UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM .............. TO................
COMMISSION FILE NUMBER 0-14136
CASMYN CORP.
(Exact name of Company as specified in its charter)
COLORADO 84-0987840
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification no.)
1335 GREG STREET, UNIT 104, SPARKS, NEVADA 89431
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 331-5524
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF CLASS: COMMON STOCK, $0.04 PAR VALUE
- --------------
Check whether issuer (1) has filed all reports to be filed by Section 13
or 15(d) of the Securities Exchange Act during the preceding 12 months (or for
such shorter period that the Company was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
[ X ] No [ ]
Check if disclosure of delinquent filers pursuant to Item 405 of
regulation S-K is not contained herein and will not be contained, to the best
of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the common stock held by non-affiliates of
the Company as of December 17, 1997 was approximately $17,775,000 (8,887,465
shares at $ 2.00 per share).
As of December 17, 1997 there were 13,709,909 shares of common stock
outstanding, par value $.04 per share.
Documents Incorporated By Reference: None
<PAGE>
PART I
ITEM 1: DESCRIPTION OF BUSINESS
This 10-K contains 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 represent the Company's
expectations or beliefs concerning future events, including statements
regarding the calculated mineral reserves located at the Company's mining
properties in Zimbabwe and the ability of the Company to secure additional
debt and/or equity financing to fund future expansion and operations. In
addition, statements containing expressions such as "believes," "anticipates,"
"plans" or "expects" used in the Company's periodic reports filed with the
Securities and Exchange Commission are intended to identify forward-looking
statements. The Company cautions that these and similar statements included
in this and in previously filed periodic reports are qualified by important
factors that could cause actual results to differ materially from those in the
forward-looking statements such as set forth in "Industry Overview and Certain
Factors Relating to the Company's Properties" and other factors, 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.
HISTORY OF THE COMPANY
Casmyn Corp. ("Casmyn" or the "Company"), which term shall include, unless the
context so requires, its subsidiaries, was originally incorporated under the
laws of the State of Colorado on December 4, 1984, as Fintech, Inc. In
November, 1985, the Company completed its initial public offering of
securities. On November 29,1991, the Company changed its name from Fintech,
Inc. to Summa Metals Corporation. 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. 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., a Nevada corporation, from Dahya Holdings, Inc., a related party. On
September 14, 1994 the Company changed its name from Summa Metals Corporation
to Casmyn Corp. Prior to 1994, the Company's principal business was
performing contract research and development services for the mining and
environmental industries.
The Company currently operates through the following active subsidiaries:
<TABLE>
<CAPTION>
JURISDICTION
OF ORGANIZATION BUSINESS PURPOSE
<S> <C> <C>
ENTITY
- -------------------------------------------------------------------------
Casmyn Mining Corporation Nevada Mining exploration
- South Africa
Casmyn Mining Zimbabwe [Private] Ltd. Zimbabwe Mining Operations
- Zimbabwe
Casmyn Gold Corporation Bahamas Gold acquisition and
export
Copperbelt Associates Limited Zambia Mining exploration
- Zambia
Casmyn International Inc. Bahamas Business development
- Commonwealth of
Independent States
("CIS")
</TABLE>
BUSINESS - GENERAL
- -------------------
Since the acquisition of the majority ownership of the Company by Mr. Amyn
Dahya in 1994, 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 and base metal resource properties in
Zimbabwe, Zambia and South Africa, precious stones in South Africa, and
research and development related to minerals testing, process engineering and
environmental technologies.
<PAGE>
On May 13, 1995, the Company obtained an option to acquire 100% of the shares
of a group of private mining companies in Zimbabwe. After extensive
geological and engineering review of the properties, the Company exercised its
option on January 31, 1996. As a result, the Company acquired 100% of the
shares of a group of five (5) private mining companies (the "Zimbabwe
Companies"): Matabeleland Minerals (Private) Limited, Greenhorn Mines
(Private) Limited, Morven Mining (Private) Limited, Motapa Minerals (Private)
Limited and Turk Mines (Private) Limited. The Zimbabwe Companies own a 100%
interest in mining claims controlling gold and silver mineral rights on
properties that lie within the Bubi Greenstone Belt, Zimbabwe, and the mines
contain numerous shafts, mining equipment and mineral processing mills with a
total capacity of 3,000 metric tons per day (in a combination of milling and
dump retreatment capacity). There are no underlying royalties payable on any
gold production from these properties, with the exception of re-processing of
tailings dumps at the Lonely Mine where a 2% royalty is payable to Ashanti
Goldfields. The Company has commenced gold production as well as completed
the first phase of a capital expenditure program to upgrade and retrofit
various mine facilities.
Also, on January 31, 1996, the Company purchased the assets of the Queen's
Group of Mines (Dawn Mine property) in Zimbabwe from Olympus Gold Mines
Limited. The Queen's Mines have produced over 340,000 ounces of gold at an
average grade of 0.44 ounces (14.9 grams per tonne) of gold per ton. The
Queen's Mines are located in close proximity (eleven kilometers) to the Turk
mine and mill and will be operated under a mine plan which includes the Turk
mine and other mining properties in the area owned by the Company.
In addition, Casmyn has an exploration license covering property in the Zambia
copper belt where exploration is currently on-going. This property is
adjacent to some of the largest copper mining operations in the world.
Previous exploration at the Casmyn controlled property has yielded ore grade
drill intercepts of copper together with uranium and cobalt. The Company has
completed a ground and airborne geophysical program and is currently drilling
several targets identified by the geophysical surveys.
The Company is conducting a diamond exploration program in the Schweizer
Property in South Africa, where on certain mineral properties located
approximately 220 kilometers from the Kimberly diamond mining area.
Historically, there has been mining of diamonds in the alluvial gravel's in
this area. This property is currently under option to the Company. The
Company has conducted 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 in close
proximity to the properties being prospected. The Company is undertaking 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.
Prior to September 30, 1997, the Company had positioned itself in the
environmental industry through an equity investment in WaterPur International
Inc. ("WPUR"), formerly Vector Environmental Technologies, Inc. which is
engaged in the development, manufacture, sales and management of water
treatment equipment and facilities. WPUR's shares are traded on the OTC
Bulletin Board. On June 29, 1995, the Company acquired a controlling interest
in WPUR through the acquisition of 3,000,000 convertible preferred shares, in
exchange for approximately $2,400,000 in liabilities owing to the Company. On
September 29, 1995, the Company purchased an additional 1,000,000 preferred
shares of WPUR at $2.00 per share. On September 30, 1996, the Company elected
to convert its preferred shares into common shares of WPUR, resulting in the
Company owning approximately 24.3% of WPUR. Also, during the fourth quarter
of 1996, the Company exchanged 425,750 shares of common stock of Auromar
Development Corp. owned by the Company for 1,532,700 shares of WPUR restricted
common stock, resulting in the Company increasing its percentage ownership in
WPUR to approximately 31.2%. This investment was accounted for using the
equity method. WPUR is also related to the Company through certain common
officers, directors and significant stockholders.
<PAGE>
Effective September 30, 1997, the Company restructured its interest in WPUR
(the "Restructuring"). In connection therewith the Company received an
aggregate of 7,900,004 shares of the Convertible Preferred Stock
("Convertible Preferred Shares") of WPUR through the following:
(a) Conversion of $4,574,368 (net of $157,435 which represents the market
value of 31,487 common shares of the Company which was offset against the
total debt) of outstanding debt of WPUR (the "WPUR Debt") to 5,082,626
Convertible Preferred Shares.
(b) Exchange of 5,634,756 common shares of WPUR owned by the Company for
2,817,378 Convertible Preferred Shares of WPUR. Each Preferred Share is
entitled to two votes per share, bears no dividend, constitutes a senior
security of WPUR and may be converted by the holder at any time after twelve
months from the date of distribution into two shares of WPUR Common Stock.
All remaining Convertible Preferred Shares will be automatically converted
into two WPUR common shares on the eighteenth month from the distribution date
(discussed below). The number of Convertible Preferred Shares to be received
upon the conversion of the WPUR Debt was determined based upon the closing
market price of WPUR common stock on September 30, 1997. The Restructuring
was based upon the advice of independent investment banking firms representing
the respective interests of the Company and WPUR.
(c) Spin-off to its shareholders of all the 7,900,004 Convertible Preferred
Shares received by the Company in the Restructuring to the common and
preferred shareholders of record of the Company on October 15, 1997 to be
completed following regulatory compliance.
(d) The purchase of 150,000 shares of the Company's common stock held by WPUR
for cash of $5.00 per share.
(e) WPUR issued to the Company warrants to purchase up to 3,300,000 WPUR
common shares at a price of $.75 per share exercisable for a three year
period.
The Company must receive regulatory approval prior to distribution of these
Convertible Preferred Shares.
The Company continues to share offices, personnel and certain facilities with
WPUR and accordingly actual costs related to these officers, personnel and
facilities are shared.
During the year ended September 30, 1997, Casmyn International Inc., owned
55% by the Company, was formed to seek out and evaluate business opportunities
in the CIS.
OTHER TRANSACTIONS
On May 24, 1996, the Company entered into a Stock Purchase Agreement to
exchange shares with WestAmerica Corporation ("WACC"), an oil and gas and
exploration company, whereby the Company received 5,680,514 common shares of
WACC (approximately a 65% interest) in exchange for 606,061 shares of the
Company's common stock. On September 30, 1996, the Company and WACC agreed to
cancel the transaction and have returned the respective shares to each party.
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 common stock plus one warrant; two warrants plus $10.00, will
entitle the holder to purchase one share of the Company's common stock. These
warrants expire two years from the date of issue.
<PAGE>
On May 7, 1996, the Company entered into a 50:50 joint venture with Newgold
Incorporated ("Newgold"), a public company listed on the OTC Bulletin Board,
for the development of the Relief Canyon Mine located in Pershing County,
Nevada.. The Company contributed $775,000 against a total commitment of
$1,398,000 for its 50% interest in the venture. Subsequent to September 30,
1996, the Company sold its interest back to Newgold for $900,000 and 1,000,000
restricted common shares of Newgold and a release from the $623,000 balance of
the Company's commitment.
On April 14, 1997, the Company completed the placement of 751,200 shares of
Convertible Preferred stock for cash proceeds of approximately $16,759,000
(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
(less $84,000 unamortized debt issue costs) of pre-existing convertible
debentures. Societe Generale also converted the remaining $2,913,325
principal balance (less unamortized debt issue costs of $116,000) of its
convertible debenture in exchange for 594,856 common shares. The Company also
issued an additional 3,637 preferred shares for interest accrued on the
convertible debenture through the date of conversion. On September 2, 1997,
the Company completed the placement of 533,885 shares of Convertible Preferred
stock for cash proceeds of approximately $12,423,000 including accrued
interest at 8% per annum from April 14, 1997 to the date of closing and after
cash fees to the placement agents and estimated transaction expenses.
The subscription price for the Convertible Preferred placements 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
right 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 agents received
warrants exercisable for a period of five years to purchase 172,725 shares of
the Convertible Preferred stock at $25 per share. The Company issued an
additional 11,686 Convertible Preferred shares to participants in the April
14, 1997 placement as a penalty for the Company failing to have a registration
statement declared effective by the Securities and Exchange Commission within
90 days of the funding date as provided in the subscription agreement.
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 accounted for as an additional
preferred stock dividend under generally accepted accounting principles and
SEC rules and guidelines. At September 30, 1997, the Company recorded a
charge to retained earnings and a corresponding increase to additional paid-in
capital of $3,825,676 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>
MINERAL RESOURCE DEVELOPMENT
GLOSSARY OF MINING TERMS AND DEFINITIONS
Presented below are the definitions of various mining terms:
KIMBERLITE PIPES - geologic structures containing mantle derived material that
may be diamond bearing.
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.
RESERVE - That part of a mineral deposit which could be economically and
legally extracted or produced at the time of the reserve determination.
PROVEN (MEASURED) RESERVES - Reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade
and/or quality are computed from the results of detailed sampling and (b) the
sites for inspection, sampling and measurement are spaced so closely and the
geologic character is so well defined that size, shape, depth and mineral
content of reserves are well established.
PROBABLE (INDICATED) RESERVES - Reserves for which quantity and grade and/or
quality are computed from information similar to that used from proven
(measured) reserves, but the sites for inspection, sampling, and measurement
are farther apart or are otherwise less adequately spaced. The degree of
assurance, although lower than that for proven (measured) reserves, is high
enough to assume continuity between points of observation.
TONNE - Refers to metric ton and is equal to 1.102 short tons or 2,204.622
pounds or 35,274 ounces or 32,151 grams.
MINING ACTIVITIES
Casmyn is responsible for exploration and mining activities in Zimbabwe
through its wholly owned subsidiary, Casmyn Mining Zimbabwe [Private] Ltd;
exploration in Zambia through its wholly owned subsidiary, Copperbelt
Associates Limited; and exploration in South Africa through its wholly owned
subsidiary, Casmyn Mining Corporation. The primary business activities of
these subsidiaries is described below.
ZIMBABWE GOLD PROPERTIES
Casmyn Mining Zimbabwe [Private] Ltd. was organized and incorporated in
Zimbabwe to acquire mineral properties and mining operations as described
below. The Company's objectives in the acquisition of these properties and
operations are the exploration, development and production of gold reserves
and resources. The Company is approaching its exploration and development
activities so as to balance exploration and proving of reserves with the
development of mining and processing capacity. The Company's objective is to
maintain an optimum mine life. In this connection the Company has spent in
excess of $20.5 million through September 30, 1997 in the purchase and
development of these properties.
As indicated above, on January 31, 1996, the Company acquired 100% of the
shares of the Zimbabwe Companies. The total consideration for this
acquisition was $4,071,415 (Zim $37,986,300) cash plus applicable taxes of
$792,801 (Zim $9,496,575) to be paid upon assessment of said taxes as defined
in the terms of the Memorandum of Agreement. The funds used to conclude this
acquisition were obtained from a combination of private placements of Company
Common Stock and from proceeds of a convertible debenture.
<PAGE>
The purchase price 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 for the Zimbabwe
Companies include: i) the tangible and intangible asset values of the
businesses acquired including primarily gold reserves; ii) the potential for
increasing gold production of the Zimbabwe Companies and iii) 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
Zimbabwe Companies for the purpose of mining and processing gold. It is the
intention of the Company to continue such use.
Through the acquisition of the Zimbabwe Companies, the Company owns a 100%
interest in 18 past producing gold mines that have produced in excess of
1,000,000 ounces of gold since mining commenced in the early 1900's. The
Company believes that through the modernization of the physical plant and
implementation of advanced mining technologies significant increases in gold
recovery can be realized. In addition, the Company is expanding its gold
reserves through the application of advanced exploration techniques.
Independent consultants have calculated that the Company has in excess of
500,000 ounces of proven and probable gold reserves for the mines owned by
the Company (See Item 2 "Description of Property"). As of September 30, 1997,
the Company was operating three (the Turk, Dawn and Lonely mines) of the 18
mines acquired.
The Company's first phase of expansion of the physical plant at a cost of
approximately $12 million has been completed. This phase consisted of: i)
mill refurbishing; ii) installation of a new crushing plant; iii) new leach
and gold recovery circuits; iv) refurbishing three existing shafts at the Turk
Mine; v) sinking a new shaft at the Turk Mine western extension; vi) new
tailings reprocessing plants at the Turk and Lonely Mines; vii) housing and
infrastructure and viii) preparation of new tailings disposal sites.
Also, on January 31, 1996, the Company purchased the assets of the Queen's
Group of Mines (Dawn Mine property) in Zimbabwe from Olympus Gold Mines
Limited for approximately $455,000 (Zim $4,250,000). The group of mines
making up the Queen's Mines have produced over 340,000 ounces of gold at an
average grade of 0.44 ounces (14.9 grams per tonne) of gold per ton. The
Queen's Mines are located in close proximity (eleven kilometers) south of the
Turk mine and will be operated under a mine plan which includes the Turk mine
and other mining properties in the area owned by the Company.
On August 1, 1996, an option agreement was concluded with Mr. Philip Austin
Williams on the "Elumba and Up To Date" gold mining properties which are
within 5 kilometers of the Turk mine and mill and were past producers of gold
and silver. The options are exercisable for an exercise price of between
$60,000 and $125,000 depending upon the date exercised.
ZAMBIAN COPPERBELT
During the fiscal year ended September 30, 1996, the Company purchased all of
the common shares of Copperbelt Associates Limited for $65,700 thereby
acquiring full interest in a prospecting license covering an area of
approximately 4,388 square kilometers. The Luswishi Property is located in the
Zambian Copperbelt. Earlier work, including drilling in the area has shown
the presence of copper, uranium and cobalt. The Company has commenced a
drilling and exploration program aimed at proving economically viable mining
reserves on this property position. The Company spent approximately $94,000
on exploration activities in the fiscal year ended September 30, 1996. The
Company expended approximately $830,000 in the fiscal year ending September
30, 1997. It is not the Company's intention to become a copper mining
operating company. If the Company's exploration program is successful, the
Company intends to seek a joint venture partner(s) to develop the property.
<PAGE>
SOUTH AFRICA
Casmyn Mining Corporation is conducting mineral exploration programs in
various areas of South Africa, primarily the Schweizer Property located in the
Schweizer-Reneke area of South Africa. These properties are located
approximately 220 kilometers from the Kimberly diamond mining area.
There has been significant mining of diamonds in the alluvial gravels in the
area under study by the Company. The Company has conducted 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 to the properties
being prospected. The Company has undertaken an exploration program in this
area directed at discovering diamond bearing kimberlite pipes. The
exploration program consisted of geophysical studies which include gravity and
magnetic surveys and soil sampling. The Company spent approximately $76,000
and $200,000 on exploration activities in the fiscal years ended September 30,
1997 and 1996 respectively. The Company estimates that it will expend
approximately $100,000 in the fiscal year ended September 30, 1998. To date
no kimberlite pipe(s) have been discovered, and there is no assurance that
such pipe(s) will be discovered.
INDUSTRY OVERVIEW AND CERTAIN FACTORS RELATING TO THE COMPANY'S PROPERTIES
Competition
Competition includes 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, may
provide the Company with increased flexibility and certain strategic
advantages over its competitors in developing countries. Most mining
companies in Zimbabwe are small owner operated mines with limited capital and
technical expertise.
Government Approval/Regulations
The mining operations of the Company, through its wholly-owned subsidiaries
Casmyn Mining Corporation, Copperbelt Associates Limited and Casmyn Mining
Zimbabwe [Private] Ltd., are conducted through its offices in South Africa and
Zimbabwe. Casmyn Mining Corporation is subject to the laws of South Africa,
which include permits to allow the Company to conduct exploration activities
on optioned properties. Copperbelt Associates Limited is conducting mineral
exploration in Zambia under a prospecting license obtained from the government
of Zambia. Casmyn Mining Zimbabwe [Private] Ltd. received approval from the
Zimbabwe Investment Centre to carry out exploration and mining activities and
from the Zimbabwe Reserve Bank to purchase 100% of the shares of a group of
five private mining companies in Zimbabwe.
