on future profitable operations
or proceeds from the disposition thereof.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Mineral properties and deferred exploration costs
The Corporation is in the process of exploring and developing its
mineral properties. Accordingly, property acquisition costs and
exploration and development costs are deferred until the property to
which they relate is placed into production, sold or abandoned. These
deferred costs will be amortized on the unit of production method
following commencement of production or written off if the property is
sold, abandoned or there is an impairment in value. Proceeds received
on options for mining properties are credited against the exploration
and development costs of the related mining properties.
Exploration costs incurred during the search for new ore bodies are
deferred and will be charged to future operations on a unit-of-
production basis following commencement of production. If the property
is abandoned or there is an impairment in value, the exploration costs
will be charged to the current year's operations.
b) Petroleum and natural gas properties
The Corporation follows the full-cost method of accounting which
provides that all costs incurred in connection with the exploration for
and the acquisition and development of petroleum and natural gas
properties, including non-productive costs, be capitalized.
Such costs are accumulated in centres established on a country-by-
country basis and depleted using the unit of production method based
upon the estimated proven oil and gas reserves in each cost centre as
determined by independent engineers, or charged to income if
exploration in any
F-45
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
(A development stage company)
NOTES TO THE FINANCIAL STATEMENTS
for the years ended March 31
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
cost centre is determined to be unsuccessful. Proceeds on disposal of
petroleum and gas properties are ordinarily deducted from costs with no
recognition of gains or losses.
c) Capital assets
Capital assets are recorded at cost and are depreciated using the
straight-line method, at an annual rate of 20%.
d) Translation of foreign currencies
Amounts stated in foreign currencies are translated into Canadian
dollars as follows:
i) monetary assets and liabilities are translated at the exchange rate
in effect at the balance sheet date; and,
ii) non-monetary items, revenue and expenses at the rate in effect on
the date of the transaction.
The net effect of the foreign currency translation is included in the
statement of operations and deficit.
e) Interim financial information
The accompanying unaudited interim financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information. In the opinion of management, all
adjustments (consisting of normal, recurring adjustments) necessary
for a fair presentation have been included. Results for interim
periods are not necessarily indicative of the results to be expected
for a full year.
3. MINERAL PROPERTIES AND DEFERRED EXPLORATION COSTS
<TABLE>
<CAPTION>
1995 1996
---------------------------------------------------------------------------------------------
Land and lease Deferred Land and lease Deferred
payments exploration Total payments exploration Total
---------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Schweizer-Reneke,
South Africa $ 2,586,160 $ 957,817 $ 3,543,977 $ 4,774,696 $ 1,039,839 $ 5,814,535
---------------------------------------------- ----------------------------------------------
---------------------------------------------- ----------------------------------------------
</TABLE>
In an agreement between the Corporation and Diamond Fontein International
Limited ("DFI"), the Corporation acquired an option to purchase a 50%
working interest in the mineral rights of eight exploration properties,
totalling approximately 150 square kilometres in the Schweizer-Reneke area
of South Africa. DFI currently holds the option on these mineral rights.
To acquire the 50% interest in any of the eight properties from DFI, the
Corporation, after an initial payment of U.S.$35,000 which was paid, must:
a) allot and issue 150,000 shares per property, as follows:
i) 50,000 shares on the date of approval of the agreement by the
Vancouver Stock Exchange and subject to completion of airborne
geophysical survey work, which were issued:
F-46
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
(A development stage company)
NOTES TO THE FINANCIAL STATEMENTS
for the years ended March 31
3. MINERAL PROPERTIES AND DEFERRED EXPLORATION COSTS (CONTINUED)
i) 50,000 shares on completion of a drilling program of not less
than an additional U.S.$75,000 per property, the results of
which indicate further work is warranted, which were issued;
and
ii) 50,000 shares per property on acceptance of a qualified
feasibility report from a qualified South African mining
engineer recommending that the property be placed into
commercial production.
b) To effect exploration work of U.S.$100,000 per property to be
undertaken by June 1996; and
c) pay one-half of the underlying property owner option fees for each
property which are approximately U.S.$50,000 per year.
Upon completion of the above, the parties shall form a 50-50 joint venture
with Casmyn Corp. Casmyn Corp. will be the operator of the joint venture.
4. PETROLEUM AND NATURAL GAS PROPERTIES
1995 1996
-------------------------
Petroleum and natural gas properties $ 1 $ 1
-------------------------
-------------------------
The Corporation has interests in two petroleum properties. At this time, it
is not known if or when production will occur on these properties.
