SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
AMENDMENT TO
FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
-------------
OR
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
COMMISSION FILE NUMBER 0-14136
CASMYN CORP.
(Exact name of registrant as specified in Charter)
COLORADO
(State or other jurisdiction of incorporation)
84-0987840
(IRS Employer Identification No.)
1335 GREG STREET, UNIT #104
SPARKS, NEVADA 89431
(702) 331-5524
(Address and Telephone Number of Principal Executive Offices)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [ X ] No [ ].
As of August 1, 1997, 13,464,967 shares of the issuer's common stock were
outstanding.
This report contains 17 pages.
<PAGE>
CASMYN CORP.
FORM 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION: No.
---
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 1997
and September 30, 1996 3
Condensed Consolidated Statements of Operations - Three Months
and Nine Months ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows - Nine Months
ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. Other Information:
Item 3 - Changes in Securities 16
Item 4 - Submission of Matters to a Vote of Security Holders 16
Item 6 - Exhibits and Reports on Form 8-K 17
Signatures 17
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CASMYN CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, 1997 SEPTEMBER 30, 1996
---------------------------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 8,163,636 $ 4,046,194
Marketable securities 6,040,939 -
Accounts receivable, net 1,338,218 210,748
Inventories 861,599 517,837
Prepaid expenses and other assets 24,315 15,295
----------------------------------
Total current assets 16,428,707 4,790,074
INVESTMENT IN AND ADVANCES TO AFFILIATE (NOTE 3) 4,142,875 2,748,031
PROPERTY AND EQUIPMENT, NET 18,279,542 14,101,782
DUE FROM RELATED PARTIES, NET 224,072 211,708
OTHER ASSETS 508,289 465,544
----------------------------------
TOTAL ASSETS $ 39,583,485 $ 22,317,139
==================================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,701,913 $ 2,024,973
Accrued taxes from acquisition 909,719 993,660
Payable to joint venture - 623,000
Accrued liabilities 76,029 303,864
Line of credit (Note 6) 4,915,066 -
Current portion of long-term debt - 107,471
----------------------------------
Total current liabilities 7,602,727 4,052,968
LONG-TERM DEBT - 71,230
CONVERTIBLE DEBT - 5,000,000
----------------------------------
Total Liabilities 7,602,727 9,124,198
----------------------------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value;
20,000,000 shares authorized;
834,667 and nil shares issued and
outstanding; liquidation preference
$22,187,107 83,467 -
Common stock, $.04 par value;
300,000,000 shares authorized;
13,453,167 and 12,512,133 shares
issued and outstanding 538,127 500,485
Additional paid-in capital 50,531,785 25,735,368
Accumulated deficit (17,029,929) (12,389,109)
Foreign currency translation adjustment ( 2,142,692) ( 653,803)
---------------------------------
Total Stockholders' Equity 31,980,758 13,192,941
--------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $39,583,485 $22,317,139
================================
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
CASMYN CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 1997 AND 1996
FOR THE NINE MONTHS FOR THE THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
----------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Precious metals $2,522,688 $372,756 $1,025,537 $267,378
-------------------------------------------------
COSTS AND EXPENSES:
Mineral operations 2,264,958 285,641 841,528 261,500
General and administrative
expenses 1,514,450 1,116,174 337,377 527,953
Compensatory stock option
expense 83,085 364,560 - 66,284
Professional services 492,229 367,671 318,818 172,283
Depreciation, depletion and
amortization 294,457 40,280 69,594 17,251
Write down of assets - 250,000 - 150,000
Mineral exploration expense 439,756 447,647 34,663 127,864
Mergers and acquisitions 204,414 68,896 30,182 38,381
-------------------------------------------------
5,293,349 2,940,869 1,632,162 1,361,516
-------------------------------------------------
LOSS FROM OPERATIONS (2,770,661)(2,568,113) ( 606,625) (1,094,138)
-------------------------------------------------
OTHER INCOME (EXPENSE):
Equity in net loss of
affiliate ( 791,734)(1,975,255) ( 234,024) ( 945,030)
Interest (expense) income,
net 110,561 94,195 125,179 12,077
Gain on sale of investment 126,000 - - -
Other income (expense), net 5,446 15,862 ( 19,702) 15,824
Other expense, net ( 549,727)(1,865,198) ( 128,547) ( 917,129)
-------------------------------------------------
NET LOSS $(3,320,388)$(4,433,311) $( 735,172) $(2,011,267)
==================================================
LOSS PER COMMON SHARE:
Net loss $(3,320,388)$(4,433,311) $( 735,172) $(2,011,267)
Less: undeclared dividends
on convertible preferred
stock ( 356,728) - ( 356,728) -