Compliance With Environmental Laws
The exploration operations of the Company in South Africa are directed at
determining the presence of economically viable mineral deposits on properties
under evaluation. It is the Company's intention, once such mineral 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, 1997 due to the nature of the Company's exploration
activities. On January 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 also engaged in an
exploration program in Zambia that consists mainly of geophysics, soil
sampling and core drilling. The Company believes that it is in compliance
with the environmental laws of the countries in which it operates.
<PAGE>
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, copper, cobalt and uranium mining are
subject to a variety of risks and hazards, including decline in the selling
price of minerals, environmental hazards, industrial accidents, flooding and
the discharge of toxic chemicals. The Company has obtained insurance in
amounts it 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
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. 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, production
facilities required to extract the desired minerals, the total mineral
deposits that can be mined using a given facility 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 agreements negotiated with the property
owner. The agreements generally have a term of one 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.
To date, the Company's properties and exploration programs in South Africa and
Zambia have not indicated the presence of proven commercially viable mineral
deposits.
Uncertainty of Reserve Estimate Calculations and Uncertainty of Ability to
Replace Existing Reserves
Uncertainty exists in the determination of proven and probable gold reserves
due to assumptions made as to cost of production and world gold prices.
Additionally, while the Company continues its exploration program at its
Zimbabwe properties to identify new reserves to replace those currently being
depleted, there is no assurance that the Company will be able to find such new
reserves.
Market Factors and Volatility
Active international markets have historically existed for gold. There has
been an active market for diamonds, copper, cobalt and uranium which are of a
commodity nature. As such, the Company anticipates no barriers to the sale of
these minerals. 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 significant decline in the price of gold being produced or expected to be
produced by the Company could have a material adverse effect on the Company.
World gold prices have dropped significantly during 1997 and this has resulted
in the Company revising its proven and probable gold reserve estimates from
approximately 1,000,000 ounces to approximately 500,000 ounces (see "Item 2.
Description of Property").
<PAGE>
Need for Additional Financing
To achieve the full potential of continued exploration, development and
production of the Company's mineral properties, including the purchase of
additional properties, the exercise/extension of options on properties and
construction of mining facilities are likely to require substantial additional
financing, and there is no assurance that the Company will be able to secure
such financing on acceptable terms.
Certain Tax Considerations
The Company is predominantly invested in foreign subsidiaries. Those
subsidiaries are subjected to taxes imposed on them in the foreign
jurisdictions in which they operate and in which they are organized. Further,
their income is subject to US federal and state income taxes when distributed,
deemed distributed or otherwise attributed to, the Company, which is a US
corporation. Complex US tax rules apply for purposes of determining the
calculation of those US taxes, the availability of a credit for any foreign
taxes imposed on the foreign subsidiaries or the Company and the timing of the
imposition of US tax.
Normally, all foreign income earned by a US multinational eventually will be
subject to US tax. Income earned by a foreign branch of a US company is
taxable currently in the United States, and income earned by a foreign
subsidiary could be subject to US tax either in the year distributed to the US
as a dividend or in the year earned by means of Subpart F, foreign personal
holding company or other federal tax rules requiring current recognition of
certain income earned by foreign subsidiaries.
Income earned in foreign countries often is subject to foreign income taxes.
In order to relieve double taxation, the US federal tax law generally allows
US corporations a credit against their US tax liability in the year the
foreign earnings become subject to US tax in the amount of the foreign taxes
paid on those earnings. The credit is limited, however, under complex
limitation rules, to, in general, the US (pre-credit) tax imposed on the US
corporation's foreign source income. Further, complex rules exist for
allocating and apportioning interest, research and development expenses and
certain other expense deductions between US and foreign sources. Limiting
provisions of the source rules decrease the amount of foreign source income
many US multinationals can generate. Reduced foreign source income results in
a smaller foreign tax credit limitation, as the limitation is based on the
ratio of foreign source net income to total net income.
These rules can prevent US multinationals from crediting all of the foreign
taxes they pay. To the extent that foreign taxes are not creditable, foreign
source income bears a tax burden higher than the US tax rate.
General Political Risks and Risk of Currency Exchange Rate Fluctuations
The Company is actively engaged in exploration and production activities in
Zimbabwe, Zambia and South Africa. These countries may be subject to a
substantially greater degree of social, political and economic instability
than is the case in the United States and Western European countries. Such
instability may result from, among other things, the following: (i) popular
unrest associated with demands for improved political, economic and social
conditions; and (ii) ethnic, religious and racial disaffection. Such social,
political and economic instability could significantly disrupt the Company's
business. In addition, there may be the possibility of nationalization, asset
expropriations or future confiscatory levels of taxation affecting the
Company. In the event of nationalization, expropriation or other
confiscation, the Company may not be fairly compensated for its loss and could
lose its entire investment in the country involved.
<PAGE>
The economies of individual countries in which the Company does business may
differ favorably or unfavorably and significantly from the U.S. economy in
such respects as the rate of growth of GDP or gross national product, rate of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency, structural unemployment and balance of payments position.
Governments in certain foreign countries in which the Company does business
participate to a significant degree, through ownership interests or
regulation, in their respective economies. Action by these governments could
have a significant adverse effect on the Company's business.
The value of the assets of the Company as measured in dollars also may be
affected favorably or unfavorably by fluctuations in currency rates and
exchange control regulations. Some of the currencies of countries in which
the Company does business have experienced devaluation's relative to the
dollar, and major adjustments have been made periodically in certain of such
currencies. Also, certain of these countries face serious exchange
constraints. Further, the Company may incur costs in connection with
conversions between various currencies. Foreign exchange dealers realize a
profit based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer normally will offer to sell a
foreign currency to the Company at one rate, while offering a lesser rate of
exchange should the Company desire immediately to resell that currency to the
dealer. The Company conducts its foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through entering into forward, futures or options
contracts to purchase or sell foreign currencies or through entering into
currency swap transactions. If the foreign currency hedging engaged in by the
Company does not protect the Company against adverse changes in exchange
rates, the Company's net assets (including accrued income and realized capital
gains) and distributions would be affected by fluctuations in the value of the
local currency. The Company does not currently have any foreign exchange
hedge contracts in place.
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 approximately
five-hundred-fifty (550) employees. Approximately four hundred and
twenty-five (425) of these employees are mine workers who are covered by
Zimbabwe government and Chamber of Mines labor agreements. The balance of
employees are management and professional staff who are not subject to any
collective bargaining agreements or union affiliations. Management believes
that its relations with its employees are good.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
ZIMBABWE
The Company owns 100% of 18 past producing gold mines in Zimbabwe covering
approximately 1,200 hectares (2,965 acres) in the Bubi Greenstone belt in
central Zimbabwe . The company has pegged an additional 153 gold reef claim
blocks (1463 hectares) and 10 base metal claim blocks (250 hectares). As well
the company has applied for an exclusive prospecting order that includes an
expanded land package for the Turk and Charliesona mines. If granted, this
will give the company the exclusive right to prospect and peg gold claims in
an area covering 37,182 hectares, for a period of three years. The Company's
properties have produced in excess of 1,000,000 ounces of gold since mining
commenced in the early 1900's . Within the Company's properties, several
producing mines exist, the largest of which is the Turk Mine with historical
production in excess of 400,000 ounces of gold. In addition, the Company is
presently conducting mining operations at the Lonely and Dawn mines.
TURK MINE
The Turk Mine is located approximately 55 km north of Bulawayo, Zimbabwe. A
single lane paved road accesses the mine and a national power grid parallels
the road. The Turk Mine is a typical Archean shear hosted lode gold vein
deposit that has been partially exploited down to 800 meters. Historical
grades are approximately 0.15 ounces per ton (5.1 grams per tonne or "g/t")
over widths averaging 2 meters in a series of multiple vein sets. The mine
has been dewatered down to the 390 meter level and current rehabilitation and
development work is being concentrated in the first 140 meters. A diamond
drilling and underground development program by the company in 1997 identified
an open-pit mineable body (the "Eli Khulu body"), between the Incline and
Armenian shafts. Surface and underground drilling are currently defining the
limits of the this discovery to allow pit optimization.
The Turk Mine has a combination of open pit and underground sulphide ore and
retreatable mill tailings dumps. The current proven and probable geological
ore reserves at the Turk Mine are as follows: 363,319 open pit mineable
tonnes at an average grade of 3.32 grams per tonne gold for a contained gold
reserve of 38,781 ounces. There are 1,303,493 tonnes of underground ore with
an average grade of 7.76 grams per tonne gold for a contained gold reserve of
325,006 ounces, and 2,056,000 tonnes of slimes and sands dumps grading 1.08
grams per tonne gold for a contained gold reserve of 71,198 ounces.
EXISTING INFRASTRUCTURE - The Turk Mine consists of managers' and workers'
houses; mine offices and work shops. The mineral processing facilities
consist of 240 tonne and 60 tonne per day hard rock mills and associated
crusher circuits and leaching/adsorption circuits; a 1,500 tonne per day
carbon in leach ("CIL") for retreating old tailings material and a 250,000
square metre tailings dam. The company operates a 300 sample per day
analytical facility at the Turk mine. The infrastructure to develop and mine
the underground and surface ore bodies consists of four operational shafts
(one not fully developed), 4500 cfm of compressed air, underground locomotives
and air driven ore loaders, and underground pump stations to dewater the mine.
The mine owns and operates its own earth moving fleet.
REFURBISHMENT AND CONSTRUCTION - The Company is currently undertaking the
following projects at the Turk mine:
<TABLE>
<CAPTION>
<S> <C>
i) Additional offices and mine worker and manager housing
ii) New 1,500 tonne per day sands regrind circuit
iii) New leaching/carbon in leach circuit
iv) Additional leaching capacity for the existing milling circuits
v) Development of the electrical reticulation system to distribute 5,000 kva
of electricity)
vi) Installation of power factor correction equipment
vii) Installation of dewatering circuits at the tailings dams
</TABLE>
<PAGE>
During the fiscal year ended September 30, 1997, the Company expended
approximately $6,600,000 on these projects and anticipates spending
approximately $4,400,000 on these projects at the Turk Mine over the next two
years.
EXPLORATION AND DEVELOPMENT - The Company has either completed or currently
has in progress the following exploration and development projects at the Turk
mine:
<TABLE>
<CAPTION>
<S> <C>
i) Two surface core drills and five underground core drills during
1997 delineated underground sulphide ore zones, and continuing
surface and underground core drilling and underground development
in 1998
ii) Underground primary and secondary development to gain access to
underground sulphide ore zones on levels between 25 meters and
350 meters below the surface
iii) New shaft sinking on Armenian shaft from surface to 120 meters
below surface and continuing to 370 meters below surface
iv) Several hundred meters of trenching of open pit oxide ore and
related metallurgical test work
v) Development of two open pits in oxide ore
vi) Augering and metallurgical test work on old mill tailings dumps
vii) Re-mapping and sampling of old underground workings
viii) Exploration drives, raises and cross-cuts on multiple underground
levels
</TABLE>
LONELY MINE
- ------------
The Lonely mine is located 30 km north of the Turk Mine and is located on the
national electrical power grid. The Company has the rights to the surface
deposits through a tribute agreement with Ashanti Goldfields. There is a 2.5%
net smelter return payable to Ashanti Goldfields on the gold produced from the
surface deposits that includes 1.1 million metric tons of mill tailings
grading 0.9 to 1.1 grams per tonne. The Company operates a 1,500 tonne per
day CIL processing facility to recover gold from tailings. This CIL facility
can be easily disassembled and moved to another site at the end of operations
at the Lonely minesite.
EXISTING INFRASTRUCTURE - The underground infrastructure at Lonely mine
consists of a mine shaft, hoist and headframe and dewatering pumps. The
mineral processing facility includes a high pressure hydraulic tailings
recovery circuit, a CIL plant and tailings dam. Offices and accommodation for
all workers and managers are at the site.
REFURBISHMENT AND CONSTRUCTION - The Company has completed or currently has in
progress the following projects at the Lonely mine:
<TABLE>
<CAPTION>
<S> <C>
i) Upgrading the hoisting and dewatering capacity at two shafts
ii) Installing further elution equipment
iii) Installing electrical reticulation for 1,000 kva of power
iv) Upgraded water supply, underground pumps and surface boreholes
</TABLE>
During the fiscal year ended September 30, 1997, the Company expended
approximately $320,000 on the above projects and anticipates spending
approximately $400,000 on these projects at the Lonely Mine over the next two
years.
EXPLORATION AND DEVELOPMENT - The Lonely Mine produced over 1.1 million
ounces of gold at an average recovered grade of 0.51 grams per tonne.
QUEEN'S GROUP OF MINES
The Queen's Mining District (which includes the Dawn mine) is located 42 km
north of Bulawayo accessed via an all weather tar road and is located on the
national electrical power grid. These mines have produced over 340,000 ounces
of gold at an average grade of 0.44 ounces of gold per tonne since mining
operations began. Underground sulphide ore which is trucked to the Turk Mine
mill, and the high grade mill tailings dumps are being evaluated for transport
to the Turk mine for treatment.
<PAGE>
EXISTING INFRASTRUCTURE - The Queen's mines consists of mine shafts and
headframes, tailings dams, thickener tanks, mine offices , workshops, mill
buildings and manager and worker housing.
REFURBISHMENT AND CONSTRUCTION - The Company has completed or currently has in
process the following projects at the Dawn mine:
<TABLE>
<CAPTION>
<S> <C>
i) The Q-7 shaft refurbishment to the second level
ii) Purchase of a vacuum to sweep coarse gold left behind in the old workings
</TABLE>
EXPLORATION AND DEVELOPMENT - In 1997, the Company conducted surface trenching
and underground mapping and sampling of sulphide ore zones. Further drilling
and underground development is scheduled to continue in 1998.
During the fiscal year ended September 30, 1997, the Company expended
approximately $45,000 on the above projects and anticipates spending
approximately $260,000 on these projects at the Dawn Mine in the future.
CHARLIESONA MINE
The Charliesona mine is located 6 kilometers northwest of the Turk mine on an
all weather road and is located on the national electrical power grid. The
ore sources for the Chaliesona mine are open pit oxide and surface mill
tailings dumps.
EXISTING INFRASTRUCTURE - The Charliesona mine consists of three vertical mine
shafts with headgear and hoists, a mill building with a 100 tonne per day ball
mill, crusher circuit, water reservoir, CIP tanks, flotation cells and vat
leach tanks.
REFURBISHMENT AND CONSTRUCTION - The Company has completed or currently has in
progress the following projects at the Charliesona mine:
<TABLE>
<CAPTION>
<S> <C>
i) Dewatering of number 4 shaft to gain access to oxide ore bodies
ii) Ball mill and crushing circuit currently being refurbished
</TABLE>
During the fiscal year ended September 30, 1997, the Company expended
approximately $107,000 on the above projects and anticipates spending
approximately $10,000 on these projects in fiscal 1998.
EXPLORATION AND DEVELOPMENT - In 1997, the Company completed surface
trenching, percussion drilling, underground development, geological mapping,
sampling of oxide ore and metallurgical test work. Further work in these
areas is scheduled to continue in 1998.
DING DONG, SANDY, PETER PAN AND TIBERIUS
All of these properties are on the national electrical power grid and are
within close proximity of the Turk mine. The ore sources for these mines
consist of open pit oxide and underground sulphide mineral deposits.
EXISTING INFRASTRUCTURE - These mines consist of vertical and incline mine
shafts, surface excavations and boreholes for water. There is a crushing
circuit and vat leach tanks at the Peter Pan mine.
REFURBISHMENT AND CONSTRUCTION - The Company has completed or currently has in
progress the following projects at the mines:
Fencing off and making safe old mine workings
<PAGE>
The Company has expended minor amounts on the above projects, and anticipates
minor expenditures on these properties in 1998.
EXPLORATION AND DEVELOPMENT - At certain of these mines in 1997, the Company
completed surface trenching, core and percussion drilling, underground
development and shaft sinking, surface and geological mapping, sampling and
metallurgical test work.
GEOLOGY
The regional geology of the area of the mines comprises metasediments,
metavolcanics and serpentinite of the Bulawayan Group as shown on the
simplified geological map of Zimbabwe. The gold mineralization is greenstone
type hosted in quartz veins or shear zones.
RESERVES
The tables presented below set forth the Company's interest in estimated
proven and probable reserves of contained ounces of gold in place at each
property. These estimates have been prepared by Mr. P. Bekker, Consulting
Geologist an independent mineral consultant. The proven/probable ore reserves
are currently estimated at 502,499 ounces compared to 1,023,322 in the
Company's 1996 10-K/A filed in July 1997, a decrease of approximately 50%.
This decrease is partly the result of mining a certain amount of oxide,
sulphide and dump material. However the majority of the decrease in the
Company's proven/probable ore reserves was caused by the need to apply
significantly higher cut-off grades in the reserve calculations due to the
sharp drops in world gold prices (an approximate 30% decrease). A gold price
of $425 per ounce was used in the previous calculations, whereas $310 per ounce
is now being used. The gold price used for the updated reserve calculations
more accurately reflects current market conditions. The Company
believes it to be prudent to state its reserve estimates based on recent
trends in the gold market. In addition, the Company completed over 100 new
underground and surface boreholes since the last reserve calculations were
performed. This new information was used to update the geological models used
in the reserve calculations
<PAGE>
TABLE 1 - PROVEN RESERVES
<TABLE>
<CAPTION>
GRAMS PER CONTAINED
TONNE OUNCES AU
LOCATION TONNES
- ------------------------------------------------------------------------------
TURK MINE:
Turk Section - Open-pit
<S> <C> <C> <C>
159,637 3.32 17,040
Underground 38,602 4.65 5,766
Tailings Dump A 217,000 1.14 7,954
Tailings Dump B 279,000 1.30 11,661
Tailings Dump C 240,000 1.35 10,417
Tailings Dump D 1,320,000 0.97 41,166
QUEEN'S MINE (DAWN):
Underground sulphide 28,898 4.01 3,725
Tailings Dumps 312,576 1.86 18,692
DING DONG MINE:
Sulphides 17,930 7.28 4,198
LONELY MINE:
Tailings Dump A 425,000 0.87 11,888
Tailings Dump C 435,000 0.86 12,028
Tailings Dump D 215,250 1.06 7,336
-------------------
TOTAL PROVEN RESERVES 151,871
===================
TABLE 2 - PROBABLE RESERVES
GRAMS PER CONTAINED
TONNE OUNCES AU
LOCATION TONNES
- ------------------------------------------------------------------------------
TURK MINE:
Turk section Open-pit 203,682 3.32 21,741
Underground 1,152,361 7.75 287,236
Angelus section - Underground 112,530 8.36 30,246
QUEEN'S MINE (DAWN):
Underground sulphide 48,525 4.73 7,380
Tailings dumps 33,348 1.04 1,115
DING DONG MINE:
Underground sulphide 13,640 6.64 2,910
-------------------
TOTAL PROBABLE RESERVES 350,628
===================
</TABLE>
GOLD RECOVERY RATES
The recovery of gold from the Company's in-place contained gold reserves has
been measured and it varies by location and type of material. Gold recoveries
resulting from the different mining methods and benefication processes are as
follows: milled sulphide ore gives gold recovery rates between 80% and 90%
and retreatment tailings (dump) gold recovery rates range from 49% to 68%.