Accordingly, the properties have been written down to a nominal carrying
value.
5. EQUIPMENT
<TABLE>
<CAPTION>
1995 1996
--------------------------------------------------------------------------------
Accumulated Net book Accumulated Net book
Cost depreciation value Cost depreciation value
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Furniture, fixtures and
office equipment $ 4,285 $ 1,040 $ 3,245 $ 4,285 $ 2,082 $ 2,203
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
F-47
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
(A development stage company)
NOTES TO THE FINANCIAL STATEMENTS
for the years ended March 31
6. SHARE CAPITAL
Details of capital stock transactions from inception, August 20, 1987 to
March 31, 1996 are as follows:
Number of
shares Amount
-------------- --------------
Issued on incorporation 1,150,001 $ 107,501
-------------- --------------
Balance, March 31, 1987 and 1988 1,150,001 107,501
-------------- --------------
Issued for
Public offering for cash 555,000 166,500
Property purchase (Butler Gulch) 50,000 30,000
Exercise of stock options 180,000 63,000
-------------- --------------
Balance, March 31, 1989 1,935,001 367,001
Issued for
Property purchase 449,200 269,520
-------------- --------------
Balance, March 31, 1990 2,384,201 636,521
Issued for
Cash 552,000 102,800
Debt 140,526 36,160
Petroleum and natural gas property 100,000 15,000
Shares returned to treasury (99,200) (59,520)
-------------- --------------
Balance, March 31, 1991 3,077,527 730,961
Issued for
Cash 362,500 64,290
Debt 348,242 52,235
Petroleum and natural gas properties 230,000 77,800
Shares returned to treasury (198,500) (60,310)
-------------- --------------
Balance, March 31, 1992 Pre-Consolidation 3,819,769 864,976
Balance, March 31, 1992 Post-Consolidation
(3.5:1) 1,091,363
Issued for
Bonuses on loans 98,874 24,719
-------------- --------------
Balance, March 31, 1993 1,190,237 889,695
Issued for
Debt settlement 1,016,897 406,758
Private placements, net of costs of
$61,400 1,771,978 935,629
Options for cash 25,000 125,000
Warrants for cash 1,178,250 375,398
Mineral property options 400,000 2,400,000
Finders fee on private placements 12,992 39,787
-------------- --------------
Balance, March 31, 1994 5,595,354 5,172,267
Warrants for cash 98,750 109,097
-------------- --------------
F-48
<PAGE>
Balance, March 31, 1995 5,694,104 5,281,364
Warrants for cash 325,000 74,750
Mineral property options 400,000 2,200,000
-------------- --------------
Balance, March 31, 1996 6,419,104 $ 7,556,114
-------------- --------------
-------------- --------------
F-49
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
(A development stage company)
NOTES TO THE FINANCIAL STATEMENTS
for the years ended March 31
6. SHARE CAPITAL (CONTINUED)
At March 31, 1995, incentive share purchase options were outstanding to
certain of the Corporation's employees and directors to purchase 345,000
common shares at a price of $5.00 per share, expiring on November 26, 1995.
These incentive share purchase options were cancelled subsequent to March
31, 1995 and on April 4, 1995, incentive share purchase options were
granted to certain of the Corporation's employees and directors to purchase
605,000 common shares at a price of U.S.$2.50 per share for a two year
period terminating April 4, 1997.
7. OTHER INFORMATION
On March 12, 1996, the Corporation held an extraordinary general meeting
pursuant to a Plan of Arrangement under the Company Act of British
Columbia. The proposed merger with Casmyn Corp. ("Casmyn"), a Colorado
corporation, calls for the allotment and issue of one Casmyn share in
exchange for 2.6 shares of the Corporation. The merger was approved by the
shareholders of the Corporation at the extraordinary general meeting. The
merged company will consolidate 100% of the property interest of the
Corporation located in the Schweizer-Reneke region of South Africa with
that of Casmyn. At year end, the Merger was pending approval of the Supreme
Court of British Columbia.
8. RELATED PARTY TRANSACTIONS
The Corporation paid $11,393 (1995 - $89,997; 1994 - $232,423) to DFI for
project management, geologic, geophysical and vehicle lease fees. DFI is a
private company. A director and officer of Casmyn Corp. Indirectly holds
25% of the shares of DFI. At March 31, 1996, the Corporation had a payable
of $146,353 (1995 - $155,539; 1994 - receivable of $170,729) to DFI.
The Corporation has a payable of $2,258 (1995 - $2,324; 1994 - $8,516) to
Casmyn USA, Inc., a subsidiary of Casmyn Corp.