Less: amortization of
discount on convertible
preferred stock ( 963,704) - ( 963,704) -
--------------------------------------------------
Net loss applicable to
common shares $(4,640,820)$(4,433,311) $(2,055,604) $(2,011,267)
==================================================
NET LOSS PER COMMON SHARE $(.36) $(.71) $(.15) $(.29)
==================================================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 12,879,210 6,270,719 13,337,535 6,931,264
==================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
CASMYN CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996
<S> <C> <C>
1997 1996
-------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,320,388) $ (4,433,311)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, depletion and amortization 294,457 23,029
Equity in net loss of affiliate 791,734 2,187,539
Write down of assets - 250,000
Compensatory stock option expense 83,085 364,560
Amortization of debt issue costs 30,000 45,000
Gain on sale of investment ( 126,000) -
Other non-cash expense 258,617 58,563
Increase in accounts receivable ( 1,194,705) ( 56,285)
(Increase) decrease in inventories ( 430,600) 295,056
Increase in prepaid expenses and other
assets ( 225,971) ( 195,700)
(Decrease) increase in accounts payable ( 43,375) 1,435,284
Decrease in accrued liabilities ( 311,776) ( 923,747)
Decrease in amounts due from related
parties ( 12,364) ( 438,132)
----------------------------
Net cash used in operating activities ( 4,207,284) ( 1,388,144)
----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business, net of cash acquired * - ( 4,526,415)
Decrease in cash due to change in accounting for
investment in VETI** - ( 459,708)
Proceeds from sale of assets 900,000 -
(Increase) decrease in long-term deposits( 72,745) 28,265
Investment in marketable securities ( 6,040,939) -
Investment in and advances to affiliates ( 2,186,578) ( 2,313,144)
Purchase of property and equipment ( 7,739,754) ( 4,705,530)
----------------------------
Net cash used in investing activities (15,140,016) (11,976,532)
---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Private placement of common stock and units 1,410,500 13,559,685
Issuance of common stock for exercise of
stock options 236,862 200,000
Private placement of convertible preferred
stock 16,751,389
Proceeds from line of credit 5,252,621 -
Repayments of long-term debt ( 189,045) ( 330,905)
Purchase of treasury stock - ( 25,000)
---------------------------
Net cash provided by financing activities 23,462,325 13,404,138
---------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS 2,417 53,700
--------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,117,442 93,162
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,046,194 4,938,945
--------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,163,636 $ 5,032,107
===========================
(CONTINUED)
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
CASMYN CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996
----------------------------------
1997 1996
----------------------------------
<S> <C> <C>
CASH PAID FOR INTEREST $ 134,060 $ 36,029
==================================
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for services $ 226,561 $ -
Issuance of common stock for payment of
interest 88,697 58,563
Conversion of debenture to common stock and
preferred stock 5,000,000 -
Amortization of discount on convertible
preferred stock 963,704 -
Accrued dividend on convertible preferred stock 356,728
Conversion of common stock to preferred stock - 270,700
Reduction of payable to joint venture and
investment in joint venture 623,000 -
Common stock issued to acquire WestAmerica - 6,779,702
</TABLE>
- -----------------------------------------------------------------------------
* PURCHASE OF BUSINESS, NET OF CASH ACQUIRED:
<TABLE>
<CAPTION>
<S> <C>
Working capital, other than cash $( 111,594)
Mineral properties ( 4,748,373)
Property and equipment ( 892,074)
Accrued taxes from acquisition 993,660
Capital lease obligations 231,966
------------
Net cash used to acquire business $ (4,526,415)
============
</TABLE>
** IMPACT ON THE COMPANY'S JUNE 30, 1996 CONDENSED CONSOLIDATED BALANCE SHEET
RESULTING FROM THE CHANGE FROM CONSOLIDATION TO THE EQUITY METHOD OF
ACCOUNTING FOR THE INVESTMENT IN VETI:
<TABLE>
<CAPTION>
<S> <C>
Current assets $439,673
Investment in and advances to affiliates (654,853)
Property and equipment, net 141,688
Other assets 3,024
Current liabilities (389,240)
--------
Decrease in cash due to change in
accounting for investment in VETI $(459,708)
=========
</TABLE>
<PAGE>
CASMYN CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed 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.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the Company's
consolidated financial statements filed as part of the Company's September 30,
1996 Form 10-K/A. The Form 10-K/A should be read in conjunction with this
quarterly report.