In addition to the proven and probable reserves, a substantial amount of
mineralized deposits are being evaluated which will be confirmed by
independent consultants prior to being categorized as proven or probable
reserves.
<PAGE>
ZAMBIA
LUSWISHI DOME
In January 1996, the Company acquired 100% of a three year prospecting license
covering an area of approximately 4,388 square kilometers within the
Zaire-Zambia Copperbelt in Zambia . Included in the area under license is the
Luswishi Dome project which is targeting a large tonnage copper-cobalt-uranium
mineral deposit. The Company has commenced a drilling and exploration program
aimed at proving economically viable mining reserves on this property.
SOUTH AFRICA
SCHWEIZER PROPERTY
The Company is carrying out exploration on certain mineral properties located
in the Schweizer-Reneke area of South Africa. These properties are located
approximately 220 kilometers from the Kimberly diamond mining area.
FACILITIES
The Company maintains offices in Vancouver, Canada in office space which is
currently occupied under a month-to-month leases at a cost of approximately
$7,600 per month. The Vancouver offices, which are also shared with WPUR,
occupy 6,036 square feet in a high rise office building. These facilities are
adequate for the current level of operations and sufficient office space is
conveniently located to support future growth.
Casmyn Mining Corporation, South Africa is located in Pretoria, South Africa
in an office which is occupied on a month-to-month basis at a cost of $1,000
per month. Casmyn Mining Zimbabwe [Private] Ltd., is located in Bulawayo,
Zimbabwe in an office which is leased for $775 per month.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material litigation, whether pending or
threatened, to which it is or may become a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Registrant's Common stock is publicly traded on the NASDAQ SmallCap
Market, under the symbol "CMYN". The following table sets forth the range of
approximate high and low bid quotations since October 1, 1995, which represent
prices between dealers, do not include retail markups, markdowns or
commissions and may not represent actual transactions. The prices are based
upon information obtained from the National Daily Quotation Service published
by the National Daily Quotation Bureau, Inc.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
Quarter from October 1, 1995 $21.50 $ 8.00
to December 31, 1995
Quarter from January 1, 1996 $20.00 $16.00
to March 31, 1996
Quarter from April 1, 1996 $18.00 $15.00
to June 30, 1996
Quarter from July 1, 1996 $16.50 $13.00
to September 30, 1996
Quarter from October 1, 1996 $12.50 $ 8.63
to December 31, 1996
Quarter from January 1, 1997 $ 9.63 $ 8.00
to March 31, 1997
Quarter from April 1, 1997 $ 8.38 $ 6.00
to June 30, 1997
Quarter from July 1, 1997 $ 7.75 $ 4.50
to September 30, 1997
</TABLE>
On December 17, 1997, the closing bid quotation for the Company's common stock
was $ 2.00 per share. As of December 17, 1997, there were 1,124
shareholders of record of the Company's common stock (including brokerage
firms and/or other nominees who may hold shares for multiple investors).
Holders of common stock are entitled to receive dividends if, as and when
declared by the Board of Directors out of funds legally available subject to
the dividend and liquidation rights of any preferred stock that may be issued.
The Company has never paid cash dividends on its common stock and does not
anticipate doing so in the foreseeable future so as to utilize any earnings in
the expansion of its business. Such policy is subject to change, based on
current industry and market conditions, as well as other factors beyond the
control of the Company.
<PAGE>
ITEM 6. SELECTED FINANCIAL INFORMATION
The selected consolidated historical financial data presented below as of and
for the years ended September 30, are derived from the Company's audited
consolidated financial statements. 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" appearing elsewhere herein (amounts in $000's
except per share amounts).
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1995 (1)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 3,392 $ 630 $ 382
------------ ------------ -------------
Costs and expenses:
Mineral operations 3,045 959 -
Cost of water purification revenues - - 490
General and administrative expense 3,161 2,377 3,678
Professional services 421 319 230
Compensatory stock option expense 74 364 955
Depreciation, depletion and amorti-
zation 523 232 99
Mineral exploration expense 1,304 423 1,010
Research and development - - 185
Mergers and acquisitions 281 482 135
Write down of assets - 673 -
------------ ------------ -------------
Total costs and expenses 8,809 5,829 6,782
------------ ------------ -------------
Loss from operations ( 5,417) ( 5,199) ( 6,400)
------------ ------------ -------------
Other income (expense):
Equity in net loss of affiliate (1) ( 1,035) ( 3,178) -
Minority interest in net loss of
consolidated subsidiary 36 - 3,502
Loss on foreign exchange ( 861) - -
Gain (loss) on sale of investments 126 - ( 150)
Other income (expense) 358 56 ( 27)
------------ ------------ -------------
Other income (expense), net ( 1,376) ( 3,122) 3,325
------------ ------------ -------------
Income (loss) from continuing
operations ( 6,793) ( 8,321) ( 3,075)
Gain (loss) from discontinued
operations - - 33
------------ ------------ -------------
Net income (loss) $ ( 6,793) $ ( 8,321) $ ( 3,042)
============ ============ =============
Income (Loss) Per Common Share:
Net income (loss) $ ( 6,793) $ ( 8,321) $ ( 3,042)
Less: dividends on convertible
preferred stock ( 871) - -
Less: amortization of discount
on convertible preferred stock ( 3,826) - -
------------ ------------ -------------
Net income (loss) applicable to
common shares $ ( 11,490) $ ( 8,321) $ ( 3,042)
============ ============ =============
Income (loss) from
continuing operations $ (0.90) $ (1.16) $ (0.40)
Income (loss) from
discontinued operations - - -
------------ ------------ -------------
Net income (loss) $ (0.90) $ (1.16) $ (0.40)
============ ============ =============
Weighted average number
of common shares outstanding (000's)
12,812 7,149 7,651
============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 (1) 1993 (1)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 601 $ 75
----------------- -------------
Costs and expenses:
Mineral operations - -
Cost of water purification revenues 603 1
General and administrative expense 3,012 961
Professional services 212 115
Compensatory stock option expense - -
Depreciation, depletion and amortization 39 80
Mineral exploration expense - -
Research and development 15 85
Mergers and acquisitions - -
Write down of assets 908 399
----------------- -------------
Total costs and expenses 4,789 1,641
----------------- -------------
Loss from operations ( 4,188) ( 1,566)
----------------- -------------
Other income (expense):
Equity in net loss of affiliate (1) - -
Minority interest in net loss of
consolidated subsidiary 4,581 1,302
Loss on foreign exchange - -
Gain (loss) on sale of investments 253 ( 14)
Other income (expense) 45 ( 16)
----------------- -------------
Other income (expense), net 4,879 1,272
----------------- -------------
Income (loss) from continuing operations 691 ( 294)
Gain (loss) from discontinued operations (644) ( 292)
----------------- --------------
Net income (loss) $ 47 $ ( 586)
================= ==============
Income (Loss) Per Common Share:
Net income (loss) $ 47 $ ( 586)
Less: dividends on
convertible preferred stock - -
Less: amortization of discount
on convertible
preferred stock - -
----------------- --------------
Net income (loss) applicable
to common shares $ 47 $ ( 586)
================= ==============
Income (loss) from
continuing operations$ 0.14 $ (0.09)
Income (loss) from
discontinued operations (0.13) (0.09)
----------------- --------------
Net income (loss) $ 0.01 $ (0.18)
================= ==============
Weighted average number of common
shares outstanding (000's)
4,946 3,244
================= ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
1997 1996 1995 (1) 1994 (1) 1993 (1)
---------------------------------------------------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Total assets $ 48,273 $ 22,317 $ 14,316 $ 3,369 $ 2,309
Long term debt - 5,071 5,071 110 207
Stockholders' equity
(deficit) $ 34,472 13,193 8,144 2,214 ( 507)
</TABLE>
Note (1): Consolidated financial statements for fiscal years prior to fiscal
1996 include financial statements of WPUR and its subsidiaries on a
consolidated basis due to the Company acquiring a controlling voting interest
in WPUR in fiscal year 1995 and accounting for the acquisition of the
investment in WPUR as a combination of entities under common control.
Effective September 30, 1996, the Company reduced its voting interest in WPUR
and as of that date has recorded its investment in WPUR using the equity
method. The consolidated statements of operations for fiscal year 1996
reflects an equity method presentation retroactive to the beginning of the
year.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
During the year ended September 30, 1997, the Company operated in the mineral
resource development ("mining") business segment. During the years ended
September 30, 1996, and 1995, the Company operated in two business segments:
mining and water purification systems ("water purification") through its
investment in WPUR. See Note 1 of Notes to the Consolidated Financial
Statements.
The business activities of the Company are centered around mineral resource
development. The focus to date has been the acquisition and exploration of
precious mineral resource properties in Zimbabwe, Zambia and South Africa.
Prior to September 30, 1997, the Company had positioned itself in the
environmental industry through an equity investment in WPUR. As discussed in
Note 1 of the Notes to the Consolidated Financial Statements, the Company has
declared a dividend to its common and preferred shareholders thereby
spinning-off its investment in WPUR.
Effective September 30, 1996, the Company reduced its voting interest in WPUR
as a result of converting WPUR preferred stock, which had voting rights per
share equivalent to four WPUR common shares, to common shares 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. The Company has
elected, however, to provide a consolidated statement of operations for the
year ended September 30, 1996 which reflects an equity method presentation
retroactive to the beginning of the year. The consolidated financial
statements as of September 30, 1995 and for the year ended September 30, 1995
have not been restated. As a result, the consolidated financial statements
for the year ended September 30, 1996 are not readily comparable to those for
the year ended September 30, 1995.
Due to the operating losses of the Company or the availability of net
operating loss carryforwards, there were no provisions for income taxes
recorded in the consolidated financial statements for the years ended
September 30, 1997, 1996 and 1995.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1996
Revenues for the year ended September 30, 1997 were $3,392,160 compared to
$630,481 for the year ended September 30, 1996. The increase of $2,761,679
was due to the sale of approximately 9,770 ounces of gold in the year ended
September 30, 1997 compared to approximately 1,600 ounces sold in the year
ended September 30, 1996. The average selling price of gold for the year
ended September 30, 1997 was approximately $347 per ounce compared to an
average price of approximately $394 per ounce in the year ended September 30,
1996. Fixed and variable mineral operations expenses related to gold
production were $3,045,360 for the year ended September 30, 1997. As a
result, revenues exceeded direct costs of production by $346,800 for the year
ended September 30, 1997. For the year ended September 30, 1996, fixed and
variable mineral operations expenses of $958,561 related to the production of
gold exceeded the revenues from gold sales by $328,080 due to a limited level
of operations in that period.
Total costs and expenses excluding the $3,045,360 and $958,561 for the years
ended September 30, 1997 and 1996 respectively related to gold production were
$5,763,998 for the year ended September 30, 1997, compared to $4,871,330 for
the year ended September 30, 1996, an increase of $892,668.
<PAGE>
General and administrative expenses were $3,161,153 in 1997 compared to
$2,377,138 in 1996, an increase of $784,015. This increase is due to an
increase in compensation related expenses of $362,675 for employees and
consultants in the year ended September 30, 1997 compared to the year ended
September 30, 1996 due to the full year of operations at the Company's
Zimbabwe properties compared to eight months operations in the year ended
September 30, 1996. Travel related expenses increased $142,401 in 1997
compared to 1996 due to increased travel between South Africa, Zimbabwe,
Zambia and the CIS related to operations and business development in those
countries. Additionally, the Company incurred travel expenses in the year
ended September 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. Insurance costs were $93,435
higher for the year ended September 30, 1997 compared to the year ended
September 30, 1996 due primarily to the Company obtaining increased liability
and property insurance coverages. Expenses related to trade shows, investment
conferences and public/investor relations increased $175,875 in the year ended
September 30, 1997 compared to the year ended September 30, 1996 due to
increased efforts by the Company to create increased investor awareness of and
interest in the Company. Other general and administrative expenses increased
$9,629 in the year ended September 30, 1997 compared to the year ended
September 30, 1996 due to higher expenses in the Company's operations in
Zimbabwe from a full year of operations compared to eight months in the year
ended September 30, 1996.
Professional services related costs increased from $318,997 in 1996 to
$420,648 in 1997 an increase of $101,651. This increase was due to costs
incurred in the Company's Convertible Preferred Stock placements along with
higher legal, audit, tax and financial consulting services provided to the
Company in the year ended September 30, 1997.
Compensatory stock option expense was $74,040 in 1997 compared to $364,560 in
1996, a decrease of $290,520. The decrease is due to the fact that all of the
options granted in 1995 fully vested in the year ended September 30, 1996 and
there were no compensatory options granted in the year ended September 30,
1997.
Depreciation, depletion and amortization expense increased from $232,019 in
1996 to $523,463 in 1997, an increase of $291,444. This increase is due to
the acquisition of the property and equipment in Zimbabwe and depletion
expense related to increased gold production in 1997.
Mineral exploration expenses increased from $423,717 in 1996 to $1,304,242 in
1997, an increase of $880,525. The Company's mineral exploration program in
Zambia accounted for $831,459 of the total amount of mineral exploration
expense incurred in the year ended September 30, 1997. There were no mineral
exploration expenditures in Zambia in the year ended September 30, 1996. In
addition, the Company charged $394,455 in costs related to its diamond
exploration program in the Schweizer-Reneke area of South Africa to expense in
the year ended September 30, 1997. This amount was $49,066 higher than
amounts expensed on the Company's mineral exploration program in South Africa
in the year ended September 30, 1996.
The Company recorded a write down of assets of $672,560 in 1996 to reserve
against advances it had made to certain parties in Ghana pursuant to contracts
to purchase unrefined gold. The write down was recorded due to the
uncertainties that exist because of disputes and litigation surrounding the
failure of the sellers to deliver the gold to the Company as required by the
contracts. The Company is currently pursuing various options to recover the
amounts advanced and the Company believes that it will ultimately be
successful in recovering either gold or the advances made under the contracts.
Merger and acquisition related expenses decreased $201,887 in 1997 to $280,452
due to reduced merger and acquisition related activities in the year ended
September 30, 1997. While expenses in this category decreased in the current
year, the Company is actively seeking economically viable acquisition
opportunities in the gold sector. These types of acquisitions are an integral
part of the Company's growth strategy. In the year ended September 30, 1996
the Company completed the merger with Auromar, the proposed acquisition of
WestAmerica Corporation, and the Relief Canyon joint venture.
<PAGE>
Total other income (expense), net was $1,376,229 for the year ended September
30, 1997, compared to $3,121,916 for the year ended September 30, 1996, a
decrease of $1,745,687. This decrease was due to a reduction in the equity in
the net loss or WPUR of $2,143,349, an increase of $209,941 in interest income
net of interest expense, a gain on the sale of the Company's interest in a
mining joint venture of $126,000 (see Note 15 to the Consolidated Financial
Statements) and other income items totaling $128,254. These amounts were
offset by a realized loss on foreign exchange of $861,857 as a result of the
conversion from Zimbabwe dollars to US dollars of a short term loan on the
books of the Zimbabwe operation. Although the short term loans are to be
repaid by the Company in US dollars generally accepted accounting principles,
in the United States, require that the Company recognize this loss in its
current statement of operations.
YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1995
As discussed above, the consolidated financial statements of the Company for
fiscal years 1996 and 1995 are not comparable due to the change from
consolidation to the equity method of accounting for the investment in WPUR.
The following table is presented for the year ended September 30, 1995 to
assist in the discussion of results of operations.
<TABLE>
<CAPTION>
1995
---------------------------------------
Consolidated Amounts Consolidated
With WPUR Attributable Without
to WPUR WPUR
---------------------------------------
<S> <C> <C> <C>
REVENUES:
Precious metals $ - $ - $ -
Water purification 382,158 382,158 -
---------------------------------------
Total revenues 382,158 382,158 -
---------------------------------------
COSTS AND EXPENSES:
Mineral operations - - -
Cost of water purification revenues 489,589 489,589 -
General and administrative expenses 3,908,099 2,471,492 1,436,607
Compensatory stock option expense 955,100 99,500 855,600
Depreciation, depletion and 98,805 32,272 66,533
amortization
Mineral exploration expense 1,010,334 - 1,010,334
Research and development 185,053 185,053 -
Write down of assets - - -
Mergers and acquisitions 134,749 - 134,749
---------------------------------------
Total costs and expenses 6,781,729 3,277,906 3,503,823
---------------------------------------
LOSS FROM OPERATIONS $ (6,399,571) $(2,895,748) $(3,503,823)
=======================================
</TABLE>
<TABLE>
<CAPTION>
1996
---------------------------
Consolidated Without WPUR
---------------------------
<S> <C>
REVENUES:
Precious metals $ 630,481
Water purification -
---------------------------
Total revenues 630,481
---------------------------
COSTS AND EXPENSES:
Mineral operations 958,561
Cost of water purification revenues -
General and administrative expenses 2,696,135
Compensatory stock option expense 364,560
Depreciation, depletion and 232,019
amortization
Mineral exploration expense 423,717
Research and development -
Write down of assets 672,560
Mergers and acquisitions 482,339
---------------------------
Total costs and expenses 5,829,891
---------------------------
LOSS FROM OPERATIONS $ (5,199,410)
===========================
</TABLE>
Revenues for the year ended September 30, 1996 were $630,481 representing
sales of gold produced in Zimbabwe. There were no gold sales in 1995. During
the year ended September 30, 1996, the Zimbabwe mining properties were updated
and improved through a continuing major capital improvement program. As a
result, the mines had only been operated on a very limited basis since
acquisition of the properties on January 31, 1996. Due to these low operating
levels the fixed and variable mineral operations expenses of $958,561 related
to the production of gold exceeded the revenues from gold sales by $328,080.
Total costs and expenses excluding the $958,561 related to gold production
were $4,871,330 for the year ended September 30, 1996, compared to $3,503,823
for the year ended September 30, 1995, an increase of $1,367,507.