9. SUBSEQUENT EVENTS
On June 19, 1996, 22,000 incentives share purchase options were exercised
at U.S.$2.50 each to acquire 22,000 common shares of the Corporation.
F-50
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
(A development stage company)
NOTES TO THE FINANCIAL STATEMENTS
for the years ended March 31
10. THE EFFECT OF APPLYING ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN
THE UNITED STATES
These financial statements have been prepared in accordance with accounting
principles in Canada which, except as set out below, conform, in respect of
these statements, in all material respects with those in the United States.
(a) US GAAP requires non-cash investing and financing activities to be
excluded from the Statements of Cash Flow, whereas Canadian GAAP
requires these activities to be included. The effect on the
Corporation's Statements of Cash Flow is that "Mineral property
acquisitions" and "Issue of shares for mineral property acquisitions"
would be reduced by $2,200,000 in 1996, $Nil in 1995, and $2,400,000
in 1994 representing the valuation of mineral properties acquired by
the issuance of Common Shares. In addition, "Investment in shares" and
"Sales of mineral property interests" would be reduced by $173,130
representing shares acquired by the sale of mineral property
interests. The revised amounts under US GAAP are as follows:
<TABLE>
<CAPTION>
INCORPORATION
TO MARCH 31,
1994 1995 1996 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mineral property acquisitions $ (113,638) $ (72,522) $11,464 $ (335,565)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Issue of shares for mineral
property acquisitions $ - $ - $ - $ 332,010
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Sales of mineral property interests $ - $ - $ - $ 24,090
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Investment in shares $ - $ - $ - $ -
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>
(b) The Corporation has formulated a policy to adopt the recommendations
of Statement of Accounting Standards No. 121, Accounting for the
Impairment of Long Lived Assets and Long Lived Assets to be Disposed
of. The Corporation reviews the appropriateness of the carrying value
of assets on a periodical basis.
F-51
<PAGE>
AUDITOR'S REPORT
To the Shareholders
Auromar Development Corporation
I have audited the balance sheet of Auromar Development Corporation as at March
31, 1994 and the statements of operations and deficit and changes in financial
position for the year then ended. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
In my opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at March 31, 1994 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles. As
required by the British Columbia Company Act, I report that, in my opinion,
these principles have been applied, on a basis consistent with that of the
preceding year.
/S/ DENNIS N. WONG
VANCOUVER, B.C. CHARTERED ACCOUNTANT
July 27, 1994
F-52
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
BALANCE SHEET
MARCH 31, 1994
Assets
------
Note
Current
Cash $ 296,302
Accounts receivable 7 171,474
-------------
467,776
Interest in and Expenditures on
Resource Properties, at cost 2, 3, 4 & 6
Mineral properties 2,513,638
Deferred exploration costs 543,452
Petroleum and natural gas properties 21,409
-------------
3,078,499
-------------
Capital 2 & 5 3,523
-------------
$ 3,549,798
-------------
Liabilities
-----------
Current
Accounts payable 7 $ 23,217
-------------
Shareholders' Equity
--------------------
Share Capital 2, 6 & 7
Authorized:
100,000,000 common shares
without par value
Issued and fully paid:
5,595,354 common shares 5,172,267
Deficit (1,645,686)
-------------
3,526,581
-------------
$ 3,549,798
-------------
-------------
Continuing operations (Note 1)
Approved on behalf of the Board:
_________________________ DIRECTOR
_________________________ DIRECTOR
F-53
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE YEAR ENDED MARCH 31, 1994
REVENUE
Interest $ 3,365
-------------
EXPENSES
Travel and entertainment 172,995
Promotion 69,626
Management fees and administration 31,743
Professional fees 30,343
Mineral properties and deferred exploration costs written-off 24,867
Financing costs 22,413
Office and miscellaneous 16,400
Filing and transfer agency fees 15,411
Telephone 13,408
Depreciation 185
Exchange loss (gain) (10,079)
-------------
387,312
-------------
LOSS BEFORE OTHER ITEM (383,947)
OTHER ITEM
Write-down of receivable (1,019)
-------------
NET LOSS FOR THE YEAR (384,966)
DEFICIT, BEGINNING OF YEAR (1,260,720)
-------------
DEFICIT, END OF YEAR $ (1,645,686)
-------------
-------------
F-54
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED MARCH 31, 1994
OPERATING ACTIVITIES
Net loss for the year $ (384,966)
Add: Items not involving cash
Mineral properties and deferred exploration costs
written-off 24,867
Amortization 185
-------------
(359,914)
Changes in non-cash operating working capital
Accounts receivable (163,246)
Accounts payable (175,499)
Loans payable (227,225)
-------------
(925,884)
FINANCING ACTIVITIES
Issuance of shares 4,282,572
-------------
INVESTING ACTIVITIES
Mineral exploration and development costs (3,057,090)
Purchase of capital assets (3,708)
-------------
(3,060,798)
-------------
INCREASE (DECREASE) IN CASH 295,890
CASH AT BEGINNING OF YEAR 412
-------------
CASH AT END OF YEAR $ 296,302
-------------
-------------
F-55
<PAGE>
AUROMAR DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1993
1. CONTINUING OPERATIONS
The Company is in the exploration stage on all of its mineral and petroleum
and natural gas properties and has not, as yet, achieved commercial
production on any of its properties.