Consolidated financial statements for the fiscal years ended prior to
September 30, 1996 included the financial statements of WaterPur International
Inc. ("WPUR"), formerly Vector Environmental Technologies, Inc. on a
consolidated basis due to the Company having a voting controlling interest in
WPUR and accounting for the acquisition of its investment in WPUR as a
combination of entities under common control. This voting controlling
interest arose through the provisions of the Preferred Shares held by the
Company, whereby each Preferred Share was entitled to the equivalent of four
(4) common share votes. Effective September 30, 1996, the Company converted
these Preferred Shares into common shares and thereby relinquished its voting
control of WPUR. Therefore, as of September 30, 1996, the investment in WPUR
has been recorded in the consolidated balance sheet using the equity method of
accounting and this method of accounting has been applied prospectively from
that date. The consolidated statement of operations for the six months and
quarter ended March 31, 1996 reflect an equity method presentation retroactive
to the beginning of the respective period.
RECENTLY ISSUED ACCOUNTING STANDARDS - Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Awards of Stock-Based Compensation,
was issued by the Financial Accounting Standards Board ("FASB") in October
1995, and established financial accounting and reporting standards for
stock-based employee compensation plans and for transactions where equity
securities are issued for goods and services. The Company adopted the
provisions of SFAS No. 123 during the first quarter of the year ending
September 30, 1997. This statement requires expanded disclosures of
stock-based compensation arrangements with employees and encourages (but does
not require) compensation cost to be measured based on the fair value of the
equity instrument awarded. Companies are permitted, however, to continue to
apply APB No. 25, Accounting for Stock Issued to Employees, which recognizes
compensation cost based upon the intrinsic value of the equity instrument
awarded. The Company will continue to apply APB Opinion No. 25 to its
stock-based compensation awards to employees and will disclose the required
pro forma effect on net income and earnings per share.
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share. The
statement is effective for financial statements of the Company for periods
ending after December 15, 1997, including interim periods. SFAS No. 128
<PAGE>
establishes standards for computing and presenting earnings per share (EPS)
and applies to entities with publicly held common stock or potential common
stock. This statement simplifies the standards for computing earnings per
share previously found in APB Opinion No. 15, Earnings Per Share, and makes
them comparable to international EPS standards. It replaces the presentation
of primary EPS with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income statement for
entities with complex capital structures and requires a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. The Company will adopt the new
statement for its fiscal year ending September 30, 1998, and does not
anticipate earnings per share calculations will be significantly different
from those previously calculated.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. CASH AND CASH EQUIVALENTS
At June 30, 1997, the Company had $5,000,000 of restricted cash. This amount
was deposited with two financial institutions as collateral for short term
loans to unrelated third parties. These deposits bear interest at market
rates.
3. INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company's investment in and advances to affiliate at June 30, 1997 and
September 30, 1996 include the following:
<TABLE>
<CAPTION>
JUNE 30 SEPTEMBER 30
---------- -------------
<S> <C> <C>
Investment in WPUR $ 241,870 $ 1,034,604
Advances to WPUR 3,901,005 1,712,421
Other - 1,006
---------- -------------
Total $4,142,875 $ 2,748,031
========== =============
</TABLE>
The Company's investment in WPUR consists of 5,532,700 shares of WPUR common
stock (approximately 31.2%). The advances to WPUR which bear interest at 9%
per annum were originally due within one year. The Company has extended the
maturity of the loans until such time as WPUR is able to generate sufficient
cash flows to repay the loans or WPUR is successful in placing additional debt
and/or equity. Summarized financial information of WPUR for the nine months
ended June 30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Sales $ 1,006,022 $ 692,782
Net loss (2,607,607) (2,458,056)
</TABLE>
4. INVESTMENT IN NEWGOLD INCORPORATED
On May 7, 1996, the Company entered into a 50:50 joint venture with Newgold
Incorporated ("Newgold"), a public company based in Reno, Nevada, for the
<PAGE>
development of the Relief Canyon Mine located in Pershing County, Nevada
("Relief Canyon"). The Company committed to contribute $1,398,000 for its 50%
interest in the venture. As of September 30, 1996, the Company had
contributed approximately $775,000 toward its 50% interest in this venture and
had recorded the remaining $623,000 commitment as a payable to joint venture.
On October 7, 1996, the Company sold its interest back to Newgold for $900,000
cash, 1,000,000 restricted shares of Newgold common stock and a release from
the remaining $623,000 of its commitment. The Company recorded a gain of
$126,000 on this transaction. The Company has recorded its investment in the
1,000,000 restricted common shares of Newgold received in the sale described
above at a nominal value of $1,000. These shares were assigned this nominal
value based upon the fact that Newgold shares were not widely traded at that
time.