<PAGE>
General and administrative expenses were $2,696,135 in 1996 compared to
$1,436,607 in 1995, an increase of $1,259,528. This increase included an
increase in compensation expense, both direct and through consultants, of
$822,514 due to the continued expansion of operations worldwide. Expenses
related to professional services, primarily audit and legal increased by
$185,505 in 1996 compared to 1995 primarily due to costs incurred in relation
to filing an S-1 registration statement in September 1996. Travel related
expenses increased $129,935 in 1996 compared to 1995 due mainly to increased
travel to and between South Africa, Zimbabwe and Zambia related to the
Company's operations in those countries. Other general and administrative
expenses increased $121,574 in 1996 due to continued growth and expansion of
the Company.
Compensatory stock option expense was $364,560 in 1996 compared to $855,600 in
1995, a decrease of $491,040. The decrease was due to the granting of the
options in 1995 and the vesting of such options which dictated the year in
which the expense was recognized. No compensatory options were issued in
1996.
Depreciation, depletion and amortization expense increased from $66,533 in
1995 to $232,019 in 1996, an increase of $165,486. This increase was due to
the acquisition of the property and equipment in Zimbabwe and the related gold
production in 1996.
Mineral exploration expenses decreased from $1,010,334 in 1995 to $423,717 in
1996, a decrease of $586,617, due to reduced exploration costs and land fees
on various mineral properties under option to the Company in South Africa and
emphasis placed on the start up of limited gold production at the Zimbabwe
mines.
The Company recorded a write down of assets of $672,560 in 1996 to reserve
against advances it had made to certain parties in Ghana pursuant to contracts
to purchase unrefined gold. The write down was recorded due to the
uncertainties that existed because of disputes and litigation surrounding the
failure of the sellers to deliver the gold to the Company as required by the
contracts. The Company is currently pursuing various options to recover the
amounts advanced and the Company believes that it will ultimately be
successful in recovering either gold or the advances made under the contracts.
Merger and acquisition related expenses increased $347,590 in 1996 to $482,339
due to the Company's increase in developing new business opportunities around
the world. These activities included the merger with Auromar, the temporary
acquisition of WestAmerica Corporation, the Relief Canyon joint venture and
other investment opportunities that the Company had evaluated during the year.
Total other income (expense), net was $(3,121,916) for the year ended
September 30, 1996, compared to $3,324,714 for the year ended September 30,
1995. The principal reason for the total difference of $6,446,630 was due to
the lack of comparability between years due to consolidation of WPUR in fiscal
1995 versus consolidating the results of operations of WPUR in an equity
method presentation in fiscal 1996. In addition, minority interest in net
loss of WPUR of $3,502,401 (an other income item) was recorded in the
consolidation in fiscal 1995 since minority common stockholders' equity of
WPUR was available to absorb WPUR losses . Once WPUR minority common
stockholders' equity was eliminated through allocation of WPUR losses in
fiscal 1996, all WPUR losses were allocated in consolidation to Casmyn's
preferred stockholders' equity, resulting in reporting equity in net loss of
affiliate of $(3,177,953) (an other expense item). Exclusive of amounts
reported relating to WPUR, total other income (expense) was $56,037 in fiscal
1996 compared to $(177,687) in fiscal 1995, an increase of $233,724. The
principal reason for this total increase was a loss on the sale of investments
of $150,000 recorded in 1995 that did not occur in 1996. In addition,
interest income earned on short term investments made by the Company and other
income, offset by interest expense and other miscellaneous expenses, were
$83,724 higher in 1996 compared to 1995.
In 1995 a subsidiary of WPUR discontinued its metal fabrication segment,
resulting in a net gain from discontinued operations of $32,429.
<PAGE>
OUTLOOK
The Company anticipates that revenues from the sale of gold from the Zimbabwe
mines will exceed expenditures from operation of the mines commencing in the
fiscal quarter ended March 31, 1998, based upon current gold price and the
continued ability of the Company to deliver and process ore at its mills. It
is also anticipated that the capital improvement budget will be postponed
until improvement in gold prices is experienced. The Company intends to
produce gold from the tailings dumps and the surface materials and delay
higher cost underground production until gold prices increase. Additionally,
the Company anticipates that expense levels experienced in the year ended
September 30, 1997 relating to active exploration programs will continue but
at a lower level in the year ended September 30, 1997. 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.
The Company estimates that total proven and probable gold reserves at the
Zimbabwe Properties are approximately 500,000 ounces (See Item 2 "Description
of Property"). Independent engineering studies are currently underway which
may cause this estimate to change. Should gold prices continue to change, the
proven and probable gold reserves will also change. In addition, the
continued exploration program being undertaken by the Company along with gold
production will result in adjustments to the Company's proven and probable
reserves. The gold occurs in sulfides, oxides and old mill tailings.
LOSS PER COMMON SHARE
The net loss per common share for the year ended September 30, 1997 was
$(0.90) per share. This loss per share is comprised of the following:
<TABLE>
<CAPTION>
<S> <C>
Net Loss $ (0.53)
Dividend on Convertible Preferred Stock ( 0.07)
Amortization of discount on Convertible Preferred
Stock (0.30)
Net Loss Per Common Share $ (0.90)
</TABLE>
The amortization of the discount on the convertible preferred stock is
recognized as a return to the preferred shareholders and as a reduction of
income available to common shareholders (see Note 12 to the Notes to the
Consolidated Financial Statements).
CAPITAL RESOURCES AND LIQUIDITY
At September 30, 1997, the Company's working capital was $17,783,845,
including $18,185,514 in cash and cash equivalents.
Management anticipates that the net use of cash by operations will decrease
compared to amounts used in the year ended September 30, 1997 due to projected
profitability of the Zimbabwe mining operation, reduced mineral exploration
expenditures and decreased costs related to corporate staff and activities.
The Company expects to spend approximately $3,000,000 in the fiscal year ended
September 30, 1998 on capital expenditures related to refurbishment and
construction as well as on projects related to power supply, water supply and
housing. 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
although there can be no assurance that any such financing will be secured or
the amounts thereof.
<PAGE>
As evidence of the Company's ability to secure debt and/or equity financing on
April 14, 1997, the Company completed the initial placement of 751,200 shares
of Convertible Preferred stock for cash proceeds of approximately $16,759,000
(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
(less $84,000 unamortized debt issue costs) of pre-existing convertible
debentures. Societe Generale also converted the remaining $2,913,325
principal balance (less unamortized debt issue costs of $116,000) of its
convertible debenture in exchange for 594,856 common shares. The Company also
issued 3,637 preferred shares for interest accrued on the convertible
debenture through the date of conversion. In addition, on September 2, 1997,
the Company completed an additional placement of 533,885 shares of Convertible
Preferred stock for cash proceeds of approximately $12,423,000 including
accrued interest at 8% per annum from April 14, 1997 to the date of closing
and after cash fees to the placement agents and estimated transaction
expenses. The subscription price for the placements 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 agents received warrants
exercisable for a period of five years to purchase 172,725 shares of the
Convertible Preferred stock at $25 per share (see Note 12 to the Consolidated
Financial Statements).
During February 1997, the Company negotiated a $5,000,000 credit facility with
Barclays Bank of Zimbabwe. At September 30, 1997, the Company had borrowed
$4,966,160 against this facility. Also during the year ended September 30,
1997, the Company negotiated a $40,000,000 project finance agreement with
Barclays Bank, London. At September 30, 1997, the Company had not financed
any projects under that agreement.
In addition to the above, on November 8, 1996, the Company completed a private
placement of 155,000 units for total net proceeds of $1,410,500. Each unit
consisted of one common share plus one warrant; two warrants plus $10 will
entitle the holder to purchase one share of the Company's common stock.
During the fiscal year ended September 30, 1995, the Company completed
placement of a $5,000,000, 2.5%, unsecured, convertible debenture for net
proceeds of $4,700,000. This debenture was converted to a combination of
common and preferred stock in the year ended September 30, 1997 as discussed
above. Additionally, 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.
Net Cash Used in Operating Activities. Net cash used in operating activities
was $5,425,844 for the year ended September 30, 1997 due to net loss (before
depreciation and other non-cash expenses) of $3,721,528 which was due
primarily to the increased expenses related to the Zimbabwe mining operations
and administrative costs, increased investor relations expenses and increased
travel related expenses, net cash used in operations of $1,849,592 from
increases of accounts receivable and inventory in the Zimbabwe operation,
increases in prepaid expenses and other assets and decreases in accounts
payable and accrued liabilities. Net cash was provided by operations of
$145,276 due to increases in amounts due from related parties. Net cash used
in operating activities was $2,990,691 for the year ended September 30, 1996
and $5,996,061 for the year ended September 30, 1995, a decrease of
$3,005,370. The decrease in net cash used in operating activities in 1996 was
due principally to the decrease in the net loss (before depreciation and other
non-cash expenses) of $1,354,615 because of the decrease in active mineral
exploration programs along with increases in accounts payable, accrued
liabilities and decreases in inventories.
<PAGE>
Net Cash Used in Investing Activities Net cash of $11,100,624 was used in
investing activities to purchase property and equipment at the Zimbabwe mining
properties and make investments in and advances to WPUR. This amount was
offset by proceeds from the sale of assets and a decrease in other assets
amounting to $922,374. These activities resulted in net cash used in
investing activities of $10,186,250. Net cash used in investing activities
was $15,746,799 for the year ended September 30, 1996 due to the purchase of
certain businesses in Zimbabwe, the development of certain mineral properties
and assets in Zimbabwe, purchases of property and equipment at the Zimbabwe
mining properties and investments in WPUR, and the investment in the Relief
Canyon joint venture. 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 an increase in investments in and advances to
affiliates of $650,000 and $239,749 that was used to purchase property and
equipment. These transactions resulted in net cash provided by investing
activities of $807,113.
Net Cash Provided by Financing Activities. Net cash provided by financing
activities was $30,061,122 for the year ended September 30, 1997 due to the
Company receiving $29,277,264 from the collection of funds, net of costs, from
private placements of convertible preferred stock, $1,410,500 from collection
of funds, net of costs, from a private placement of common stock, $352,140
received from the exercise of stock options and $4,966,160 proceeds from a
bank line of credit. These amounts were offset by an increase in restricted
cash of $5,074,659, purchases of treasury stock of $750,000 and payments of
long-term debt of $120,283. Net cash provided by financing activities was
$17,772,082 for the year ended September 30, 1996 due to the Company receiving
$17,725,685 from the collection of funds, net of costs, from private
placements of common stock and $200,400 received from the exercise of stock
options, offset by the repayment of long-term debt of $154,003. 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,
$3,060,712 from the issuance of common stock of the Company and $1,326,564
from the issuance of WPUR and Vector Venture Corporation common stock, offset
by repayment of long-term debt of $42,609, resulting in net cash provided by
financing activities of $9,044,667.
INFLATION AND CHANGING PRICES
The Company's consolidated financial statements are prepared on a historical
cost basis of accounting, and as such do not recognize changes in purchasing
power. Due to the recent declines in gold prices, the Company has
significantly curtailed its underground development for sulphide ore and is
concentrating on tailings processing and treatment of oxide ore.
The Company's gold mining operations are located in Zimbabwe which is
considered to be a desirable location. All of the Company's gold production
is sold to the Zimbabwe government refinery at the current world gold spot
price as quoted in London, England. Gold sales are settled in U.S. dollars.
The spot gold price at December 17, 1997 was $283.50 per ounce while the 400
day moving average spot gold price was $352.30 per ounce.
Operating costs will be affected in part by local inflation rates. Inflation
in Zimbabwe has been relatively stable in recent years and was estimated at
20.0% for 1997 and was 21.4% for 1996 and 22.6% for 1995. The rate on foreign
exchange has typically dropped in line with the inflation rate and as such,
since the Company settles its gold sales in U.S. dollars, most of the negative
impact of inflation is offset.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 ("SFAS 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 128
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 fully 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 fully diluted 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 anticipates that earnings per share calculations will not be
significantly different from those previously calculated.
<PAGE>
The FASB recently issued Statement of Financial Accounting Standards No. 130
("SFAS 130"), Reporting Comprehensive Income, which is effective for fiscal
years beginning after December 15, 1997. SFAS 130 establishes standards for
reporting and displaying comprehensive income and its components in a full set
of general-purpose financial statements. The Company will adopt the new
statement for its fiscal year beginning October 1, 1998, and does not
anticipate that adoption will have a significant impact on its consolidated
financial statements. Under the new statement the Company will report the
change in foreign currency translation adjustment as a component of
comprehensive income.
The FASB recently issued Statement of Financial Accounting Standard No. 131
("SFAS 131"), Disclosure About Segments of an Enterprise and Related
Information, which is also effective for fiscal years beginning after December
15, 1997. SFAS 131 establishes standards for segment reporting in the
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. The
Company will adopt the new statement for its fiscal year beginning October 1,
1998 and does not anticipate that providing required disclosures will result
in significantly different information from that which is disclosed in Note 5.
in the Notes to the Consolidated Financial Statements.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
The following financial statements are filed as part of this Report: Page
----
<TABLE>
<S> <C>
Consolidated Financial Statements of Casmyn Corp.
Independent Auditors' Report..........................................30
Consolidated Balance Sheets as of September 30, 1997 and 1996........ 31
Consolidated Statements of Operations for the Years Ended
September 30, 1997, 1996 and 1995.................................. 32
Consolidated Statements of Stockholders' Equity (Deficiency)
for the Years Ended September 30, 1997, 1996 and 1995.............. 33
Consolidated Statements of Cash Flows for the Years
Ended September 30, 1997, 1996 and 1995............................35
Notes to the Consolidated Financial Statements....................... 37
</TABLE>
<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 (collectively, the "Company") as of September 30, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity (deficiency), and cash flows for each of the years in the three year
period ended September 30, 1997. 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 in the United States. 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, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at September
30, 1997 and 1996, and the results of their operations and their cash flows
for each of the years in the three year period ended September 30, 1997 in
conformity with accounting principles generally accepted in the United States.
Deloitte & Touche
Chartered Accountants
Vancouver, Canada
December 17, 1997
<PAGE>
<TABLE>
<CAPTION>
CASMYN CORP.