The recoverability of the amounts shown for mineral and petroleum and
natural gas properties and deferred exploration costs is dependent upon the
quantity of economically recoverable reserves, on the ability of the
Company to obtain financing to complete exploration and development of the
properties, on the timing of legislative or regulatory developments
relating to environmental protection, and on future profitable operations
or proceeds from the disposition thereof.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Mineral properties and deferred exploration costs:
The Company is in the process of exploring and developing its mineral
properties. Accordingly, property acquisition costs and exploration
and development costs are deferred until the property to which they
relate is placed into production, sold or abandoned. These deferred
costs will be amortized on the unit of production method following
commencement of production or written off if the property is sold,
abandoned or there is an impairment in value. Proceeds received on
options for mining properties are credited against the exploration and
development costs of the related mining properties.
Exploration costs incurred during the search for new ore bodies are
deferred and will be charged to future operations on a unit-of-
production basis following commencement of production. If the
property is abandoned or there is an impairment in value, the
exploration costs will be charged to the current year's operations.
(b) Petroleum and natural gas properties:
The company follows the full-cost method of accounting which provides
that all costs incurred in connection with the exploration for and the
acquisition and development of petroleum and natural gas properties,
including non-productive costs, be capitalized.
Such costs are accumulated in centres established on a country-by-
country basis and depleted using the unit of production method based
upon the estimated proven oil and gas reserves in each cost centre as
determined by independent engineers, or charged to income if
exploration in any costs centre is determined to be unsuccessful.
Proceeds on disposal of petroleum and gas properties are ordinarily
deducted from costs with no recognition of gains or losses.
(c) Capital assets:
Capital assets are recorded at cost and are depreciated using the
straight line method, at the following annual rate:
Furniture, fixtures and office equipment 20%.
F-56
<PAGE>
(d) Translation of foreign currencies:
Amounts stated in United States dollars are translated into Canadian
dollars as follows: - monetary assets and liabilities are translated
at the exchange rate in effect at the balance sheet date and non-
monetary items, revenue and expenses at the rate in effect on the date
of the transaction. The net effect of the foreign currency
translation is included in the statement of operations and deficit.
(e) Share capital:
Shares issued for other than cash consideration are valued at the quoted
price on the Vancouver Stock Exchange on the date the shares were issued.
Debt settlement values are reached with the approval of the Vancouver Stock
Exchange.
3. MINERAL PROPERTIES AND DEFERRED EXPLORATION COSTS
Land and Lease Deferred
Payments Exploration Total
--------------------------------------
Schweizer-Reneke, South Africa $2,513,638 $543,452 $3,057,090
---------- -------- ----------
During the year the company abandoned the Adam Claim. The claim cost and
related deferred exploration costs have been written off.
On November 29, 1993 an Amended Interim Agreement amending an agreement
dated June 2, 1993 between the Company and Diamond Fontein International
Limited ("DFI") whereby the Company acquired a sub-option to purchase a 50%
working interest in the mineral rights of eight diamond exploration
properties, totalling approximately 150 square kilometers in the Schweizer-
Reneke area of South Africa. DFI currently holds the option on 100% of the
mineral rights. A director of the Company indirectly holds 25% of the
shares of DFI. He was appointed as a director subsequent to the signing of
the June 2, 1993 agreement.
To acquire the 50% interest in any of the eight properties from DFI, the
Company, after an initial payment of $25,000 US., which was paid, must:
(a) allot and issue 150,000 shares per property, as follows:
i) 50,000 shares on the date of approval of the agreement by the
Vancouver Stock Exchange and subject to completion of airborne
geophysical survey work, which were issued;
ii) 50,000 shares on completion of a drilling program of not less
than an additional U.S. $75,000 per property, the results of
which indicate further work is warranted and subject to the
Vancouver Stock Exchange acceptance of a qualified engineering
report respecting the same; and
iii) 50,000 shares per property on acceptance by the Vancouver Stock
Exchange of a qualified feasibility report from a qualified South
African mining engineer recommending that the property be placed
into commercial production.