5. SUMMARY OF STOCKHOLDERS' EQUITY TRANSACTIONS
During the nine months ended June 30, 1997, the Company has recorded the
following activity in its stockholders' equity accounts:
<TABLE>
<CAPTION>
Number of Number of
Preferred Preferred Common Common
Shares Stock Shares Stock
<S> <C> <C> <C> <C>
Description
Balances September 30, 1996 - $ - 12,512,133 $ 500,485
Private placement of units - - 155,000 6,200
Issuance of shares for
consulting services - - 25,000 1,000
Deferred compensation - - - -
Exercise of stock options - - 155,500 6,220
Shares issued in lieu of
interest - - 10,678 428
Private Placement 751,200 75,120 - -
Conversion of
Convertible Debt to
Convertible Preferred 83,467 8,347 - -
Conversion of
Convertible Debt to
Common Shares - - 594,856 23,794
Conversion Discount
on Convertible
Preferred - - - -
Preferred stock
dividend accrual - - - -
Foreign currency translation
adjustment - - - -
Net loss - - - -
-------------------------------------------------
Balances at June 30, 1997 834,667 $ 83,467 13,453,167 $ 538,127
=================================================
</TABLE>
<TABLE>
<CAPTION>
Foreign
Additional Currency Total
Paid-in Accumalted Translation Stockholders
Capital Deficit Adjustment Equity
<S> <C> <C> <C> <C>
Description
Balances September 30, 1996 $25,735,368 $(12,389,109) $( 653,803) $13,192,941
Private placement of units 1,404,300 - - 1,410,500
Issuance of shares for
consulting services 225,561 - - 226,561
Deferred compensation 83,085 - - 83,085
Exercise of stock options 230,640 - - 236,860
Shares issued in lieu of
interest 88,271 - - 88,699
Private Placement 16,676,269 - - 16,751,389
Conversion of
Convertible Debt to
Convertible Preferred 1,994,328 - - 2,002,675
Conversion of
Convertible Debt to
Common Shares 2,773,531 - - 2,797,325
Conversion Discount
on Convertible
Preferred 963,704 (963,704) - -
Preferred stock
dividend accrual 356,728 (356,728) - -
Foreign currency translation
adjustment - - (1,488,889) ( 1,488,889)
Net loss - (3,320,388) - ( 3,320,388)
---------------------------------------------------
Balances at June 30, 1997 $50,531,785 $(17,029,929) $(2,142,692) $31,980,758
===================================================
</TABLE>
On November 8, 1996, the Company completed a private placement of 155,000
units for net proceeds of $1,410,500. Each unit consists of one share of the
Company's restricted common stock plus one warrant; two warrants plus $10.00
will entitle the holder to purchase one share of the Company's common stock.
The warrants are exercisable for a period of two years.
During the six months ended March 31, 1997, the Company issued 25,000
restricted common shares to an investment banking company for services to be
rendered during the current fiscal year.
<PAGE>
6. ZIMBABWE CREDIT FACILITY
On January 24, 1997, Casmyn Mining Zimbabwe (Private) Limited ("CMZ"), a
wholly owned subsidiary of the Company, obtained a $5,000,000 short term
credit facility which provides the Company with the ability to draw down short
term loans to fund operating and capital expenditures. Loans under this
facility can be drawn down in minimum increments of $500,000 for up to 180
days but not past the maturity date of the facility. All borrowings under the
facility must be repaid on or before one year from the date of the first
funding. Interest on borrowings under this facility is at LIBOR plus 2.25%
per annum ("pa"); 1% pa paid as a funding fee at the time of borrowings and
LIBOR plus 1.25% pa paid at maturity. In addition the Company paid a $50,000
arrangement fee and is required to pay a quarterly commitment fee of 0.15% on
the unused portion of the facility. The facility also provides a refinancing
fee of 0.5% of the outstanding loan on the day prior to any refinancing if the
lender is not a party to the refinancing. At June 30, 1997, $4,915,066 in
short term loans were outstanding under the credit facility. The facility is
secured by a pledge of substantially all of the assets of CMZ plus the
guarantee of the Company. In addition, CMZ is required to hedge a portion of
forward gold production through the lender if at any time the gold price
offered by the Reserve Bank of Zimbabwe falls below $350 per ounce.
7. PREFERRED STOCK PLACEMENT
On April 14, 1997, the Company completed the placement of 751,200 shares of
convertible preferred stock for cash proceeds of approximately $16.7 million
(after cash fees to the placement agent and the Company's financial advisor
and estimated transaction expenses); an additional 83,467 preferred shares
were issued to Societe Generale in exchange for $2,086,675 principal amount of
pre-existing convertible debentures. Societe Generale also converted the
remaining $2,913,325 principal balance of its convertible debt in exchange for
594,856 common shares. The Company also issued 3,587 common shares for
interest accrued on the convertible debentures through the date of conversion.