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $18,185,515 $4,046,194
Restricted cash 5,074,659 -
Marketable securities 2,096,704 -
Accounts receivable 511,135 210,748
Inventories 751,299 517,837
Prepaid expenses and other assets 247,560 15,295
---------------- ---------------
Total current assets 26,866,872 4,790,074
INVESTMENT IN AND ADVANCES TO AFFILIATES 4,574,368 2,748,031
PROPERTY AND EQUIPMENT, NET 16,676,347 14,101,782
DUE FROM RELATED PARTIES, NET - 211,708
OTHER ASSETS 155,792 465,544
---------------- ---------------
TOTAL ASSETS $48,273,379 $22,317,139
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $1,108,944 $2,024,973
Short-term borrowings 4,966,160 -
Accrued taxes from acquisition 792,801 993,660
Payable to joint venture - 623,000
Accrued liabilities 2,156,704 303,864
Current portion of long-term debt 58,418 107,471
---------------- ---------------
Total current liabilities 9,083,027 4,052,968
---------------- ---------------
DIVIDEND PAYABLE 4,574,368
LONG-TERM DEBT - 71,230
CONVERTIBLE DEBT - 5,000,000
---------------- ---------------
Total Liabilities 13,657,395 9,124,198
---------------- ---------------
MINORITY INTEREST 144,220 -
---------------- ---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value; 20,000,000
shares authorized; 1,406,962 and nil shares
issued and outstanding;
liquidation preference $38,999,726 140,697 -
Common stock, $.04 par value; 300,000,000 shares
authorized; 13,376,714 and 12,512,133 shares
issued and outstanding 535,069 500,485
Additional paid-in capital 66,486,227 25,735,368
Accumulated deficit ( 28,453,840) ( 12,389,109)
Foreign currency translation adjustment ( 3,328,954) ( 653,803)
Treasury stock at cost, 181,487 and nil
shares ( 907,435) -
---------------- -------------
Total stockholders' equity 34,471,764 13,192,941
---------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $48,273,379 $22,317,139
================ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
<TABLE>
<CAPTION>
CASMYN CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<S> <C> <C>
1997 1996
---------------- ---------------
REVENUES:
Precious metals $ 3,392,160 $ 630,481
Water purification - -
---------------- ---------------
3,392,160 630,481
---------------- ---------------
COSTS AND EXPENSES:
Mineral operations 3,045,360 958,561
Cost of water purification revenues - -
General and administrative expenses 3,161,153 2,377,138
Professional services 420,648 318,997
Compensatory stock option expense 74,040 364,560
Depreciation, depletion and amortization 523,463 232,019
Mineral exploration expense 1,304,242 423,717
Write down of assets - 672,560
Research and development - -
Mergers and acquisitions 280,452 482,339
---------------- ---------------
8,809,358 5,829,891
---------------- ---------------
LOSS FROM OPERATIONS ( 5,417,198) ( 5,199,410)
---------------- ---------------
OTHER INCOME (EXPENSE):
Equity in net loss of affiliate ( 1,034,604) ( 3,177,953)
Minority interest in net loss of
consolidated subsidiary 35,780 -
Loss on foreign exchange ( 861,857) -
Gain (loss) on sale of investments 126,000 -
Interest income (expense), net 257,404 47,463
Other income (expense), net 101,048 8,574
---------------- ---------------
( 1,376,229) ( 3,121,916)
---------------- ---------------
LOSS FROM CONTINUING OPERATIONS ( 6,793,427) ( 8,321,326)
---------------- ---------------
DISCONTINUED OPERATIONS:
Loss from discontinued operations - -
Gain on disposal of discontinued operations - -
---------------- ---------------
- -
---------------- ---------------
NET LOSS $ ( 6,793,427) $ ( 8,321,326)
================ ===============
LOSS PER COMMON SHARE:
Net loss $ ( 6,793,427) $ ( 8,321,326)
Less: dividends on convertible
preferred stock ( 871,260) -
Less: amortization of discount on
convertible preferred stock ( 3,825,676) -
---------------- --------------
NET LOSS APPLICABLE TO COMMON SHARES $ (11,490,363) $ ( 8,321,326)
=============== ==============
NET LOSS PER COMMON SHARE $ (0.90) $ (1.16)
================ ===============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 12,811,670 7,148,742
================ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
<TABLE>
<CAPTION>
CASMYN CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<S> <C>
1995
-------------
REVENUES:
Precious metals $ -
Water purification 382,158
-------------
382,158
-------------
COSTS AND EXPENSES:
Mineral operations -
Cost of water purification revenues 489,589
General and administrative expenses 3,678,245
Professional services 229,854
Compensatory stock option expense 955,100
Depreciation, depletion and amortization 98,805
Mineral exploration expense 1,010,334
Write down of assets -
Research and development 185,053
Mergers and acquisitions 134,749
-------------
6,781,729
-------------
LOSS FROM OPERATIONS ( 6,399,571)
-------------
OTHER INCOME (EXPENSE):
Equity in net loss of affiliate -
Minority interest in net loss of
consolidated subsidiary 3,502,401
Loss on foreign exchange -
Gain (loss) on sale of investments ( 150,000)
Interest income (expense), net ( 44,863)
Other income (expense), net 17,176
-------------
3,324,714
-------------
LOSS FROM CONTINUING OPERATIONS ( 3,074,857)
-------------
DISCONTINUED OPERATIONS:
Loss from discontinued operations (77,354)
Gain on disposal of discontinued operations 109,783
-------------
32,429
-------------
NET LOSS $ (3,042,428)
=============
LOSS PER COMMON SHARE:
Net loss $( 3,042,428)
Less: dividends on convertible
preferred stock -
Less: amortization of discount on
convertible preferred stock -
-------------
NET LOSS APPLICABLE TO COMMON SHARES $( 3,042,428)
=============
NET LOSS PER COMMON SHARE $ (0.40)
=============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 7,651,336
=============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CASMYN CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
COMMON COMMON PREFERRED PREFERRED
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1994 7,447,351 $297,887 - -
- ------------------------------------------------------------------------------
Issuance of shares for consulting
services 38,000 1,520 - -
Private placements 405,000 16,200 - -
Private placement of units 714,286 28,578 - -
Gain on sale of investment in
related party - - - -
Issuance of compensatory stock
options - - - -
Less: deferred compensation - - - -
Foreign currency translation
adjustments - - - -
Net loss - - - -
- ------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1995 8,604,637 344,185 - -
- ------------------------------------------------------------------------------
Conversion to preferred stock (2,707,000) (108,280) - 270,700
Private placement of units 1,159,091 43,364 - -
Shares issued in lieu of interest 7,302 292 - -
Deferred compensation - - - -
Compensatory stock options - - - -
Less : deferred compensation - - - -
Exercise of stock options 40,000 1,600 - -
Acquisition of WestAmerica 606,061 24,243 - -
Rescission of acquisition of
WestAmerica (606,061) (24,243) - -
Conversion to common stock 2,707,000 108,280 - (270,700)
Acquisition of Auromar 2,701,103 108,044 - -
Foreign currency translation
adjustment - - - -
Net loss - - - -
- ------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1996 12,512,133 500,485 - -
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
CASMYN CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(CONTINUED)
NUMBER OF NUMBER OF
COMMON COMMON PREFERRED PREFERRED
SHARES STOCK SHARES STOCK
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1996 12,512,133 500,485 - -
- ------------------------------------------------------------------------------
Adjustment of Auromar acquisition (174,418) (6,977) - -
Private placement of units 155,000 6,200 - -
Issuance of shares for services 25,000 1,000 - -
Deferred compensation - - - -
Exercise of stock options 185,500 7,420 - -
Shares issued in lieu of interest 10,678 428 - -
Private placement - - 1,285,085 128,509
Conversion of convertible debt 594,856 23,794 83,467 8,347
Preferred stock penalty shares - - 11,686 1,169
Conversion discount on convertible
preferred stock - - - -
Preferred stock dividend - - 38,631 3,863
Conversion of preferred stock
to common stock 67,965 2,719 (11,907) (1,191)
Dividend payable for Spin-off
of WaterPur investment - - - -
Purchase of treasury stock - - - -
Foreign currency translation adjustment - - - -
Net loss - - - -
- ------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1997 13,376,714 $535,069 1,406,962$140,697
- ------------------------------------------------------------------------------
</TABLE>
CONTINUED
<TABLE>
FOREIGN
ADDITIONAL CURRENCY
PAID-IN ACCUMULATED TRANSLATION
CAPITAL DEFICIT ADJUSTMENT
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1994 $2,941,415 $(1,025,355) $ -
- ------------------------------------------------------------------------------
Issuance of shares for consulting
services 188,480 - -
Private placements 2,236,650 - -
Private placement of units 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
adjustments - - 7,350
Net loss - (3,042,428) -
- ------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1995 11,859,844 (4,067,783) 7,350
- ------------------------------------------------------------------------------
Conversion to preferred stock ( 162,420) - -
Private placement of units 12,929,319 - -
Shares issued in lieu of interest 120,600 - -
Deferred compensation 364,560 - -
Compensatory stock options 576,250 - -
Less : deferred compensation ( 576,250) - -
Exercise of stock options 198,800 - -
Acquisition of WestAmerica 6,755,459 - -
Rescission of acquisition of
WestAmerica (6,755,459) - -
Conversion to common stock 162,420 - -
Acquisition of Auromar 262,245 - -
Foreign currency translation
adjustment - - ( 661,153)
Net loss - ( 8,321,326) -
- ------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1996 25,735,368 (12,389,109) ( 653,803)
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
PAID-IN ACCUMULATED TRANSLATION
CAPITAL DEFICIT ADJUSTMENT
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1996 25,735,368 (12,389,109) ( 653,803)
- ------------------------------------------------------------------------------
Adjustment of Auromar acquisition 6,977 - -
Private placement of units 1,404,300 - -
Issuance of shares for services 225,561 - -
Deferred compensation 74,040 - -
Exercise of stock options 344,720 - -
Shares issued in lieu of interest 88,271 - -
Private placement 29,053,553 - -
Conversion of convertible debt 4,767,859 - -
Preferred stock penalty shares ( 1,169) - -
Conversion discount on convertible
preferred stock 3,825,676 ( 3,825,676) -
Preferred stock dividend 961,912 ( 871,260) -
Conversion of preferred stock
to common stock ( 841) - -
Dividend payable for Spin-off of
WaterPur investment - ( 4,574,368) -
Purchase of treasury stock - - -
Foreign currency translation adjustment - - ( 2,675,151)
Net loss - ( 6,793,427) -
- ------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1997 $66,486,227$(28,453,840)$( 3,328,954)
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOTAL
STOCKHOLERS'
TREASURY EQUITY
STOCK (DEFICIENCY)
<S> <C> <C>
- ------------------------------------------------------------------------------
Balances at September 30, 1994 $ - $ 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 slae of investment in
related party - 916,268
Issuance of compensatory stock
options - 1,220,160
Less: deferred compensation - (365,560)
Foreign currency translation
adjustment - 7,350
Net Loss - (3,042,428)
- -------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1995 - 8,143,596
- -------------------------------------------------------------------------------
Conversion to preferred stock - -
Private placement of units - 12,975,683
Shares issued in lieu of interest - 120,892
Deferred compensation - 364,560
Compensatory stock options - 576,250
Less: deferred compensation - (576,250)
Exercise of stock options - 200,400
Acquisition of WestAmerica - 6,799,702
Rescission of acquisition of
WestAmerica (6,779,702)
Conversion to common stock - -
Acquisition of Auromar - 370,289
Foreign currency translation
adjustment - (661,153)
Net loss - (8,321,326)
- ------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1996 - 13,192,941
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOTAL
STOCKHOLDERS'
TREASURY EQUITY
STOCK (DEFICIENCY)
<S> <C> <C>
- -------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1997 - 13,192,941
- ------------------------------------------------------------------------------
Adjustment of Auromar acquisition - -
Private Placement of units - 1,410,500
Issuance of shares for services - 226,561
Deferred compensation - 74,040
Exercise of stock options - 352,140
Shares issued in lieu of interest - 88,699
Private placement - 29,182,062
Conversion of convertible debt - 4,800,000
Preferred stock penalty shares - -
Conversion discount on
convertible preferred stock - -
Preferred stock dividend - 94,515
Conversion of preferred stock to
common stock - 687
Dividend payable for Spin-off of
WaterPur investment - (4,574,368)
Purchase of treasury stock (907,435) ( 907,435)
Foreign currency translation
adjustment - (2,675,151)
Net loss - (6,793,427)
- ------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 1997 $(907,435) $34,471,764
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
<TABLE>
<CAPTION>
CASMYN CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<S> <C> <C> <C>
1997 1996 1995
--------------- ------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(6,793,427) $(8,321,326) $(3,042,428)
Adjustments to reconcile net income
(loss) to
net cash used in operating activities:
Depreciation, depletion and
amortization 523,463 232,019 98,805
Loss on foreign currency
translation 861,857 - -
Equity in net loss of affiliate 1,034,604 3,177,953 -
Minority interest in net
loss of consolidated
subsidiary ( 35,780) - (3,502,401)
Write down of assets - 672,560 -
Write down of mineral
exploration properties 394,455 - -
(Gain) loss on sale
of investments ( 126,000) - 150,000
Gain on disposal of
discontinued operations - - ( 109,783)
Compensatory stock option
expense 74,040 364,560 955,100
Amortization of debt issue
costs 30,000 60,000 10,000
Other non-cash expense 315,260 120,892 392,750
(Increase) decrease in
accounts receivable ( 449,523) (215,335) 102,834
(Increase) decrease in
inventories ( 393,024) 255,269 140,460
Increase in prepaid expenses
and other assets ( 155,179) ( 123,900) ( 730,891)
Increase (decrease) in accounts
payable ( 608,002) 857,922 15,432
Increase (decrease) in accrued
liabilities ( 243,864) 252,282 (32,527)
Increase (decrease) in amounts
due from related parties 145,276 (323,587) (443,412)
--------------- ------------- --------------
Net cash used in operating
activities (5,425,844) ( 2,990,691) (5,996,061)
--------------- ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of businesses, net of
cash acquired * - ( 4,354,428) -
Decrease in cash due to change
in accounting for
investment in WPUR ** - ( 459,708) -
Proceeds from sale of investments
in related parties - - 1,487,538
Proceeds from sale of other assets 900,000 - 209,324
(Increase) decrease in other assets 22,374 (194,123) -
Increase in investment in and
advances to affiliates ( 2,680,941) ( 3,190,567) ( 650,000)
Purchase of property and equipment ( 8,427,683) ( 7,547,973) (239,749)
--------------- ------------- --------------
Net cash (used in) provided
by investing activities (10,186,250) (15,746,799) 807,113
--------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 1,410,500 17,725,685 3,060,712
Issuance of common stock for
exercise of stock options 352,140 200,400 -
Issuance of WPUR and VVC common
stock - - 1,326,564
Issuance of preferred stock 29,277,264 - -
Proceeds from convertible debt - - 5,000,000
Proceeds from line of credit 4,966,160 - -
Increase in restricted cash ( 5,074,659) - -
Repayments of long-term debt ( 120,283) ( 154,003) (42,609)
Purchase of treasury stock ( 750,000) - -
Payment of debt issue costs - - (300,000)
--------------- ------------- --------------
Net cash provided by
financing activities 30,061,122 17,772,082 9,044,667
--------------- ------------- --------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS ( 309,707) 72,657 7,350
--------------- ------------- --------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 14,139,321 ( 892,751) 3,863,069
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 4,046,194 4,938,945 1,075,876
--------------- ------------- --------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 18,185,515 $ 4,046,194 $ 4,938,945
=============== ============= ==============
</TABLE>
(CONTINUED)
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
<TABLE>
<CAPTION>
CASMYN CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(CONTINUED)
<S> <C> <C> <C>
1997 1996 1995
--------------- ------------- --------------
CASH PAID FOR INTEREST $ 145,349 $ 147,169 $ 12,605
=============== ============= ==============
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of common stock for
subscriptions receivable $ - $ - $ 7,125,002
Transfer of equipment to
related parties - - ( 36,641)
Issuance of common stock
for services 226,561 - 390,000
Issuance of common stock
for payment of interest 88,699 120,892 -
Investment in related party
received for repayment of debt 4,574,368 - 2,378,475
Dividend payable for spin-off
of investment in related party ( 4,574,368) - -
Issuance of preferred shares
for payment of dividend 871,260 - -
Investment in marketable
security for accrued liability 2,096,704 - -
Conversion of debenture to
common stock and preferred
stock, net of debt issue costs 4,800,000 - -
Decrease in other assets and
decrease in additional paid-in
capital to reclassify
unamortized debt issuance costs
for debt converted to preferred
stock and common stock 200,000 - -
Amortization of discount on
convertible preferred stock 3,825,676 - -
Reduction of payable to joint
venture and investment in
joint venture 623,000 - -
Acquisition of treasury stock
for repayment of amounts due
from related party 157,435 - -
Exchange of investment in
Auromar for investment in WPUR - 204,227 -
Conversion of common stock
to preferred stock - 270,700 -
Conversion of preferred stock
to common stock 2,719 270,700 -
Issuance of common stock to
acquire WestAmerica - 6,779,702 -
Rescission of acquisition of
WestAmerica - 6,779,702 -
Adjustment of acquisition of
Auromar Development Corp. 6,977 - -
Property and equipment
purchased through issuance of
accounts payable and accrued
liabilities 1,051,896 -
Decrease in investment in WPUR
and increase in advances
to WPUR for dividends on
preferred stock - 237,500 -
</TABLE>
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
* PURCHASE OF BUSINESSES, NET OF CASH ACQUIRED:
<S> <C>
Working capital, other than cash $(108,227)
Mineral properties (4,945,600)
Property and equipment (896,516)
Accrued taxes from acquisition 993,660
Stock issued 370,289
Capital lease obligations 231,966
------------
Net cash used to acquire businesses $(4,354,428)
============
</TABLE>
** IMPACT ON THE COMPANY'S 1996 CONSOLIDATED BALANCE SHEET RESULTING FROM THE
CHANGE FROM CONSOLIDATION TO THE EQUITY METHOD OF ACCOUNTING FOR THE INVESTMENT
IN WPUR:
<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 WPUR $(459,708)
==========
</TABLE>
<PAGE>
CASMYN CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Casmyn Corp. ("Casmyn" or the "Company") was incorporated in Colorado on
December 4, 1984. Casmyn was in the development stage from its inception
through August 1994 when it purchased all of the common stock of Casmyn USA,
Inc. ("Casmyn USA"). Casmyn USA's principal business was performing contract
research and development services.
Effective August 12, 1996, pursuant to approval of a Plan of Arrangement by
the Supreme Court of British Columbia, Canada, the Company acquired 100% of
the outstanding common stock of Auromar Development Corporation ("Auromar",
see Note 7).
Casmyn also has the following wholly owned subsidiaries: Casmyn Mining
Corporation, which serves as a holding company for the Company's mineral
exploration operations in South Africa; Casmyn Mining Zimbabwe (Private)
Ltd., which owns and is conducts mining operations in Zimbabwe; Copperbelt
Associates, Limited, which is actively exploring for mineral resources in
Zambia; and Casmyn International Inc., a 55% owned subsidiary, which is
evaluating various business opportunities in the Commonwealth of Independent
States ("CIS").
On June 29, 1995, the Company acquired an equity interest in WaterPur
International Inc. ("WPUR", formerly Vector Environmental Technologies, Inc.)
through the acquisition of 3,000,000 5%, cumulative, convertible, voting
preferred shares of WPUR ("Preferred Shares"), in exchange for approximately
$2,400,000 in debts owing to the Company. On September 29, 1995, Casmyn
purchased an additional 1,000,000 Preferred Shares of WPUR at $2.00 per share.
WPUR is related to Casmyn through the existence of certain common officers,
directors and significant stockholders. Under the terms of the Preferred
Shares, effective September 30, 1996, the Company converted these Preferred
Shares into common stock of WPUR, resulting in the Company owning
approximately 24.3% of the common stock of WPUR. During the fourth quarter of
fiscal 1996, the Company exchanged 425,750 common shares of Auromar held as an
investment for 1,532,700 restricted common shares of WPUR thereby increasing
its percentage ownership in WPUR to approximately 31.2% at September 30, 1996.
Effective September 30, 1997, the Company received 7,900,004 shares of the
Convertible Preferred Stock ("Convertible Preferred Shares") of WPUR from the
following transactions (the "Restructuring"). The Company restructured its
interest in WPUR through (a) the conversion of $4,574,368 (net of $157,435
which represents the market value of 31,487 common shares of the Company which
was offset against the total debt) of outstanding debt of WPUR (the "WPUR
Debt") to 5,082,626 Convertible Preferred Shares; and (b) the exchange of
5,634,756 common shares of WPUR owned by the Company for 2,817,378 Convertible
Preferred Shares of WPUR. Each Preferred Share is entitled to two votes per
share, bears no dividend, constitutes a senior security of WPUR and may be
converted by the holder at any time after twelve months from the date of
distribution into two shares of WPUR common stock. All remaining Convertible
Preferred Shares will be automatically converted into two shares of WPUR
common stock on the eighteenth month from the distribution date. The number
of Convertible Preferred Shares to be received upon the conversion of the WPUR
Debt was determined based upon the closing market price of WPUR common stock
on September 30, 1997. The Restructuring was based upon the advice of
independent investment banking firms representing the respective interests of
the Company and WPUR.
Effective September 30, 1997, the Company's Board of Directors announced the
spin-off to its shareholders of all the 7,900,004 Convertible Preferred Shares
received by the Company in the Restructuring to the common and preferred
shareholders of the Company of record on October 15, 1997 (see Note 6). The
Company purchased 150,000 shares of the Company's common stock held by WPUR
for cash of $5.00 per share, and 31,487 shares of the Company's common stock
valued at $5.00 per share were used to offset a portion of the WPUR Debt.
These 150,000 shares and the 31,487 shares used to offset a portion of the
WPUR Debt are being held in the Company's treasury.
<PAGE>
Additionally, WPUR issued to the Company warrants to purchase up to 3,300,000
WPUR common shares at a price of $.75 per share exercisable for a three year
period.
WPUR, performs research and development of water purification technologies in
addition to marketing and designing water purification and treatment
equipment. WPUR operates through various wholly owned subsidiaries: Vector
Vietnam, Ltd., which holds and manages Vietnamese operations; Vector
Manufacturing Corp. ("VMC") which provides purchasing and manufacturing
services; and its 95% owned subsidiary, Vector Venture Corp., which holds
certain technologies and licenses. The Company shares offices, personnel and
certain facilities with WPUR and accordingly actual costs related to these
officers, personnel and facilities are shared.
BASIS OF PRESENTATION
Consolidated financial statements for the fiscal year ended September 30, 1995
and subsequent interim quarterly periods in fiscal 1996 include the financial
statements of WPUR 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 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 to the date of the restructuring
described above. The consolidated statement of operations for the years ended
September 30, 1997 and 1996 reflect an equity method presentation retroactive
to the beginning of the fiscal year ended September 30, 1996. The
consolidated financial statements for the year ended September 30, 1995 have
not been restated.
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 on 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
year ended September 30, 1995. Sales for the metal fabrication segment were
$12,379 during the year ended September 30 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, 1997 and
1996, bank balances held in excess of Federally insured limits were $124,827
and $576,646, respectively.