(b) to effect exploration work of $100,000 U.S. per property to be
undertaken within 30 months of the date of the Amended Interim
Agreement, and
F-57
<PAGE>
(c) pay one-half of the underlying property owner option fees for each
property.
Upon completion of a, b, and c, the parties shall form a 50-50 joint
venture. The Company will not be the operator of the joint venture.
Deferred exploration costs incurred during the year were comprised of:
Engineering and geology $ 238,444
Aeromagnetic surveys 110,467
Travel and accommodation 63,463
Drilling 57,319
Field costs and other 33,344
Land and title work 30,245
Administration - DFI 10,107
---------
$ 543,452
---------
4. PETROLEUM AND NATURAL GAS PROPERTIES
(a) Rimby Project
By an agreement dated March 14, 1990 the company purchased
a 37.5% working interest, until payout of completing, equipping
and tie in costs and 32.5% working interest thereafter in an oil
and gas property located in Alberta for consideration of
100,000 shares $ 50,000
By an agreement dated February 18, 1991 the company sold
50% of its interest in the Rimby Project for 100,000 shares
of the purchaser at a deemed value of $0.45 per share (45,000)
---------
5,000
Deferred costs 765
---------
5,765
Less sale of Rimby project, December 23, 1991 (38,000)
----------
(32,235)
----------
(b) Garrington Project
By an agreement dated March 1, 1990 the company purchase a
95% portion of the available 10% working interest until
payout of drilling, completing and equipping costs and 80%
of the available 10% working interest thereafter in an oil
and gas property located in Alberta for the consideration
of 50,000 shares 40,000
The company incurred expenditures relating to cost overruns
and operating expenses 4,644
----------
44,644
----------
F-58
<PAGE>
(c) Wood Daly Field
By an agreement dated September 24, 1991 the company
purchased a 10% working interest before pay out of drilling,
completing and equipping costs and a 6% working interest
thereafter in an oil and gas property located in Manitoba for
the consideration of 100,000 shares at a deemed price of
$0.24 per share 24,000
By an agreement dated November 15, 1991 the company sold
a 5% working interest in the Wood Daly Field for 30,000
shares of the purchaser at a deemed price of $0.50 per share (15,000)
----------
9,000
----------
$ 21,409
----------
5. CAPITAL ASSETS
Accumulated Net Book
Cost Depreciation Value
-------------------------------------
Furniture, fixtures and
office equipment $3,708 $185 $3,523
6. SHARE CAPITAL
<TABLE>
<CAPTION>
Share capital is summarized as follows:
Number of Number of
Shares Shares
------ ------
Pre- Post-
Consolidation Consolidation Amount
(3.5:1)
------------- ------------- ------------
<S> <C> <C> <C>
ISSUED IN PRIOR YEARS
For cash 2,700,301 771,515 $444,571
For mineral claims 499,200 142,628 299,520
For debt 488,768 139,648 88,395
For petroleum and natural gas properties 131,500 37,572 32,490
For bonuses on loans - 98,874 24,719
--------- ---------- -----------
Balance, March 31, 1993 3,819,769 1,190,237 889,695
ISSUED IN CURRENT YEAR ---------
Debt settlement 1,016,897 406,758
Private placements, net of costs of $61,400 1,771,978 935,629
Options for cash 25,000 125,000
Warrants for cash 1,178,250 375,398
Issued, for mineral property options 400,000 2,400,000
Finders fee on private placements 12,992 39,787
---------- -----------
Balance March 31, 1994 5,595,354 $ 5,172,267
---------- -----------
</TABLE>
As at March 31, 1994 214,286 shares are being held in escrow subject to the
direction and determination of the Vancouver Stock Exchange.
F-59
<PAGE>
By Special Resolution passed April 29, 1992, the company consolidated its share
capital on a 3.5 to 1 share consolidation resulting in 28,571,428
post-consolidated commons shares authorized and 1,091,363 common shares issued
and outstanding. The company then increased its authorized share capital from
28,571,428 to 100,000,000 common shares without par value.
The issued and outstanding shares have been restated where necessary to reflect
the share consolidation.