The subscription price for the placement was $25 per share. The preferred
shares carry an 8% dividend to be paid in additional shares of preferred stock
and convert into common stock over a five year period at an increasing
discount to the market price of the common stock at the time of conversion,
subject to certain adjustments. The Company has the ability to force
mandatory conversion if the common stock exceeds certain trading price and
volume targets. The number of shares that can be converted by a holder over a
ten month period beginning in July, 1997 is limited to 10% per month,
cumulative. The underlying common stock is also restricted for sale subject
to daily volume limitations. The placement agent received warrants
exercisable for a period of five years to purchase 110,000 shares of the
convertible preferred stock at $25 per share.
The convertible preferred stock will be convertible at a discount to the
Common Stock ranging from 8.5% to 39% depending upon the date on which such
shares are converted. The discount is considered to be an additional
preferred stock dividend. At June 30, 1997, the Company recorded a charge to
retained earnings and a corresponding increase to additional paid-in capital
of $963,704 which represents the initial discount amount. This amount has
been recognized as a return to the preferred shareholders and as a reduction
of income available to common shareholders.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements and information contained in this Report constitute
"forward looking statements" within the meaning of the United States Federal
securities laws. Such statements involve risks and uncertainties which may
cause actual results, performance, or achievements of the Company to be
materially different from results, performance, or achievements implied by
such forward looking statements. Factors which could affect the Company's
financial results are described below and in the Company's latest Annual
Report on Form 10-K/A filed with the Securities and Exchange Commission for
the year ended September 30, 1996. Readers are cautioned not to place undue
reliance on these forward looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to release the result of any
revisions to these forward looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrences of
unanticipated events.
OVERVIEW
The business activities of the Company center around mineral resource
development. The primary focus to date has been the acquisition and
exploration and mining of precious mineral resource properties in Zimbabwe,
Zambia and South Africa. The Company holds a 100% interest in options on
certain mineral properties in South Africa, a prospecting license in Zambia
and is presently conducting mining operations at the Zimbabwe mining
properties. In addition, the Company has positioned itself in the
environmental industry through an equity investment in WPUR which is focused
primarily on the development, manufacture, sales and management of water
treatment equipment and facilities.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE NINE MONTHS ENDED JUNE 30,
1996
Revenues for the nine months ended June 30, 1997 were $2,522,688 representing
sales of approximately 7,300 ounces of gold produced in Zimbabwe compared to
$372,756 for the nine months ended June 30, 1996 representing the sale of
approximately 1,000 ounces of gold during the period between January 31, 1996
(date of acquisition of the Zimbabwe mines) through June 30, 1996. The
Company has spent in excess of $11,000,000 in the first phase of a major
capital improvement program which was completed in December 1996. Prior to
completion of this phase, the mines had operated on a limited basis. The
completion of this first phase has resulted in the Company having "state of
the art" production circuits which are capable of providing sustainable
production capacities. During the nine months ended June 30, 1997, the
Company incurred $2,264,958 in fixed and variable costs related to revenues of
$2,522,688 from the sale of gold. These levels of revenues and expenses are
not necessarily indicative of future results.
Total costs and expenses excluding the $2,264,958 related to gold production
were $3,028,391 for the nine months ended June 30, 1997, compared to
$2,655,228 for the nine months ended June 30, 1996, an increase of $373,163.
General and administrative expenses were $1,514,450 for the nine months ended
June 30, 1997 compared to $1,116,174 for the nine months ended June 30, 1996,
an increase of $398,276 Travel expenses increased $81,083 in the nine months
<PAGE>
ended June 30, 1997 compared to the nine months ended June 30, 1996 due mainly
to increased travel between Zimbabwe, Zambia and South Africa related to the
Company's operations and exploration activities in those countries.
Additionally, the Company incurred travel expenses in the nine months ended
June 30, 1997 related to conducting a tour of the Zimbabwe mining operations
for a group of mining analysts to conduct due diligence for the preparation of
independent research reports. Expenses related to public and stockholder
relations increased $40,203 in the nine months ended June 30, 1997 compared to
the nine months ended June 30, 1996. Insurance costs were $37,601 higher for
the nine months ended June 30, 1997 compared to the nine months ended June 30,
1996 due to the Company obtaining increased liability insurance coverage's.
Other general and administrative expenses increased by $239,389 due to a
general increase in the Company's business activities, primarily related to
expansion of the Zimbabwe mining operations.
Compensatory stock option expense decreased $281,475 for the nine months ended
June 30, 1997 compared to the nine months ended June 30, 1996 due to the
vesting of fewer compensatory stock options in the nine months ended June 30,
1997.
Professional services expenses, consisting of accounting, audit and tax and
legal expenses increased $124,558 in the nine months ended June 30, 1997
compared to the nine months ended June 30, 1996 due to higher consulting costs
related to the Company's tax compliance and higher legal costs related to the
preferred stock financing.