INVENTORIES
Inventories at September 30, 1997 and 1996 consist of mining supplies and are
stated at the lower of cost or market. Cost is determined using the first-in,
first-out method.
<PAGE>
PROPERTY AND EQUIPMENT
Mineral properties - Mineral properties are stated at acquisition cost.
Mineral exploration costs are expensed as incurred. When it has been
determined that a mineral property can be economically developed, the costs
incurred to develop such property, including costs to further delineate the
ore body, are capitalized. Acquisition and capitalized costs are charged to
future operations using a unit-of-production method over the estimated life of
the ore body as determined based upon proven and probable ore reserves. If a
property is determined not to be commercially feasible, unrecoverable costs
are expensed in the year such determination is made. On-going development
expenditures to maintain production are charged to operations as incurred.
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 such payments are not made, such non-payments will result in the
write-off of the related investment in mineral properties.
Buildings - Buildings are depreciated on a straight-line basis over their
estimated useful lives of forty years.
Other property and equipment - Other property and equipment are recorded at
cost and are depreciated or amortized on a straight-line basis over their
estimated useful lives of three to seven years.
REVENUE RECOGNITION
Revenue from sale of gold production is recognized when products are delivered
to the buyer or when quantity and price of the sale are reasonably assured.
Revenue from sale of water purification equipment is recognized when goods are
shipped to customers.
LOSS PER SHARE
Loss per common share is computed on the basis of the weighted average number
of outstanding common shares and common stock equivalents, when dilutive. The
net loss per common share of $(0.90) includes a loss of $(0.30) per share
attributable to the amortization of the discount on convertible preferred
stock (see Note 12) and $(0.07) from the 8% dividend on the convertible
preferred stock.
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 into US dollars at
the exchange rate in effect at each year end. Statement of operations
accounts are translated into US dollars 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.
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.
RECLASSIFICATIONS
Certain amounts in the 1996 and 1995 consolidated financial statements and
notes thereto have been reclassified to conform with the 1997 presentation.
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes, based upon current information that the carrying value
of the Company's cash and cash equivalents, restricted cash, marketable
securities, accounts receivable and accounts payable, accrued liabilities and
short term borrowings approximates fair value due to the short maturity of
those instruments. The fair value of amounts due from related parties is not
determinable because of the related party nature of the amounts. The Company
estimates that the fair value of its long-term debt approximates its carrying
value because interest rates on the debt approximate market rates.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 ("SFAS 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 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 fully 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 fully diluted 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 anticipates that earnings per share calculations will not be
significantly different from those previously calculated.
The FASB recently issued Statement of Financial Accounting Standards No. 130
("SFAS 130"), Reporting Comprehensive Income, which is effective for fiscal
years beginning after December 15, 1997. SFAS 130 establishes standards for
reporting and displaying comprehensive income and its components in a full set
of general-purpose financial statements. The Company will adopt the new
statement for its fiscal year beginning October 1, 1998, and does not
anticipate that adoption will have a significant impact on its consolidated
financial statements. Under the new statement the Company will report the
change in the foreign currency translation adjustment as a component of
comprehensive income.
The FASB recently issued Statement of Financial Accounting Standard No. 131
("SFAS 131"), Disclosure About Segments of an Enterprise and Related
Information, which is also effective for fiscal years beginning after December
15, 1997. SFAS 131 establishes standards for segment reporting in the
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. The
Company will adopt the new statement for its fiscal year beginning October 1,
1998 and does not anticipate that providing required disclosures will result
in significantly different information from that which is disclosed in Note 5.
2. RESTRICTED CASH
At September 30, 1997, the Company had $5,074,659 of restricted cash
(including accrued interest of $74,659). This amount is deposited with two
financial institutions under the Company's guarantee of short term loans to
unrelated third parties. These deposits bear interest at market rates. Under
agreements with the unrelated third parties the loans are secured by certain
investment accounts, which contain common shares of the Company. The market
value of the shares in these investment accounts at September 30, 1997 and
December 15, 1997 is $3,700,000 and $1,500,000 respectively, compared to the
loan amount of $5,000,000. The Company has the right to cause the
sale of the investments from May 30, 1998 to August 30, 1998, with the
proceeds therefrom being applied to reduce the loans. The Company may be
liable, under certain circumstances for any principal amounts guaranteed
that remain outstanding under the short term loan facilities at the
termination of the arrangement.
<PAGE>
3. MARKETABLE SECURITIES
The Company accounts for its marketable securities in accordance with
Statement of Accounting Standard No. 115 ("SFAS No. 115"), Accounting for
Certain Investments in Debt and Equity Securities. At September 30, 1997, the
Company's marketable securities consisted of U.S. government agency issues,
all of which are classified as available-for-sale as defined by SFAS No. 115.
Such investments are stated at market value which approximates cost. The
Company recognized $126,405, nil and nil in gains on sales of marketable
securities in the year ended September 30, 1997, 1996 and 1995 respectively.
4. SHORT TERM BORROWINGS
At September 30, 1997, the Company had borrowed under a short term credit
facility a total of $4,966,160. The total available under the facility is
$5,000,000 and bears interest at LIBOR plus 2.25% (8.10% at September 30,
1997). After twelve months from the date of initial drawdown, the borrowings
under the facility are repayable upon demand. The Company has recognized a
foreign exchange loss in the amount of $861,857 in connection with these
borrowing. Management does not believe there will be any future foreign
exchange losses recognized related to borrowings under this facility.
5. BUSINESS SEGMENTS
After discontinuing its metal fabrication business segment, the Company has
operated principally in two business segments: mineral resource development
("mining") and development and sale of environmental technologies,
specifically water purification systems ("water purification"). During the
year ended September 30, 1996, the Company operated in water purification
through its equity investment in WPUR. The Company's primary focus has been
mineral resource development. During fiscal 1996 the Company acquired gold
producing properties in Zimbabwe (see Note 7) which commenced operations on a
limited basis in April 1996. Throughout fiscal 1996 most of the gold
processing operations were shut down during a plant modernization and
expansion program, the first phase of which was substantially completed in
September 1996. The Company's mining operations are based in Zimbabwe .
<TABLE>
<CAPTION>
Water Corporate Consol-
(in thousands) Mining Purification and other idated
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 (SEE NOTE 1)
Revenues $ 3,392 $ - $ - $ 3,392
Loss from operations (2,079) - (3,338) (5,417)
Equity in net loss of affiliate - (1,035) - (1,035)
Identifiable assets 18,457 4,574 25,242 48,273
Depreciation, depletion and
amortization 490 - 33 523
Capital expenditures 8,416 - 12 8,428
- ------------------------------------------------------------------------------
1996
Revenues $ 630 $ - $ - $ 630
Loss from operations ( 2,690) - ( 2,509) ( 5,199)
Equity in net loss of affiliate - ( 3,178) - ( 3,178)
Identifiable assets 15,454 2,748 4,115 22,317
Depreciation, depletion and
amortization 196 - 36 232
Capital expenditures 13,832 - 133 13,965
- ------------------------------------------------------------------------------
1995
Revenues $ - $ 382 $ - $ 382
Loss from operations ( 1,314) (3,268) ( 1,818) ( 6,400)
Identifiable assets 4,259 5,486 4,571 14,316
Depreciation, depletion and
amortization 28 35 36 99
Capital expenditures 138 91 11 240
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
The Company has operations based in North America, Africa, and in Asia through
its equity investment in WPUR. The table below presents information as to the
Company's operations by geographic region.
<TABLE>
<CAPTION>
(in thousands) Africa North America Asia Consolidated
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 (SEE NOTE 1)
Revenues $ 3,392 $ - $ - $ 3,392
Loss from operations (2,079) (3,294) (44) (5,417)
Equity in net loss of
affiliate - (573) ( 462) (1,035)
Identifiable assets 18,457 29,614 202 48,273
- ------------------------------------------------------------------------------
1996
Revenues $ 630 $ - $ - $ 630
Loss from operations ( 2,175) ( 3,024) - ( 5,199)
Equity in net loss of
affiliate - ( 2,172) ( 1,006) ( 3,178)
Identifiable assets 14,056 8,261 - 22,317
- ------------------------------------------------------------------------------
1995
Revenues $ - $ 236 $ 146 $ 382
Loss from operations ( 1,315) ( 4,963) ( 122) ( 6,400)
Identifiable assets 4,259 9,753 304 14,316
- ------------------------------------------------------------------------------
</TABLE>
6. INVESTMENT IN AND ADVANCES TO AFFILIATES
The Company's investment in and advances to affiliates at September 30, 1997
and 1996 include the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Investment in WPUR $4,574,368 $1,034,604
Advances to WPUR - 1,712,421
Other - 1,006
Total $4,574,368 $2,748,031
========== ==========
</TABLE>
As described in Note 1, effective September 30, 1997, the Company completed a
settlement with WPUR whereby the Company received 5,082,626 shares of WPUR
Convertible Preferred Stock in exchange for $4,574,368 in amounts owed to the
Company. These amounts arose principally from working capital advances from
the Company to WPUR and for services provided to WPUR by the Company. The
determination of the number of Convertible Preferred shares was based upon the
market value of WPUR common stock at September 30, 1997. In addition to the
debt settlement, the Company exchanged its 5,634,756 common shares of WPUR
(approximately 31.2% of the outstanding shares of WPUR) for 2,817,378
Convertible Preferred shares of WPUR. These transactions resulted in the
Company owning 7,900,004 Convertible Preferred shares of WPUR.
Also, effective September 30, 1997, the Company's Board of Directors announced
the spin-off to its shareholders of all the 7,900,004 Convertible Preferred
Shares received by the Company in the Restructuring to the common and
preferred shareholders of the Company of record on October 15, 1997. The
Company must receive regulatory approval prior to distribution of these
Convertible Preferred Shares. As such the accompanying financial statements
include an investment in WPUR and a corresponding dividend payable in the
amount of $4,574,368.
The Company charged interest at 9% per annum on the advances made to WPUR,
the accrued unpaid interest was included in the settlement described above.
<PAGE>
As discussed in Note 1, as of September 30, 1996, the Company recorded its
investment in WPUR using the equity method and has applied this method of
accounting prospectively from that date. The consolidated statement of
operations for the year ended September 30, 1996 reflects an equity method
presentation retroactive to the beginning of the year. In addition, the
Company has applied the equity method to the consolidated statement of
operations to the date of the restructuring, September 30, 1997 . Summarized
financial information of WPUR as of September 30, 1997 and 1996 and the years
then ended is as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Sales $ 1,301,575 $ 1,017,071
Loss from operations ( 3,611,272) ( 4,091,717)
Net loss ( 4,325,654) ( 3,962,346)
Current assets $ 2,893,394 $ 2,741,958
Non-current assets 572,125 2,335,850
-------------- --------------
$ 3,465,519 $ 5,077,808
============== ==============
Current liabilities $ 700,426 $ 2,659,276
Stockholders' equity 2,765,093 2,418,532
-------------- --------------
$ 3,465,519 $ 5,077,808
============== ==============
</TABLE>
7. ACQUISITIONS
ZIMBABWE
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 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 of $792,801. The acquisition included mining claims on
several producing gold mining properties covering 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 the
net assets as follows:
<TABLE>
<CAPTION>
<S> <C>
Mineral properties $ 4,293,373
Property and equipment 892,074
Working capital 111,594
Capital lease obligations ( 231,966)
Accrued taxes from acquisition ( 993,660)
-------------
$ 4,071,415
=============
</TABLE>
Also, on January 31, 1996, the Company completed the acquisition of a 100%
interest in the Dawn Mine property in Zimbabwe from Olympus Gold Mines Ltd.
for approximately $455,000. The Dawn Mine is adjacent to the mines acquired
in the EWB transaction. The purchase price has been allocated to mineral
properties.
ZAMBIA
During the fiscal year ended September 30, 1996, the Company purchased 100% of
the common shares of Copperbelt Associates Limited for $65,700. That
company's only asset is a prospecting license covering certain properties in
the Zambian Copperbelt. The purchase price of $65,700 was allocated to the
prospecting license and included in mineral properties.
AUROMAR DEVELOPMENT CORPORATION
Effective August 12, 1996, pursuant to approval of a Plan of Arrangement by
the Supreme Court of British Columbia, Canada, the Company acquired
<PAGE>
approximately 6,570,000 common shares of Auromar in exchange for 2,526,685
common shares of the Company. This transaction has been accounted for as a
purchase. The principal asset of Auromar was a 50% option in certain mineral
properties located in the Schweizer-Reneke region of South Africa, which was
recorded at predecessor cost prior to its acquisition by Auromar. The Company
had previously acquired the other 50% in the mineral properties. The purchase
price has been allocated to the net assets as follows:
<TABLE>
<CAPTION>
<S> <C>
Working capital ( including cash acquired of $171,987) $169,620
Property and equipment 4,442
Mineral properties 196,227
--------
$370,289
========
</TABLE>
The Company completed its exploration program in the Schweizer-Reneke region
during the year ended September 30, 1997. There were no economically viable
mineral deposits located, and as a result, the Company has written off
$394,455 in capitalized mineral exploration costs related to these properties
in the year ended September 30, 1997.
The Company had previously purchased 1,000,000 shares of common stock of
Auromar, in exchange for 3,500,000 restricted common shares of the Company.
The investment was valued at $150,000 based upon the Company's approximate 21%
share of the historical cost basis of the net assets of Auromar. 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 had been
recorded as an increase to additional paid-in capital. During the fourth
quarter of 1996, the Company exchanged the remaining 425,750 common shares of
Auromar for 1,532,700 restricted common shares of WPUR. The WPUR shares were
recorded at the equivalent book value of the Auromar shares.
The following summarized unaudited pro-forma consolidated results of
operations give effect to the above acquisitions as though they had occurred
on October 1, 1994.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Years ended September 30 1996 1995
- -------------------------------------- --------- ---------
(In thousands except per share amounts)
Revenues $ 1,503 $ 2,723
Net loss ( 8,269) ( 2,767)
Loss per common share $ (.84) $ (.27)
- -------------------------------------- --------- ---------
</TABLE>
The unaudited pro forma information is not necessarily indicative either of
the results of operations that would have occurred had the purchases been made
on October 1, 1994, or the future results of operations of the combined
companies.
8. WRITE DOWN OF ASSETS
As part of its efforts to expand mining activities to Ghana, the Company
entered into contracts to purchase unrefined gold from certain parties during
the year ended September 30, 1996, for final refining and sale at the Royal
Canadian Mint in Ottawa, Canada. The Company was required to advance funds
under the contracts and paid a total of $672,560 to the sellers. The Company
has not received shipment of the gold as stipulated in the contracts, and
disputes and litigation have arisen between the parties. The Company believes
that it will ultimately be successful in recovering the gold or the advances
made under the contracts. However, because of the uncertainties related to
this matter, the Company has fully reserved against the advances made and
recorded a loss on write down of assets of $672,560 in the fiscal year ended
September 30, 1996.
<PAGE>
9. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at September 30:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
------------ -------------
Mineral properties $9,316,277 $6,041,524
Joint venture mineral properties (Note 15) - 1,398,000
Buildings 1,802,242 1,133,665
Mining production equipment 5,452,757 5,074,163
Furniture, fixtures and office equipment 294,327 257,803
Leasehold improvements 63,004 63,004
Automotive equipment - mining 444,315 490,171
------------ -------------
Total 17,372,922 14,458,330
Accumulated depreciation, depletion and
amortization (696,575) (356,548)
------------ -------------
Total property and equipment, net $16,676,347 $14,101,782
============ =============
</TABLE>
10. RELATED PARTY TRANSACTIONS
The Company paid $219,449 and $74,456, respectively, to a related party for
various office and consulting service costs incurred on behalf of the Company
on a cost-recovery basis. Also, during the year ended September 30, 1997 and
1996, the Company paid approximately $1,375,605 and $602,000, respectively,
for capital expenditures to a company in which a director of Casmyn Mining
Zimbabwe (Private) Ltd. was also a director.
The Company conducts business with various companies that are related through
the existence of certain common officers, directors and significant
stockholders. As a result of these related party transactions, cash advances
from and to the Company and other transactions, including the debt settlement
with WPUR for Convertible Preferred Stock of WPUR (see Note 6), the Company
had a net amount of $0 and $211,708 due from related parties at September 30,
1997 and 1996 respectively.
11. LONG-TERM AND CONVERTIBLE DEBT
Long-term debt consists of the following at September 30:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
-------- --------
Capital leases $178,701 $178,701
Amount repaid during fiscal 1997 (120,283) -
-------- --------
Total 58,418 178,701
Less current portion (58,418) 107,471
-------- --------
Long-term portion $ - $ 71,230
======== ========
Annual maturities of capital leases are as follows:
Total payments on capital leases in 1998 $ 64,848
Less amount representing interest ( 6,430)
-------
Present value of net minimum lease payments 58,418
Less current portion (58,418)
-------
Long-term portion $ -
=======
</TABLE>
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
(the "Holder"). Interest was 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. During the fiscal year ended September 30,
1997, the Holder elected to convert the Debenture into common stock and
convertible preferred stock (see Note 12). The net proceeds from this
debenture were $4,700,000 after deducting $300,000 in costs relating to the
placement.
<PAGE>
12. STOCKHOLDERS' EQUITY
The FASB issued SFAS No. 123 ("SFAS 123") "Accounting for Awards of
Stock-Based Compensation to Employees" in October, 1995. 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". 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 of SFAS 123 on net income and earnings
per share.
COMMON STOCK
On March 29, 1996, the Company completed a private placement of 750,000 units
for net proceeds of $8,745,683. Each unit consisted 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. The warrants are exercisable for a period of two years.
On September 11, 1996, the Company completed a private placement of 409,091
units for net proceeds of $4,230,000. Each unit consisted of one share of the
Company's restricted common stock plus one warrant. Two warrants plus $11.00
will entitle the holder to purchase one share of the Company's common stock.
The warrants are exercisable for a period of four years.
On November 8, 1996, the Company completed a private placement of 155,000
units for net proceeds of $1,410,500. Each unit consisted 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.
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. In January 1997, the Board of
Directors of the Company authorized the creation of a series of 2,500,000
First Convertible Preferred Stock $.10 par value ("Convertible Preferred").
On April 14, 1997, the Company completed the placement of 751,200 shares of
Convertible Preferred stock for cash proceeds of approximately $16,759,000
(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
(less $84,000 unamortized debt issue costs) of pre-existing convertible
debentures. Societe Generale also converted the remaining $2,913,325
principal balance (less unamortized debt issue costs of $116,000) of its
convertible debenture in exchange for 594,856 common shares. The Company also
issued 3,637 common shares for interest accrued on the convertible debenture
through the date of conversion.