At March 31, 1994 warrants were outstanding enabling the holder to acquire the
following number of shares:
Price
Number of -----
Shares $ Expiry Date
------ -----------
375,000 0.20 June 14, 1994
0.23 June 14, 1995
48,750 2.00 July 28, 1994
108,228 2.30 U.S. May 15, 1994
3.05 U.S. November 15, 1994
Subsequent to the year end 31,250 warrants were exercised at $2 each for
proceeds to the Company of $62,500.
At March 31, 1994 there were stock options outstanding to certain of the
Company's employees and directors to purchase 345,000 common shares at a price
of $5.00 per common share, expiring on November 26, 1995.
7. RELATED PARTY TRANSACTIONS
(a) The Company paid $232,423 to Diamond Fontein International
Limited for project management, geologic, geophysical and
vehicle lease fees. The Company also paid $44,940 towards
the eight sub-options on the Schweizer-Reneke property. The
Company also issued 400,000 common shares to DFI relating to
the Schweizer-Reneke diamond exploration property. DFI is a
private company. A director of the Company indirectly holds
25% of the shares of DFI. At March 31, 1994 the Company had
a receivable of $170,729.
(b) The Company paid $4,500 to Norshah Enterprises ("Norshah"),
a private company controlled by an officer and director, in
return for administrative services. At year end, there was
no liability to Norshah, but the previous year end liability
of $10,700 was paid in a debt settlement of 22,500 common
shares at $0.40 each during the year.
(c) The Company paid $9,000 (1993 - $3,000) to Bristol
Management Ltd. ("Bristol"), a private company controlled by
a former officer and director, in return for administrative
services rendered while an officer and director. At year
end, there was no liability to Bristol, but the previous
year end liability of $15,127 was paid in a debt settlement
of 34,067 common shares at $0.40 each during the year.
(d) The Company had a payable of $8,516 to Casmyn USA, Inc., a
private company controlled by a former officer and director
of the Company, for travel expenses incurred on behalf of
the Company.
F-60
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Securities and Exchange Commission Registration Fee. . . $ 11,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . 55,000
Legal Fees and Expenses. . . . . . . . . . . . . . . . . . 35,000
Printing and Engraving Fees and Expenses . . . . . . . . . .5,000
Fees of Transfer Agent and Registrar . . . . . . . . . . . 10,000
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . .9,000
Total. . . . . . . . . . . . . . . . . . . . . . $125,000*
- ----------------
*Estimated
The Company has agreed to pay all of such fees and expenses on behalf of the
Selling Shareholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, by law, contract, or other arrangement
under which any controlling person, director or officer of the Company is
insured or indemnified in any manner against any liability which he may incur in
his capacity as such, is as follows:
(1) Article XIII of the Articles of Incorporation of the Company, filed as
Exhibit 3(I) to the Registration Statement.
(2) Section 145 of the Delaware General Corporation Law.
The general effect of the foregoing is to indemnify a control person, officer or
director from liability, thereby making the Company responsible for any expenses
or damages incurred by such control person, officer or director in any action
brought against them based on their conduct in such capacity, provided they did
not engage in fraud or criminal activity.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
MAY 24, 1996. On May 24, 1996 the Company acquired 5,680,514 shares of
restricted common stock of WestAmerica Corporation ("WestAmerica") for 606,061
shares of its restricted common stock. The transaction results in the Company
holding approximately 65% of the outstanding common stock of WestAmerica. The
Company has delivered an irrevocable proxy to a director of WestAmerica to vote
these restricted shares and, as a result the Company has not obtained voting
control of WestAmerica and will account for the transaction as an investment.
II-1
<PAGE>
APRIL 3, 1996. On March 29, 1996 the Company, through an offshore securities
subscription agreement executed in reliance upon the "safe harbor" afforded by
Regulation S as promulgated by the Securities and Exchange Commission, under the
Securities Act of 1933, as amended, completed the sale of 750,000 units for net
proceeds of $8,809,862 to twelve (12) accredited foreign investors. Each unit
consists of one share of the Company's restricted common stock plus one warrant,
two warrants plus $13.00 will entitle the holder to purchase one share of the
Company's common stock.
SEPTEMBER 29, 1995. On September 29, 1995, the Company, in an exempt private
transaction, pursuant to Section 4(2) of the Securities Act of 1933, as amended,
sold 714,286 of its restricted Common Stock to Societe Generale for $7.00 per
share, or $4,750,000 (net of an investment banking fee of $250,000). The terms
of the Agreement also provide for warrants to purchase an additional 357,143
shares of Common Stock at $8.50 per share.