Mineral exploration costs charged to operations were $439,756 for the nine
months ended June 30, 1997 compared to $447,647 for the nine months ended June
30, 1996, a decrease of $7,891. Actual cash expenditures on exploration
programs increased however by approximately $300,000 from costs related to the
identification of additional economic reserves in Zimbabwe. These costs were
capitalized in the nine months ended June 30, 1997.
Merger and acquisition related expenses increased $135,518 in the nine months
ended June 30, 1997 to $204,414 due to the Company's continued activity in
developing new business opportunities around the world.
Total other expense, net was $549,727 for the nine months ended June 30, 1997,
compared to $1,865,198 for the nine months ended June 30, 1996, a decrease of
$1,315,471. This decrease was largely due to a reduction in the equity in the
net loss of WaterPur of $1,183,521 and a gain on the sale of the Company's
interest in a mining joint venture of $126,000 (see Note 3 to the Condensed
Consolidated Financial Statements).
The Company anticipates that, in the short term, expenditures related to
upgrading the mining properties in Zimbabwe will exceed revenues derived from
the sale of gold from the mines. Additionally, the Company anticipates that
current expense levels 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 resources 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.
<PAGE>
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1996
Revenues for the three months ended June 30, 1997 were $1,025,537 representing
the sale of approximately 3,000 ounces of gold produced in Zimbabwe compared
to $267,378 (approximately 900 ounces) for the three month period ended June
30, 1996. Gold sales exceeded fixed and variable mineral operating expenses
by $184,009 for the three months ended June 30, 1997. The operations for the
three months ended June 30, 1996 reflect mine operations on a limited basis.
Total costs and expenses excluding the $841,528 related to gold production
were $790,634 for the three months ended June 30, 1997, compared to $1,100,016
for the three months ended June 30, 1996, a decrease of $309,382.
General and administrative expenses were $337,377 for the three months ended
June 30, 1997 compared to $527,953 for the three months ended June 30, 1996,
an decrease of $190,576. Travel expenses decreased $37,024 in the three
months ended June 30, 1997 compared to the three months ended June 30, 1996
due mainly to decreased travel between Zimbabwe, Zambia and South Africa
related to the Company's operations in those countries. Expenses related to
public and stockholder relations decreased $47,656 in the three months ended
June 30, 1997 compared to the three months ended June 30, 1996. Other general
and administrative expenses decreased $123,551 in the three months ended June
30, 1997 compared to the three months ended June 30, 1996 mainly due to
returning to a normal level of activity in Zimbabwe, after undergoing rapid
expansion during the first six months of the current year associated with
operations start-up. These decreases were offset by an increase of $17,655 in
insurance costs in the current quarter due to the Company increasing its
liability insurance coverage's.
There were no compensatory stock option expense for the three months ended
June 30, 1997 as no compensatory stock options vested during the period. This
compares to $66,284 for the three months ended June 30, 1996.
Professional services expenses, consisting of accounting, audit and tax and
legal expenses increased $146,535 in the three months ended June 30, 1997
compared to the three months ended June 30, 1996 due to higher legal and tax
consulting costs.
Mineral exploration expenses were $34,663 for the three months ended June 30,
1997 compared to $127,864 for the three months ended June 30, 1996, a decrease
of $93,201. As mentioned earlier, this decrease is largely due to the
Company's meeting certain accounting criteria for capitalizing a portion of
its exploration costs. Additionally the Company had an active exploration
program in South Africa during the three months ended June 30, 1996 which the
Company did not have in the three month period ended June 30, 1997.
Merger and acquisition related expenses decreased by $8,199 in the three
months ended June 30, 1997. These expenses were associated with developing
new business opportunities around the world.
Total other expense, net was $128,547 for the three months ended June 30,
1997, compared to $917,129 for the three months ended June 30, 1996, a
decrease of $788,582. This decrease was largely due to a reduction in the
equity in the net loss of WaterPur of $711,006 and an increase in net
investment income of $113,102. The increase in investment income is due to
the Company investing funds raised in the convertible preferred stock private
placement.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
At June 30, 1997, the Company had working capital of $8,825,980, including
$8,163,636 in cash and cash equivalents. 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 a
mineral exploration program currently underway in Zambia. The Company will
use current cash and cash equivalents to fund the on-going projects in the
short and medium term and anticipates that it will be able to secure
additional debt and/or equity financing to fund longer term projects although
there can be no assurance that any such financing will be secured or the
amounts thereof.
As evidence of the Company's ability to secure debt or equity financing, in
the year ended September 30, 1996, the Company received $12,975,683, net of
commissions and other expenses related to the transactions, through issuance
of 1,159,091 units, consisting of warrants and shares of restricted common
stock in exempt private transactions. On November 8, 1996, the Company
completed a private placement of 155,000 units for net proceeds of $1,410,500.