<PAGE>
On September 2, 1997, the Company completed the placement of 533,885 shares of
Convertible Preferred stock for cash proceeds of approximately $12,423,000
including accrued interest at 8% per annum from April 14, 1997 to the date of
closing and after cash fees to the placement agents and estimated transaction
expenses. The subscription price for the placements 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 right to
require 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,
on a cumulative basis. The underlying common stock is also restricted for
sale subject to daily volume limitations. The placement agents received
warrants exercisable for a period of five years to purchase 172,725 shares of
the Convertible Preferred stock at $25 per share. The Company issued an
additional 11,686 Convertible Preferred shares to participants in the April
14, 1997 placement as a penalty for the Company failing to have a registration
statement declared effective by the Securities and Exchange Commission within
90 days of the funding date as provided in the subscription agreement.
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 September 30, 1997, the Company recorded a
charge to retained earnings and a corresponding increase to additional paid-in
capital of $3,825,676 ($0.30 per common share) 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 issued a total of 38,631 shares of Convertible
Preferred stock as payment of the 8% dividend due on the Convertible Preferred
stock through September 30, 1997.
On August 30, 1996 the Company converted 2,707,000 Series A preferred shares
into 2,707,000 common shares. These preferred shares were originally issued
on October 3, 1995, when 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 share of Series A preferred stock was convertible, at the holder's option
into one share of common stock and was entitled to the equivalent of five
common share votes.
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. The
total options available under the ISOP was increased from 800,000 to 1,500,000
upon approval by the Company's shareholders at the annual meeting held June
16, 1997. 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.
All options granted through September 30, 1995 are exercisable for a term of
five years from the date of vesting and vest at a rate of 25% per year over a
period of four years. During the year ended September 30, 1996, options to
purchase 75,000 shares were granted under the ISOP at prices ranging from
$7.00 to $10.00 per share. These options are exercisable for a term of five
years from the date of vesting and vest on varying terms of periods up to six
years. Certain of these options were compensatory and resulted in total
compensation of $74,040, nil and nil being recorded as compensation expense
during 1997, 1996 and 1995 respectively.
<PAGE>
During 1995, the Company also adopted a non-qualified Stock Option Plan (SOP),
which provides for the granting of 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
SOP are not intended to qualify as incentive stock options under the 1981 Act.
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 which was been recorded as
compensation expense for the year ended September 30, 1996. With the
exception of 50,000 options that completely vested on the date of grant, the
options vest over a one year period with 50% vesting at the grant date and 50%
on the first anniversary of the grant date.
During 1997, the Company adopted the 1997 Directors Stock Option Plan (DSOP),
which provides for the granting of options to purchase a maximum of 350,000
shares of the Company's common stock to Directors of the Company. Options
granted under the DSOP are considered to be Nonstatutory Stock Options for tax
purposes.
All options granted under the DSOP through September 30, 1997, have an
exercise price of $9.00 per share which was equal to the market price per
share on the date of grant. All options granted under the DSOP are
exercisable for a term of five years from the date of vesting and vest at a
rate of 33-1/3% per year beginning December 31, 1997.
During the year ended September 30, 1996, 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. These options vest over a two year period with one-third vesting
at the grant date, and one-third on each of the anniversaries of the grant
date. These options expire five years from the date of vesting. In addition,
options to purchase 25,000 shares of the Company's common stock at $7.00 were
granted to a consultant to the Company. These options were exercised during
the year ended September 30, 1996. The option price for these grants was
equal to the market price per share at the date of the grants.
The fair value of each option grant during the fiscal years ended September
30, 1997 and 1996 was estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: risk-free interest rate
of 5%; no dividends; expected lives ranging from three to ten years; and
expected volatility of 37%. The weighted-average fair value of those option
grants in 1996 and 1997 is $1.41 and $0.99 respectively. The Company applies
APB Opinion 25 and related Interpretations in accounting for its option plans.
In 1997 and 1996, the Company recorded $74,040 and $364,560 respectively in
compensation expense related to certain options that were compensatory. Had
compensation costs for grants made under the SOP, ISOP and DSOP been
determined consistent with the method of SFAS 123, the Company would have
recorded approximately $589,000 and $531,000 as additional compensation
expense for the years ended September 30, 1997 and 1996 respectively.
Had the Company recorded compensation expense related to certain options under
SFAS 123, the loss per common share would have been $(0.94) and $(1.19) for
the years ended September 30, 1997 and 1996 respectively.
<PAGE>
A summary of stock option activity under these plans follows:
<TABLE>
<CAPTION>
Weighted Weighted
average average
option option Available
price per Out- price per Exer- for
share standing share isable grant
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 ISOP
October 1, 1994, balance - - -
Granted $5.00 765,000 $- - 35,000
--------------------------------------------------
September 30, 1995, balance 5.00 765,000 - 35,000
Became exercisable - 191,250 -
Canceled 5.00 ( 170,000) ( 25,000) 170,000
Granted 7.80 75,000 - ( 75,000)
Exercised 5.00 ( 5,000) ( 5,000)
--------------------------------------------------
September 30, 1996, balance 5.32 665,000 5.01 161,250 130,000
Became exercisable - 143,752 -
Canceled 5.83 ( 60,000) ( 60,000) 60,000
Exercised 5.00 ( 69,500) ( 69,500)
Increase in available for
grant - - 700,000
--------------------------------------------------
September 30, 1997, balance 5.30 535,500 5.15 175,502 890,000
--------------------------------------------------
1995 SOP
October 1, 1994, balance - - - -
Granted .04 246,000 - 123,000 4,000
--------------------------------------------------
September 30, 1995, balance .04 246,000 .04 123,000 4,000
Became exercisable - - 123,000 -
Exercised .04 ( 10,000) - ( 10,000) -
--------------------------------------------------
September 30, 1996, balance .04 236,000 .04 236,000 4,000
Exercised .04 ( 116,000) - ( 116,000) -
--------------------------------------------------
September 30, 1997, balance .04 120,000 .04 120,000 4,000
--------------------------------------------------
1997 DSOP
October 1, 1996, balance - - -
Granted 9.00 275,000 - 75,000
Canceled ( 100,000) - 100,000
-------------------------------------------------
September 30, 1997, balance 9.00 175,000 - 175,000
-------------------------------------------------
OTHER STOCK OPTIONS
October 1, 1995, balance - - -
Granted 7.00 1,025,000 - -
Became exercisable - 358,000 -
Exercised 7.00 ( 25,000) ( 25,000) -
---------------------------------------------------
September 30, 1996, balance 7.00 1,000,000 7.00 333,000 -
Became exercisable - 333,000 -
---------------------------------------------------
September 30, 1997, balance 7.00 1,000,000 7.00 666,000 -
---------------------------------------------------
Total, September 30, 1997 6.24 1,830,500 5.78 961,502 1,069,000
====================================================
</TABLE>
During the year ended September 30, 1997, the Company also entered into an
agreement to issue options, upon attainment of certain defined performance
criteria, to purchase 375,000 shares of the Company's common stock as
compensations for consulting services pertaining to shareholder and investor
relations, mergers and acquisitions and strategic planning. These options
expire on September 2, 1998 and are exercisable at prices ranging from $6.00
to $9.00.
<PAGE>
13. INCOME TAXES
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>
<S> <C> <C> <C>
1997 1996 1995
-------------------------------------
Tax benefit (provision) at U.S.
statutory rate $2,377,699 $2,912,464 $1,064,850
Operating losses with no current
tax benefit ( 2,372,449) ( 2,910,437) ( 1,016,968)
Other ( 5,250) ( 2,027) ( 47,882)
-------------------------------------
Total $ - $ - $ -
=====================================
</TABLE>
The Company's deferred tax items as of September 30 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
---------------- ------------
DEFERRED TAX ASSETS:
Difference between book and tax gain on
sale of stock sale $ - $ 581,960
Difference between book and tax basis
of property 33,790 7,341
Net operating loss carryforwards 3,073,823 1,231,439
Foreign loss carryforwards 1,379,450 412,800
Capitalized organization and start-up costs 146,515 181,515
Capitalized exploration costs 201,342 360,942
Other 20,000 13,129
---------------- ------------
Total deferred tax assets 4,854,920 2,789,126
DEFERRED TAX LIABILITIES - -
VALUATION ALLOWANCE (4,854,920) (2,789,126)
---------------- ------------
NET DEFERRED TAX ASSETS $ - $ -
================ ============
</TABLE>
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 or because they were not generated within the United States.
Federal operating loss carryforwards amounted to approximately $10,300,000 at
September 30, 1997, and expire in various years through 2012.
14. OPERATING LEASES
The Company has obligations under operating leases for offices and facilities.
Minimum annual lease payments are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $57,350
1999 38,486
2000 38,142
2001 38,520
2002 38,897
thereafter 26,099
Related rental expense was $31,380, $48,381 and $93,197 for the years ended
September 30, 1997, 1996 and 1995 respectively.
</TABLE>
<PAGE>
15. RELIEF CANYON JOINT VENTURE
On May 7, 1996, the Company entered into a 50:50 joint venture with Newgold
Incorporated ("Newgold"), a public company listed on the OTC Bulletin Board,
based in Reno, Nevada, for the development of the Relief Canyon Mine located
in Pershing County, Nevada. 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 the joint
venture. The Company recorded this investment as an addition to mineral
properties. During the year ended September 30, 1997, 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 has recorded its investment in the 1,000,000
restricted shares of Newgold at the nominal value of $1,000.
16. 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 in WestAmerica. The shares acquired were subject
to a repurchase agreement by WestAmerica and were placed in a voting trust
controlled by an officer and director of WestAmerica. The transaction was
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 reflected a
discount from recent similar sized transactions to compensate for the
restricted nature of the shares issued in the transaction. On September 30,
1996, the Company and WestAmerica agreed to cancel the transaction and have
returned the respective shares to each party.
17. MINORITY INTEREST
Activities in the minority interest account for the year ended September 30,
1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
$ -
Investment by minority
interest 180,000
Minority interest in net loss ( 35,780)
---------
Balance, end of year $ 144,220
==========
</TABLE>
<PAGE>
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None of the "reportable events" described in Item 304 (a) (1) (ii) or (iv) of
Regulation S-K occurred with respect to the Company within the last two fiscal
years, or the subsequent interim period to date hereof.
<PAGE>
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
COMPANY
<TABLE>
<CAPTION>
Certain information about the directors and executive officers of the Company
is contained in the following table.
<S> <C> <C> <C>
SERVED IN
CURRENT
POSITION
NAME AGE POSITION SINCE
- -------------------------------------------------------------------------------
Amyn S. Dahya 40 President, Chief Executive Officer and
Chairman of the Board 1994
Hanif Dahya (1) (2) 42 Vice Chairman of the Board 1995
Edmund de Rothschild,
C.B.E. 80 Director * 1997
Selwyn Kossuth (1) (2) 60 Director ** 1997
Sandro Kunzle (1) (2) 42 Director 1994
Al-Karim Haji 30 Chief Financial Officer 1997
Douglas C. Washburn 52 Vice President and Treasurer 1994
Dr. Gregory J. Gosson 41 Managing Director of Mining 1994
Dennis E. Welling 51 Controller and Secretary 1994
(1) Member of Audit Committee
(2) Member of Compensation Committee
* Effective January 8, 1997
** Effective September 26, 1997
</TABLE>
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 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
ten years. Mr. Dahya serves on the Board of Directors of several companies,
including WPUR where he also holds executive management positions.
HANIF DAHYA. Mr. Dahya is a graduate of Harvard Business School (MBA) with an
undergraduate degree in (BSc) in Production Engineering from Loughborough
University, UK. He has built a distinguished career on 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 was most recently a partner at Sandler,
O'Neil, a Wall Street investment bank prior to starting his own investment
banking and money management company. His experience includes multi-million
dollar financings and bond issues. Mr. Dahya provides strategic direction
with respect to the Company's financial planning and growth, which is
primarily focused on the expansion of operations and the acquisition and
development of producing mining properties.
<PAGE>
EDMUND DE ROTHSCHILD. Mr. Edmund de Rothschild brings to Casmyn extensive
merchant banking experience. He has built a very distinguished career in the
international business community through his directorship positions with N. M.
Rothschild & Sons Limited, Rothschild Continuation Holdings, and Exbury
Enterprises Ltd., among others. Mr. Rothschild was Chairman of N.M.
Rothschild & Sons between 1970 - 1975. He has also served on numerous boards
such as The Sun Alliance & London Insurance Company, Dunhill Ltd. and Tokyo
Pacific Holdings. He was British Government Trustee for Freedom from Hunger
Campaign and Government Chairman of British National Export Council for Asia
in 1970/71. Mr. de Rothschild has been involved in many charities, including
the Royal National Pension Fund for Nurses, Council of Christians and Jews,
ex-service charities and various gardening charities. Exbury, his home,
features a famous garden which is open to the public and is a part of his
Charitable Foundation. He has an Hon. LL.D (University of Newfoundland), Hon.
D.Sc (Salford), Order of the Sacred Treasure, 1st Class (Japan). Mr. de
Rothschild brings to Casmyn extensive expertise in the areas of corporate
finance, business development and strategic planning. On January 1, 1997, Mr.
de Rothschild was honoured with the title of Commander of the Order of the
British Empire (C.B.E.).
SELWYN KOSSUTH. Mr. Kossuth, has had a successful career in international
mining finance and the development of strategic marketing programs and
currently serves on the board and audit committee of Royal Bank of Canada
Mutual Funds, and on the board of the Glen Ardith Frazer Corp. He is a
consultant to the Investment Funds Institute of Canada. Over his
distinguished career, Mr. Kossuth has served as president and chief executive
officer of the Investment Funds Institute of Canada, as executive director and
chief operating officer of the Ontario Securities Commission, vice president
and director of corporate finance of Nesbitt Thomson, Inc., and president of
the Canadian operations of the Hochschild Group. He holds a bachelors degree
in commerce from Stellenbosch University, and a master's degree in law from
Oxford University. He also is an English barrister.
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.
AL-KARIM HAJI. Mr. Haji is a graduate of the University of British Columbia,
Canada, in Commerce and Business Administration and is a Canadian Chartered
Accountant. He brings nine years of financial management experience to the
Company. Prior to joining the Company in 1993, he was with KPMG in Canada for
six years, working for clients such as McDonald Dettweiler (subsequently
acquired by Orbital Sciences Corp.), Jim Pattison Industries and the Spectra
Group. Through his background, Mr. Haji brings to the Company experience in
areas of international business development, strategic planning, financial
planning, finance and taxation. Mr. Haji is fluent in several languages.
DOUGLAS C. WASHBURN. Mr. Washburn holds a MBA/CPA and brings 26 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 Managing Director of all of the
Company's African subsidiaries 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 five 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.
<PAGE>
DENNIS E. WELLING. Mr. Welling, a CPA, currently serves as Controller and
Secretary. He has 26 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.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
During the year ended September 30, 1997, the Company instituted a
Compensation Committee (the "Committee"). This committee approves all matters
concerning executive officer compensation.
The information contained herein does not include any compensation paid or
accrued by WPUR with respect to such services provided to WPUR by officers of
the Company.
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)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ANNUAL COMPENSATION
---------------------------------------------------------
FISCAL YEAR OTHER ANNUAL COMP.
NAME AND ENDING
POSITION SALARY BONUS
- -----------------------------------------------------------------------------
Amyn Dahya, 1997 $ 150,000 $340,000 $ 79,200
President 1996 $ 150,000 $267,700 None
and CEO 1995 $ 150,000 None None
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------------------------
AWARDS PAYOUTS
---------------------------------------------------------
NAME AND RESTRICTED OPTIONS/ LTIP ALL OTHER
POSITION STOCK AWARDS SAR's(1) PAYOUTS COMPENSATION
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
Amyn Dahya, 0 0
President 0 1,000,000
and CEO 0 0 None None
</TABLE>
(1) In October 1995 Mr. Dahya was granted an option to purchase 1,000,000
shares of the Company's Common Stock at an exercise price of $7.00 per
share for a period of 5 years, expiring on September 30, 2000, these
options vest over a two year period with one-third vesting at grant date,
and one-third on each of the anniversaries of the grant date. As of
December 15, 1997 none of these Options have been exercised.
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 $102,750 for the fiscal year ended September 30,
1997. In addition, the Company pays a portion of each employee's health
insurance premium.
There are no employment contracts, proposed termination of employment or
change-in-control arrangements between the Company and any of its directors or
executive officers.
<PAGE>
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.
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
<TABLE>
<CAPTION>
Number of Securities Value of Unexerised
Underlying Unexercised In-the-Money options
Value options at Sept. 30, 1997 at Sept. 30, 1997
Shares Realized Exercisable / Exercisable /
Name Acquired ($000's) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
==============================================================================
Amyn S. Dahya 0 0 666,667/333,333 $ 0/$0
==============================================================================
</TABLE>
LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
No awards under long term incentive plans were made in the fiscal year ended
September 30, 1997.
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, employees and advisors of the Company. The
total options available under the ISOP was increased from 800,000 to 1,500,000
upon approval by the Company's shareholders at the annual meeting held June
16, 1997. 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.
The ISOP is administered by the Board of Directors through the Committee
presently consisting of three members of the Board. 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 required 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/she also has the right to exercise the accrued
options within thirty days of such termination. Upon death, his/her 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.
<PAGE>
Options must be granted within five years from the effective date of the ISOP.
As of September 30, 1995, options to purchase 765,000 shares of common stock
were granted under the ISOP. All options granted under the ISOP through
September 30, 1996, have an exercise price of $5.00 per share which was equal
to the market price per share on the date of grant. All options granted
through September 30, 1995 are exercisable for a term of five years from the
date of vesting and vest at a rate of 25% per year over a period of four
years. During the year ended September 30, 1996, options to purchase 75,000
shares were granted under the ISOP at prices ranging from $7.00 to $10.00 per
share. These options are exercisable for a term of five years from the date
of vesting and vest on varying terms of periods up to six years. Certain of
these options are compensatory and resulted in total compensation of $74,040
being recorded as compensation expense during the year ended September 30,
1997. During the year ended September 30, 1997, there were no options granted
under the ISOP and 60,000 options were canceled.
During 1995 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 SOP are not-intended to
qualify as incentive stock options under the 1981 Act.
As of September 30, 1996, options to purchase up to 246,000 shares of common
stock were granted under the SOP. With the exception of 50,000 options
granted to a former officer, whose options vest 100% on the grant date, the
options vest to the optionee over a one 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 was recorded as expense for the
year ended September 30, 1996. During the year ended September 30, 1997,
116,000 options were exercised.
The SOP is administered by the Board of Directors through the Committee which
determines which persons will 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 years and all options must be granted within five
years from the effective date of the SOP.
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.
During 1997, the Company adopted the 1997 Directors Stock Option Plan (DSOP),
under which options to purchase a maximum of 350,000 shares of the Company's
common stock can be granted to Directors of the Company. Options granted
under the DSOP are considered to be Nonstatutory Stock Options for tax
purposes.
