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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1998
[ ] 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.
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(Exact name of registrant as specified in its charter)
Colorado 84-0987840
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
28720 Canwood Street, Suite 207
Agoura Hills, California 91301
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(Address of principal executive offices)
Registrant's telephone number, including area code:
(818) 879-6501
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.04 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant'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. [ ]
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The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of March 18, 1999, was approximately
$550,000.
As of March 18, 1999, the registrant had 223,181,006 shares of common
stock issued and outstanding.
Documents incorporated by reference: None.
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Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:
This Annual Report on Form 10-K for the fiscal year ended September 30,
1998 contains "forward-looking statements" within the meaning of the Federal
securities laws. These forward-looking statements include, but are not
limited to, statements concerning the Company's expectations regarding the
price of gold, estimated future production, estimated future production
costs, currency, political and economic risks, exploration plans, and other
statements of expectations, beliefs, future plans and strategies, anticipated
events or trends, and similar expressions concerning matters that are not
historical facts. The forward-looking statements in this Annual Report on
Form 10-K for the fiscal year ended September 30, 1998 are subject to risks
and uncertainties that could cause actual results to differ materially from
those results expressed in or implied by the statements contained herein.
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PART I.
ITEM 1. BUSINESS
HISTORY OF THE COMPANY
Casmyn Corp. (the "Company", which term shall include, unless the
context requires otherwise, its subsidiaries) was incorporated in Colorado on
December 4, 1984, as Fintech, Inc. During November 1985, the Company
completed an initial public offering of its securities, generating net
proceeds of approximately $148,844. In 1986, the Company loaned funds from
the initial public offering to companies in the medical diagnostic field,
which were subsequently written-off. On November 29, 1991, the Company
changed its name to Summa Metals Corporation. The Company was in the
development stage from its inception until August 1994, when it purchased all
of the common stock of Casmyn USA, Inc., a Nevada corporation, from Dahya
Holdings, Inc., an entity related to Amyn S. Dahya, for approximately
$150,000. Prior to 1994, the principal business of Casmyn USA, Inc. was
performing contract research and development services in the mining and
environmental industries. On March 31, 1994, Amyn S. Dahya acquired
2,400,000 shares of the Company's common stock, equivalent to 74% of the
Company's voting securities at that time, from certain of its officers,
directors and shareholders, in consideration of an agreement to loan the
sellers $100,000. On September 14, 1994, Summa Metals Corporation changed
its name to Casmyn Corp.
BUSINESS OVERVIEW
The business activities of the Company are concentrated on mineral
resource development. As of and subsequent to September 30, 1998, the
Company has been focusing on its gold mining operations in Zimbabwe. The
Company conducts its mining operations in Zimbabwe through its wholly-owned
subsidiary organized in Zimbabwe, Casmyn Mining Zimbabwe (Private) Ltd. In
addition, the Company is currently implementing programs to improve
production, increase reserves, reduce expenditures, and maximize operating
profits and cash flows (see "MAJOR DEVELOPMENTS DURING AND SUBSEQUENT TO THE
FISCAL YEAR ENDED SEPTEMBER 30, 1998" and "ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS").
During the fiscal years ended September 30, 1997 and 1998, the Company's
primary business focus was the acquisition, exploration and operation of
precious mineral resource properties in Zimbabwe and base metal resource
properties in Zambia. During the fiscal years ended September 30, 1995 and
1996, the Company was also involved, to varying degrees, in the acquisition
and exploration of precious metal resource properties in South
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Africa, precious stone properties in South Africa, and research and
development related to minerals testing, processing engineering and
environmental technologies. The Company has conducted such operations
through various subsidiaries.
During May 1995, the Company received approval from the Zimbabwe
Investment Center to invest in mining operations in Zimbabwe and obtained an
option to acquire a group of private gold mining companies in Zimbabwe.
After an extensive geological and engineering review of the properties, the
Company signed a purchase agreement in August 1995, obtained Reserve Bank of
Zimbabwe approval for the purchase in December 1995, and concluded the
purchase on January 31, 1996 (see "MINING ACTIVITIES - Zimbabwe Gold
Properties"). As a result, the Company paid $4,864,216 to acquire 100% of
the shares of a group of five 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 in central Zimbabwe. As
of September 30, 1998, these properties contained aggregate proven (measured)
and probable (indicated) gold reserves of 901,490 ounces (see "ITEM 2.