MAY 15, 1995. On March 12, 1995, in an exempt transaction, pursuant to Section
4(2) of the Securities Act of 1933, as amended, the Company sold 190,000 shares
of its restricted common stock through Stires O'Donnell & Co., an unrelated
third party, in exchange for the total consideration of $1,050,000 U.S.
MAY 12, 1995. On May 1, 1995, the Company, in an exempt private transaction,
pursuant to Section 4(2) of the Securities Act of 1933, as amended, issued
25,000 shares of its unregistered restricted Common Stock to Nordic Resources
Corp., an unrelated third party, in exchange for investment banking and
financial consulting services on behalf of the Company.
MARCH 14, 1995. On January 12, 1995, the Company, in an exempt private
transaction, pursuant to Section 4(2) of the Securities Act of 1933, as amended,
issued 10,000 shares of its restricted Common Stock to Roth Investor Relations,
Inc., an unrelated third party, in exchange for financial and investor relations
services.
MARCH 14, 1995. On January 30, 1995, the Company, in an exempt private
transaction, pursuant to Section 4(2) of the Securities Act of 1933, as amended,
sold 115,000 shares of its restricted Common Stock to Coventry Securities, Ltd.,
an unrelated third party, in exchange for the total consideration of $575,000
U.S.
DECEMBER 12, 1994. In an exempt private placement transaction, pursuant to
Section 4(2) of the Securities Act of 1933, as amended, sold 378,055 shares of
its restricted Common Stock to Martindale, Inc., and unrelated third party, in
exchange for the total consideration of $1,908,000 U.S.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
3.1 Articles of Incorporation of the Company, as amended (included as an
exhibit to the Company's Annual Report on Form 10-K for the year ended
September 30, 1994 and incorporated herein by reference)
3.2 Amended and Related By Laws of the Company (included as an exhibit to the
Company's Annual Report on Form 10-K for the year ended September 30, 1994
and incorporated herein by reference)
4.1 Specimen stock certificate evidencing the Common Stock
5.1 Opinion and Consent of Jenkens & Gilchrist, P.C.
10.1 Casmyn Corp. 1995 Incentive Stock Option Plan (included as an exhibit to
the Company's Annual Report on Form 10-KSB for the year ended September
30, 1995 and incorporated herein by reference)
10.2 Casmyn Corp. 1995 Non-Qualified Stock Option Plan*** (included as an
exhibit to the Company's Annual Report on Form 10-KSB for the year ended
September 30, 1995 and incorporated herein by reference)
21.1 Subsidiaries of Registrant (see Casmyn Corp. - "Business of the Company")
II-2
<PAGE>
23.1 Consent of Jenkens & Gilchrist, P.C. (included in their opinion filed
as Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Deloitte & Touche, Chartered Accountants - Auromar Development
Corporation
23.4 Consent of Tullius Taylor Sartain & Sartain - WestAmerica Corporation
23.5 Consent of George Brenner, Certified Public Accountant - WestAmerica
Investment Company
23.6 Consent of Dennis N. Wong, Chartered Accountant - Auromar Development
Corporation
- -----------------------
* Filed Herewith
** To be filed by amendment.
*** Compensatory plan, agreement or arrangement
(b) FINANCIAL STATEMENT SCHEDULES:
None
ITEM 17. UNDERTAKINGS
The undersigned the Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-
effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424 (b) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized on the 3rd day of
September, 1996.
CASMYN CORP.
By: /s/ Amyn S. Dahya
-----------------------------------------
Amyn S. Dahya
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment to
this Registration Statement has been signed below by the following persons and
in the capacities indicated on September 6, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Amyn S. Dahya President, Chief Executive Officer and 9/6/96
Director (Principal Executive Officer)
- --------------------------------
Amyn S. Dahya
/s/ Hanif S. Dahya Director 9/6/96
(Vice Chairman of the Board)
- --------------------------------
Hanif S. Dahya
/s/ Douglas C. Washburn Vice President , Secretary - Treasurer 9/6/96
(Principal Financial Officer)
- --------------------------------
Douglas C. Washburn
/s/ Dennis E. Welling Controller 9/6/96
(Principal Accounting Officer)
- -------------------------------
Dennis E. Welling
/s/ Sandro Kunzle Director 9/6/96
- -------------------------------
Sandro Kunzle
/s/ Mehdi C. Nimjee Director 9/6/96
- -------------------------------
Mehdi C. Nimjee
/s/ Vijay J. Fozdar Director 9/6/96
- ------------------------------
Vijay J. Fozdar
</TABLE>
II-4
<PAGE>
Exhibit 5.1
September 5, 1996
Casmyn Corp.