Each unit consists of one share of the Company's restricted common stock plus
one warrant; two warrants plus $10.00 entitle the holder to purchase one share
of the Company's common stock. The warrants are exercisable for a period of
two years.
On January 24, 1997, Casmyn Mining Zimbabwe (Private) Limited ("CMZ"), a
wholly owned subsidiary of the Company, obtained a $5,000,000 short term
credit facility which provides the Company with the ability to draw down short
term loans to fund operating and capital expenditures. Loans under this
facility can be drawn down in minimum increments of $500,000 for up to 180
days but not past the maturity date of the facility. All borrowings under the
facility must be repaid on or before one year from the date of the first
funding. Interest on borrowings under this facility is at LIBOR plus 2.25%
per annum ("pa"); 1% pa paid as a funding fee at the time of borrowings and
LIBOR plus 1.25% pa paid at maturity. In addition the Company paid a $50,000
arrangement fee and is required to pay a quarterly commitment fee of 0.15% on
the unused portion of the facility. The facility also provides a refinancing
fee of 0.5% of the outstanding loan on the day prior to any refinancing if the
lender is not a party to the refinancing. At June 30, 1997, $4,915,066 in
short term loans were outstanding under the credit facility. The facility is
secured by a pledge of substantially all of the assets of CMZ plus the
guarantee of the Company. In addition, CMZ is required to hedge a portion of
forward gold production through the lender if at any time the gold price
offered by the Reserve Bank of Zimbabwe falls below $350 per ounce, the
Company is currently discussing hedge contracts with the lender as current
gold prices are below the $350 per ounce threshold.
On April 14, 1997, the Company completed the placement of 751,200 shares of
convertible preferred stock for cash proceeds of approximately $16.7 million
(after cash fees to the placement agent and the Company's financial advisor
and estimated transaction expenses); an additional 83,467 preferred shares
were issued to Societe Generale in exchange for $2,086,675 of pre-existing
convertible debentures. Societe Generale also converted the remaining
$2,913,325 balance of its convertible debt in exchange for 594,856 common
shares. The subscription price for the placement was $25 per share. The
preferred shares carry an 8% dividend to be paid in additional shares of
preferred stock and are convertible into common stock over a five year period
at an increasing discount to the market price of the common stock at the time
of conversion, subject to certain adjustments. The Company has the ability to
<PAGE>
force mandatory conversion if the common stock exceeds certain trading price
and volume targets. The number of shares that can be converted by a holder
over a ten month period beginning in July, 1997 is limited to 10% per month,
cumulative. The underlying common stock is also restricted for sale subject
to daily volume limitations. The placement agent received warrants
exercisable for a period of five years to purchase 110,000 shares of the
convertible preferred stock at $25 per share (see Note 7 to the Condensed
Consolidated Financial Statements).
Net Cash Used in Operating Activities. Net cash used in operating activities
was $5,539,177 (before depreciation and other non-cash items) for the nine
months ended June 30, 1997 due to net loss of $3,320,388 which was due
primarily to the increased expenses related to the Zimbabwe mining operations
and increased compensation and benefits; net cash used in operations of
$2,218,789 from increases in accounts receivable, inventory, and prepaid
expenses and other assets and decreases in accounts payable, accrued
liabilities; and amounts due from related parties. Net cash used in operating
activities was $4,316,835 (before depreciation and other non-cash items) for
the nine months ended June 30, 1996 due to net loss of $4,433,311; net cash
used in operations of $1,613,864 from increases in accounts receivable,
prepaid expenses and other assets, and decreases in accrued liabilities and
amounts due from related parties; and net cash provided by operating
activities of $1,730,340 due to a decrease in inventory and an increase in
accounts payable.
Net Cash Used in Investing Activities. Net cash used in investing activities
was $9,099,077 for the nine months ended June 30, 1997 due to the purchase of
property and equipment of $7,739,754 primarily at the Zimbabwe mining
properties, advances to affiliates and increase of long-term deposits of
$2,259,323 and net cash provided by investing activities of $900,000, from the
sale of the Company's investment in a mining joint venture (see Note 3 to the
Condensed Consolidated Financial Statements). Net cash used in investing
activities was $11,976,532 for the nine months ended June 30, 1996 due to the
purchase of certain businesses in Zimbabwe of $4,526,415, investments in and
advances to affiliates of $2,313,414, purchases of property and equipment of
$4,705,530, a decrease in cash of $459,708 due to a change in accounting for
the Company's investment in WaterPur, and net cash provided of $28,265 due to
decreases in long-term deposits.