During the year ended September 30, 1997, 275,000 options were granted and
100,000 options were canceled under the DSOP. All options granted under the
DSOP through September 30, 1997, have an exercise price of $9.00 per share
which was equal to the market price per share on the date of grant. All
options granted under the DSOP are exercisable for a term of five years from
the date of vesting and vest at a rate of 33-1/3% per year beginning December
31, 1997.
During the year ended September 30, 1996 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. These options vest over a two year period with one-third vesting
at the grant date, and one-third on each of the anniversaries of the grant
date. These options expire five years from the date of vesting. In addition,
options to purchase 25,000 shares of the Company's common stock at $7.00 were
granted to a consultant to the Company. These options were exercised during
the year ended September 30, 1996. The option price for these grants was
equal to the market price at the date of the grants.
The only other benefit plan offered at the present or during 1997 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
defined in Item 402 (a)(6)(iii) of the U.S. Securities and 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.
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Company formed a compensation committee during
the year ended September 30, 1997 composed of Dr. Arthur B. Laffer, Mr. Hanif
Dahya and Mr. Sandro Kunzle (Chairman). None of the members of the
compensation committee were, during the fiscal year, or previously, officers
of the Company. On November 6, 1997, Mr. Selwyn Kossuth was appointed to
replace Dr. Laffer on the compensation committee.
CASMYN CORP. COMMON STOCK PERFORMANCE GRAPH
Comparison of cumulative total return assumes $100 invested on December 31,
1994.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
12/94 3/95 6/95 9/95 12/95 3/96 6/96 9/96 12/96 3/97 6/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASMYN 100 85 85 99 216 204 182 150 108 96 89
S&P 500 100 112 119 127 134 141 146 150 161 165 193
S&P GOLD * 100 103 110 111 109 138 117 111 110 97 90
9/97 11/97
CASMYN 58 54
S&P 500 206 208
S&P GOLD * 92 68
* Barrick Gold Corp., Battle Mountain Gold Company, Echo Bay Mines Ltd., Homestake, Newmont
Mining, Placer Dome, Inc. and Santa Fe Gold Corporation.
</TABLE>
Each index assumes $100 invested on December 31, 1994 and is calculated
quarterly. Prior to March 1994, trading activity in Casmyn common stock was
nil.
<PAGE>
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.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely on a review of Forms 3 and 4 and amendments thereto furnished to
the Company during its most recent fiscal year and certain written
presentations, no person who was a director, officer, or beneficial owner of
more than 10% of the Company's common stock failed to file on a timely basis
reports required by Section 16(a) of the Exchange Act during the most recent
fiscal year.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Company's
common stock owned on December 31, 1997 by (1) any person (including any
"group") who is known by the Company to own beneficially more than 5% of its
outstanding common stock, (2) each director and named executive officer, and
(3) all officers and directors as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS OF SHARES OF COMMON STOCK OWNED COMMON STOCK
BENEFICIAL OWNER OWNED OUTSTANDING **
<S> <C> <C>
==============================================================================
AMYN DAHYA
1335 GREG ST. #104 3,681,694 (1) 25.6%
SPARKS, NV. 89431
- ------------------------------------------------------------------------------
HANIF DAHYA NIL -
5 BEECHWOOD ROAD
ALLENDALE, NEW JERSEY 07401
- ------------------------------------------------------------------------------
SELWYN KOSSUTH
1080 WALDEN CIRCLE, UNIT 55 NIL -
MISSISSAUGA, ONTARIO CANADA
L5J 4J9
- ------------------------------------------------------------------------------
EDMUND DE ROTHSCHILD
N.M ROTHSCHILD & SONS LIMITED
NEW COURT NIL -
ST. SWITHIN'S LANE
LONDON EC4P 4DU ENGLAND
- ------------------------------------------------------------------------------
SANDRO KUNZLE
TENUTA AIA VECCHIA 25,000 -
58029 SASSOFORTINO (GR)
ITALY
- ------------------------------------------------------------------------------
BISMILLAH CHILDREN'S 1,807,750 (2) 13.2%
FOUNDATION LTD.
1335 GREG ST. #104
SPARKS, NV. 89431
- ------------------------------------------------------------------------------
SOCIETE GENERALE 3,459,590 (3) 22.8%
17 COURS VALNY
LA DEFENSE
CEDEX
PARIS, FRANCE
- ------------------------------------------------------------------------------
ALL EXECUTIVE OFFICERS
AND DIRECTORS OF THE
COMPANY AS A GROUP
(8 PERSONS) 3,862,399 26.7%
==============================================================================
</TABLE>
** Based upon 13,709,909 common shares outstanding at December 17, 1997
and assumes conversion of outstanding stock options and warrants that are
currently exercisable.
(1) At December 15, 1997, Mr. Amyn Dahya held 1,982,000 common shares of
the Company. In addition 1,032,694 common shares of the Company were
owned or controlled by Dahya Holdings, Inc. ("DHL"), a foreign
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 DHL.
As officers and directors, Messrs. Amyn Dahya and Mansoor Dahya may be
deemed to have shared voting and investment power in and to these shares.
Also at December 15, 1997, Mr. Dahya had a total of 667,000 exercisable
options to purchase common stock of the Company at $7.00 per share.
<PAGE>
(2) Bismillah Children's Foundation Ltd. is a non-profit/charitable foreign
corporation of which Mr. Amyn Dahya is a Trustee and Director.
Bismillah is managed by a five member Board of Trustees. Mr. Dahya and
his wife are two of the five Trustees. A majority vote is required for
the Board to take any actions on behalf of the Foundation.
(3) Includes 2,024,027 common shares held at December 5, 1997 and 641,689
exercisable common stock warrants and 783,874 common shares assuming
the conversion of 84,636 convertible preferred shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
WaterPur International Inc.
The Company shares officers, personnel and facilities with WPUR and
accordingly actual costs related to these officers and personnel and
facilities are shared. At December 15, 1997, Dahya Holdings Limited ("DHL")
held approximately a 10% interest in WPUR.
<PAGE>
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) 3. Exhibits
-----------
3.1 Registrant's amended and restated articles of incorporation (1)
3.2 Registrant's By-Laws (1)
10. Material Contracts
----------------------
10.1 Matabeleland Minerals, Private Limited, Zimbabwe purchase
agreement (2)
10.2 Casmyn Corp. 1995 Incentive Stock option Plan (3)
10.3 Casmyn Corp. 1995 Non-Qualified Stock Option Plan (3)*
10.4 Societe Generale $5 million Subscription Agreement Casmyn (4)
10.5 Societe Generale $5 million convertible Debenture (3)
10.6 Subscription Agreement for the sale of 750,000 units (5)
10.7 Stock purchase Agreement between Casmyn Corp. and
WestAmerica (6)
10.8 Subscription Agreement for the sale of 409,091 units (7)
10.9 Sale Agreement - Newgold Incorporated**
10.10 Form of Preferred Stock Investment Agreement dated
April, 11, 1997 (8)
10.11 Form of Preferred Stock Investment Agreement dated
September 2, 1997 (9)
11. Statement re: computation of per share earnings (computation can be
determined from the material contained in this report)
21. Subsidiaries of the Registrant (see Item 1 - Description of Business)
27. Financial Data Schedule
- ------------------------------------------------------------------------------
(1) Previously filed with the commission on Form 10-KSB for the fiscal year
ended September 30, 1994 and incorporated herein by reference.
(2) Previously filed with the commission on Form 8-K dated February 15, 1996
and incorporated herein by reference.
(3) Previously filed with the commission on Form 10-KSB for the fiscal year
ended September 30, 1995, and incorporated herein by
(4) Previously filed with the commission on From 8-K dated September 29, 1995
and incorporated herein by reference.
(5) Previously filed with the commission on Form 8-K dated April 3, 1996 and
incorporated herein by reference.
(6) Previously filed with the commission on From 8-K dated July 18, 1996 and
incorporated herein by reference.
(7) Previously filed with the commission on Form 8-K dated September 18, 1996
and incorporated herein by reference.
(8) Previously filed with the commission on Form S-3 dated July 24, 1997 and
incorporated herein by reference
(9) Previously filed with the commission on Form S-3 dated September 22, 1997
and incorporated herein by reference
* Compensatory plan, agreement or arrangement
** Filed herein.
<PAGE>
(b) Reports on Form 8-K
September 30, 1997 The Company reported the receipt of approximately
7,750,000 shares of Convertible Preferred Stock of WaterPur International Inc.
from the conversion of outstanding debt and the exchange of common stock held
by the Company for Convertible Preferred shares. In addition, the Company
reported that its Board of Directors announced the spin-off of all of the
approximately 7,750,000 Preferred Shares to its common and preferred
shareholders of record on October 15, 1997.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf of
the undersigned, thereunto duly authorized.
CASMYN CORP.
/s/ Amyn S. Dahya
By: 12/19/97
Amyn S. Dahya, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------ ----------------------------------- --------
<S> <C> <C>
/s/ Amyn S. Dahya President, Chief Executive Officer 12/19/97
- ------------------------ --------
Amyn S. Dahya and Chairman of the Board
/s/ Hanif S. Dahya Director 12/19/97
- ------------------------ --------
Hanif S. Dahya (Vice Chairman of the Board)
/s/ Sandro Kunzle Director 12/19/97
- ------------------------ --------
Sandro Kunzle
/s/ Edmund de Rothschild Director 12/19/97
--------
Edmund de Rothschild
- ------------------------
/s/ Selwyn Kossuth Director 12/19/97
--------
Selwyn Kossuth
- ------------------------
/s/ Al-Karim Haji Chief Financial Officer 12/19/97
--------
Al-Karim Haji (Principal Financial Officer)
- ------------------------
/s/ Douglas C. Washburn Vice President - Treasurer 12/19/97
- ------------------------ --------
Douglas C. Washburn
/s/ Dennis E. Welling Controller, Secretary 12/19/97
- ------------------------ --------
Dennis E. Welling (Principal Accounting Officer)
</TABLE>
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
THIS AGREEMENT is made and entered into this 18th day of October, 1996, by and
between CASMYN CORP., a Colorado corporation ("Seller") and NEWGOLD, INC., a
Nevada corporation ("Buyer").
WITNESSETH:
This Agreement is made and entered into with reference to the following facts:
A. Seller is a Member of Relief Canyon, Ltd., a Nevada Limited Liability
Company (the "Company"), which owns 100% of that certain mining property in
the State of Nevada known as the Relief Canyon Mine (the "Property")
B. Buyer is a Member of the Company.
C. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, Seller's interests and membership in the Company and Property upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, and other good and valuable consideration, receipt of
which is hereby acknowledged, it is agreed by the parties as follows:
1. Sale of Assets. Seller shall sell and Buyer shall purchase, free and
clear of all liens and encumbrances, Seller's interests and membership in the
Company and Property.
2. Purchase Price. The purchase price for Seller's interests and
membership shall be the sum of Nine Hundred Thousand Dollars U.S.
($900,000.00), plus 1,000,000 fully paid and non-assessable restricted shares
of Common Stock of Newgold, Inc. The cash portion of the purchase price shall
be paid in cash to Seller and a stock certificate shall be delivered to Seller
at the time of Closing.
As additional consideration, Buyer shall waive all of Seller's obligations
under that certain Agreement between the parties, dated April 26, 1996,
including the obligation to pay an additional $623,000.
3. Warranties of Seller. Seller represents and warrants to Buyer as
follows:
(a) It has not entered into any other contracts to sell, mortgage, or assign
its interests and membership in the Company or the Property.
(b) It has full corporate power and authority to enter into this Agreement.
(c) As of the date of closing, Seller's interests and Membership in the
Corporation and the Property shall be free and clear of all liens,
encumbrances, chattel mortgages or conditional sales contracts.
4. Closing. The transaction evidenced by this Agreement shall close
within sixty (60) days after entry of an Order by the U.S. Bankruptcy Court,
Western District of New York, confirming a Plan of Reorganization in the
Chapter 11 bankruptcy proceedings of Warehouse Auto Centers, Inc. ("WAC"),
Case No 96-21279, wherein Newgold, Inc. is merging with WAC and raising the
sum of $5,000,000 through the sale of Debtor Certificates. Closing of this
Agreement is contingent upon Buyer acquiring use of the proceeds of the Debtor
Certificates sold in said bankruptcy.
5. Obligations Upon Closing. At the closing:
(a) Seller shall deliver to Buyer an Assignment in the form of Exhibit "A"
attached hereto, transferring all of its right, title and interest in and to
its interest and Membership in the Company;
(b) Seller shall deliver to Buyer a Quitclaim Deed to the Property.
(c) Buyer shall deliver to Seller the sum of Nine Hundred Thousand Dollars
U.S. ($900,000.00).
(d) Buyer shall also deliver to Seller a stock certificate for 1,000,000
fully paid and non-assessable restricted shares of Common stock of Newgold,
Inc. Buyer agrees to commence registration of such shares within six (6)
months of Buyer's listing on the NASDAQ Bulletin Board.
6. Indemnity by Seller. Seller shall indemnify Buyer against any loss,
damage, cost or expense that Buyer shall incur or suffer as a result of the
breach, untruth or inaccuracy of any promise, agreement, convenant, warranty
or representation made by Seller herein and for the benefit of Buyer.
7. Indemnity of Buyer. Buyer shall indemnify Seller against any loss,
damage, cost or expense that Seller shall incur or suffer as a result of the
breach, untruth or inaccuracy of any promise, agreement, convenant, warranty
or representation made by Buyer herein to and for the benefit of Seller.
8. Broker's Fees. The parties warrant to and with each other that the
transaction evidenced by this Agreement was initiated, negotiated and
completed by the parties hereto directly, as principals,
and without the intervention of any broker, dealer, agent or finder, except
for IBK Capital Corp., which served as a broker for Seller and Seller shall be
responsible for fees payable to IBK Capital Corp. Each party agrees to
indemnify and hold the other party harmless form and against any loss, damage,
cost or expense, including without limitation, attorneys' fees and litigation
expenses, resulting from any breach or breaches of the foregoing warranty.
9. Miscellaneous.
(a) Time. Time is of the essence of this Agreement and in the performance
and enforcement of each of the promises, covenants, representations and
warranties of the parties contained herein. For the purpose of computing any
period of time prescribed herein or relating hereto, the first day shall be
excluded. If the period of time is six (6) days or more, weekends and public
holidays shall be included. An act required to be performed on a day shall be
performed at or before the close of business on such day. If an act is
required to be performed on a certain day and such day is not a regular
business day, the time of performance or measurement shall be extended to and
including the next regular business day.
(b) Entire Agreement. This Agreement constitutes the entire agreement of
the parties and all prior rights, negotiations and representations are merged
herein.
(c) Binding Effects. This Agreement shall inure to the benefit of, and be
binding upon, the parties and their several successors in interested in any
capacity.
(d) Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Nevada.
(e) Notices. Any notice or notices which any party hereto deems necessary,
useful or convenient to give to any other party or parties hereto, at any time
and from time to time, shall be in writing and shall be personally served upon
or mailed to the parties at the following addresses:
<TABLE>
<CAPTION>
<S> <C>
To Seller at: 1335 Greg Street, Suite 104
Sparks, Nevada 89431
To Buyer at: 5190 Neil Road, Suite 320
Reno, Nevada 89502
In addition, copies of any notice shall also be sent to:
Michael J. Morrison, Esq.
1025 Ridgeview Drive, Suite 400
Reno, Nevada 89509
</TABLE>
(f) Attorneys' Fees and Costs If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement or because
of an alleged dispute, breach, default or misrepresentation in connection with
any of the provisions of this Agreement, the successful or prevailing party
shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to
which he may be entitled.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to constitute but one and the same
instrument.
(h) Captions. Articles and paragraph captions contained in this Agreement
are inserted only as a matter of convenience and reference. Said captions
shall not be construed to define, limit, restrict, extend or describe this
Agreement or the intent of any provision hereof.
(i) Gender and Number. Whenever used in this Agreement and as required by
the context of the transaction, the single number shall include the plural,
the plural number shall include the singular, and masculine gender shall
include the feminine and neuter.
(j) Form of Association As required by the context, the term "person" shall
include individuals, partnerships, limited partnerships, corporations, estates
and trusts.
(k) Waiver of Conflict. The parties waive any and all conflicts which may
exist or arise as a result of this Agreement being prepared, at the mutual
request of the parties, by Michael J. Morrison, Esq., who represents both
parties in unrelated legal matters.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
<TABLE>
<CAPTION>
<S> <C> <C>
CASMYN CORP., a Colorado NEWGOLD, INC., a Nevada
corporation - "Seller" corporation - "Buyer"
by /s/ Douglas C. Washburn by /s/ A. Scott Dockter
Douglas C. Washburn A. Scott Dockter
Its Secretary/Treasurer Its President
</TABLE>
ASSIGNMENT
- ----------
By this instrument dated October 18, 1996, for the sum of Nine Hundred Thousand
Dollars U.S. ($900,000.00) and other valuable consideration, receipt of which
is hereby acknowledged, CASMYN CORP., a Colorado corporation, does hereby
assign, transfer and deliver to NEWGOLD, INC>, a Nevada corporation, all of its
right, title and interest in and to its interest in Relief Canyon, Ltd., a
Nevada limited liability company (the "Corporation"), together with any and
all assets (tangible or intangible) or holdings or property belonging to the
Corporation, or to be assignedd to the Corporation in the future, along with
any interest it may have in any and all agreements entered into by or on behalf
of the Corporation.
By this transfer, CASMYN CORP. expressly acknowledges that it has no further
right, title or interest, directly or indirectly, in or to the Corporation,
or any of its assets, properties or agreements, and claims no such right by
or through the laws of the State of Nevada or any other jurisdiction.
Witness my hand this ___ day of ______________, 1996.
CASMYN CORP., a Colorado corporation
By: ________________________________________
Douglas C. Washburn, Secretary/Treasurer
EXHIBIT "A"
__________
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000772320
<NAME> CASMYN CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 23260
<SECURITIES> 2097
<RECEIVABLES> 511
<ALLOWANCES> 0
<INVENTORY> 751
<CURRENT-ASSETS> 26867
<PP&E> 17373
<DEPRECIATION> 697
<TOTAL-ASSETS> 48273
<CURRENT-LIABILITIES> 9083
<BONDS> 0
0
141
<COMMON> 535
<OTHER-SE> 33796
<TOTAL-LIABILITY-AND-EQUITY> 48273
<SALES> 3392
<TOTAL-REVENUES> 3392
<CGS> 3045
<TOTAL-COSTS> 3045
<OTHER-EXPENSES> 5764
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145
<INCOME-PRETAX> (6793)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6793)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6793)
<EPS-PRIMARY> (.90)
<EPS-DILUTED> (.90)
</TABLE>