1335 Greg Street
Unit #104
Sparks, Nevada 89431
Re: Offering of Common Stock of Casmyn Corp. on Form S 1
Gentlemen:
On July 18, 1996, Casmyn Corp., a Colorado corporation (the "Company"),
filed with the Securities and Exchange Commission a Registration Statement on
Form S-1 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"). Such Registration Statement relates to the sale by
certain shareholders of the Company (the "Selling Shareholders") of an
aggregate of 4,371,267 shares of the Company's common stock, par value $.04
per share (the "Common Stock"). We have acted as counsel to the Company in
connection with the preparation and filing of the Registration Statement.
In connection therewith, we have examined and relied upon the original
or copies, certified to our satisfaction, of (i) the Certificate of
Incorporation and the bylaws of the Company, as amended, (ii) copies of
resolutions of the Board of Directors of the Company authorizing the issuance
of the Shares, the preparation and filing of the Registration Statement and
related matters, (iii) the Registration Statement, and all exhibits thereto,
and (iv) such other documents and instruments as we have deemed necessary for
the expression of the opinions herein contained. In making the foregoing
examinations, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals, and the
conformity to original documents of all documents submitted to us as
certified or photostatic copies. As to various questions of fact material to
this opinion, we have relied, to the extent we deem reasonably appropriate,
upon representations or certificates of officers or directors of the Company
and upon documents, records and instruments furnished to us by the Company,
without independent check or verification of their accuracy.
Based upon the foregoing examination, we are of the opinion that the
Shares to be sold by the Selling Shareholders in the offering, as described
in the Registration Statement, have been duly and validly authorized for
issuance and the Shares, when sold by the Selling Shareholders in the manner
and for the consideration stated in the Prospectus constituting a part of the
Registration Statement, will be validly issued, fully paid and nonassessable.
<PAGE>
Casmyn Corp.
September 5, 1996
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus forming part of the Registration Statement. In
giving such consent, we do not admit that we come within the category of
persons whose consent is required by Section 7 of the Act or the rules and
regulations of the Commission thereunder.
Respectfully submitted,
JENKINS & GILCHRIST,
a Professional Corporation
By: /s/ John M. Stephenson
-----------------------------------
John M. Stephenson
Authorized Signatory
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
Casmyn Corp:
We consent to the use in this Amendment No. 1 to Form S-1 Registration
Statement No. 333-8341 of Casmyn Corp. of our report dated June 28, 1996,
appearing in the Prospectus, which is part of such Registration Statement,
and to the reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Reno, Nevada
September 6, 1996
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
Casmyn Corp:
We consent to the use in this Amendment No. 1 to Form S-1 Registration
Statement No. 333-8341 of Casmyn Corp. of our report dated June 28, 1996,
appearing in the Prospectus, which is part of such Registration Statement, on
the financial statements of Auromar Development Corporation, and to the
reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE
CHARTERED ACCOUNTANTS
Vancouver, British Columbia, Canada
September 6, 1996
II-6
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT AUDITORS
Casmyn Corp:
We consent to the use in this Amendment No. 1 to Form S-1 Registration
Statement No. 333-8341 of Casmyn Corp. of our report dated June 18, 1996,
appearing in the Prospectus, which is part of such Registration Statement, on
the financial statements of WestAmerica Corporation, and to the reference to
us under the heading "Experts" in such Prospectus.
Tullius Taylor Sartain & Sartain
Tulsa, Oklahoma
September 6, 1996
II-7
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT AUDITOR
Casmyn Corp:
I consent to the use in this Amendment No. 1 to Form S-1 Registration
Statement No. 333-8341 of Casmyn Corp. of my report dated May 3, 1996,
appearing in the Prospectus, which is part of such Registration Statement, on
the financial statements of WestAmerica Investment Company, and to the
reference to me under the heading "Experts" in such Prospectus.
GEORGE BRENNER, CERTIFIED PUBLIC ACCOUNTANT
Beverly Hills, California
September 6, 1996
II-8
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT AUDITORS
Casmyn Corp:
I consent to the use in this Amendment No. 1 to Form S-1 Registration
Statement No. 333-8341 of Casmyn Corp. of my report dated July 27, 1994,
appearing in the Prospectus, which is part of such Registration Statement, on
the financial statements of Auromar Development Corporation, and to the
reference to me under the heading "Experts" in such Prospectus.
DENNIS N. WONG INC., CHARTERED ACCOUNTANT
Vancouver, British Columbia, Canada
September 6, 1996
II-9