Net Cash Provided by Financing Activities. Net cash provided by financing
activities was $23,462,325 for the nine months ended June 30, 1997 due to the
Company receiving $1,410,500 from the proceeds, net of costs, from a private
placement of units, $236,862 from the exercise of stock options, $5,252,621
representing the proceeds from the draw down of a line of credit in Zimbabwe
and receiving $16,751,389 from the proceeds, net of costs, from a private
placement of convertible preferred stock. These amounts were offset by the
repayment of long-term debt (under capital leases) of $189,045. Net cash
provided by financing activities was $13,304,138 for the nine months ended
June 30, 1996 due to the collection of subscriptions receivable, proceeds from
the exercise of stock options and from the issuance of common stock in a
private placement. This was offset by repayment of long-term debt and the
purchase of treasury stock of $355,726.
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
Recent sales of Unregistered Securities
On April 14, 1997, the Company completed the sale of 751,200 shares of its
First Series Convertible Preferred Stock to approximately eleven accredited
investors at a price of $25.00 per share. The preferred shares carry an 8%
dividend to be paid in additional shares of preferred stock and convert into
common stock over a five year period at an increasing discount to the market
price of the common stock at the time of conversion, subject to certain
adjustments. The Company has the ability to force mandatory conversion if the
common stock exceeds certain trading price and volume targets. The number of
shares that can be converted by a holder over a ten month period beginning in
July, 1997 is limited to 10% per month, cumulative. The underlying common
stock is also restricted for sale subject to daily volume limitations. The
placement agent received warrants exercisable for a period of five years to
purchase 110,000 shares of the convertible preferred stock at $25 per share.
The convertible preferred stock will be convertible at a discount to the
Common Stock ranging from 8.5% to 39% depending upon the date on which such
shares are converted. The discount is considered to be an additional
preferred stock dividend. At June 30, 1997, the Company recorded a charge to
retained earnings and a corresponding increase to additional paid-in capital
of $963,704 which represents the initial discount amount. This amount has
been recognized as a return to the preferred shareholders and as a reduction
of income available to common shareholders.
The Company received approximately $16,700,000 (after cash fees to the
placement agent and the Company's financial advisor and estimated transaction
expenses). In addition, 83,467 preferred shares were issued to Societe
Generale in exchange for $2,086,675 principal amount of pre-existing
convertible debentures. Societe Generale also converted the remaining
$2,913,325 principal balance amount of its convertible debenture in exchange
for 594,856 common shares. As the result of these exchanges, the Company has
extinguished the entire convertible debenture.
The sale is exempt from registration under section 4 (2) of the Securities Act
of 1933. Pursuant to the terms of the preferred stock investment agreement,
the Company filed a registration statement on Form S-3 covering the resale of
the underlying shares of common stock which was declared effective by the
Securities and Exchange Commission on July 29, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting on June 16, 1997. At the meeting the
following directors were reelected by the shareholders to hold office until
the next annual meeting of shareholders or until their respective successors
shall have been duly elected and shall have qualified:
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
- -------------------------------------------------------------------
<S> <C> <C>
Amyn S. Dahya - Chairman 8,326,135 1,846
Hanif S. Dahya - Vice Chairman 8,326,135 1,846
Edmund de Rothschild 8,326,135 1,846
Dr. Arthur B. Laffer 8,326,135 1,846
Sandro Kunzle 8,326,135 1,846
</TABLE>
<PAGE>
The following proposals were submitted to the shareholders for approval:
1. The election of the above named directors;
2. Approval of the 1997 Directors Stock Option Plan as adopted by the
Board of Directors on January 17, 1997 which provides for a maximum of 350,000
options to purchase common stock of the Company and the granting a total of
275,000 of these options at a price of $9.00 per share to Messers. Hanif S.
Dahya, Edmund de Rothschild and Dr. Arthur B. Laffer. The proposal was
approved by the shareholders with 7,324,936 votes for, 49,750 votes against,
8,113 abstentions and 945,392 non-votes;
3. Approval to increase the number of shares available for grant under the
1995 Incentive Stock Option Plan from 800,000 to 1,500,000. This proposal is
to provide for additional options to be available to provide an incentive for
officers and key employees of the Company. The proposal was approved with
7,326,538 votes for, 47,120 votes against, 7,423 abstentions and 946,930
non-votes;
4. Appointment of Deloitte & Touche as auditors for the Company for the
fiscal year ending September 30, 1997. The proposal was approved with
8,327,133 votes for, 878 votes against, there were no abstentions or
non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C>
A. Exhibits
Exhibit 27 - Financial Data Schedule (Edgar filing only)
B. Forms 8-K
None
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Casmyn Corp.
/s/ Dennis E. Welling
August 11, 1997 By _____________________________
Dennis E. Welling, Controller
(Duly authorized and Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000772320
<NAME> CASMYN CORP.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
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