PROPERTIES - ZIMBABWE - Reserves"). The mines contain numerous shafts, mining
equipment and mineral processing mills with a total current capacity of
approximately 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 gold recovered from
the re-processing of tailings dumps. A 2.5% royalty is payable to Ashanti
Goldfields of Zimbabwe on the gold recovered from re-processed tailings at
the Lonely mine, and a 5% royalty is payable to Philip Austin Williams on the
gold recovered from re-processed tailings on the Elumba and Up to Date
properties. The Company has commenced gold production from these properties
as well as completed the first phase of a capital expenditure program to
upgrade and retrofit various mine facilities (see "ITEM 2. PROPERTIES
- - ZIMBABWE - Turk Mine").
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 (see "ITEM 2. PROPERTIES - ZIMBABWE -
Queen's Group of Mines"). Prior to the Company's purchase, the Queen's Group
of Mines produced over 340,000 ounces of gold at an average recovered grade
of 0.44 ounces per ton (14.9 grams per tonne). The Queen's Group of Mines
are located approximately eleven kilometers south of the Turk mine and mill
and are operated under a mine plan which includes the Turk mine and other
mining properties in the area owned by the Company.
During the fiscal year ended September 30, 1996, the Company purchased
all of the common shares of Copperbelt Associates
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Limited for $65,700, thereby acquiring a full interest in a three-year
prospecting license covering the Luswishi Dome area, which covers
approximately 4,388 square kilometers in the Zambia copperbelt. During the
fiscal year ended September 30, 1998, the Company changed the name of
Copperbelt Associates Limited to Casmyn Mining (Zambia) Limited. Previous
exploration in this area has shown the presence of copper, uranium and
cobalt. The property is adjacent to some of the largest copper mining
operations in the world. Previous exploration on this property has yielded
ore grade drill intercepts of copper together with uranium and cobalt.
Through September 30, 1998, the Company had expended approximately $800,000
on airborne and ground geophysics, geological mapping, geochemical sampling,
diamond drilling and percussion drilling. Although the prospective formations
were encountered in the drilling, there was no economic mineralization.
Since substantial additional funds would be required to finance continuing
exploration efforts, during the fiscal year ended September 30, 1998, the
Company decided to pursue a strategy of minimizing its capital expenditures
on this property through formation of a joint venture to continue exploration
efforts. The Company has signed a letter of intent to establish a joint
venture with a major mining company to continue with the exploration of this
area, but there can be no assurances that such joint venture will be
completed or that its contemplated activities will be successfully concluded.
In the interim, and in conjunction with the prospective joint venture
partner, the Company has allowed its prospecting license to lapse in
anticipation of the prospective joint venture partner obtaining a new
prospecting license covering the same area. The potential joint venture
partner is a significant operator in Zambia and has substantial experience
and financial resources.
During the fiscal years ended September 30, 1995 and 1996, the Company
conducted a diamond exploration program in South Africa, primarily on the
Schweizer property located in the Schweizer-Reneke area of South Africa,
approximately 220 kilometers from the Kimberly diamond mining area. The
Company was seeking Kimberlite pipes, which are known to contain diamond
bearing deposits. Through September 30, 1998, the Company had expended
approximately $900,000 on this exploration program. The Company did not find
any Kimberlite pipes, and as of September 30, 1998, it abandoned all the
diamond prospecting contracts that it held with respect to its diamond
exploration program in South Africa and it completed reclamation work on the
exploration sites. The Company does not intend to conduct any further
diamond exploration activities in South Africa or otherwise.
During the fiscal year ended September 30, 1997, Casmyn International
Inc. was organized by the Company to engage in business development
activities in the Commonwealth of Independent States. The Company received a
55% equity interest in Casmyn International Inc. in exchange for an
investment of
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$220,000. On May 11, 1998, the Company reached a preliminary agreement in
principle to sell its 55% equity interest in Casmyn International Inc. to
WaterPur International Inc., a related party, the completion of which was
subject to several contingencies. As of September 30, 1998, the Company had
written-off its investment in Casmyn International Inc. The Company is
evaluating its alternatives with respect to the disposition of its investment
in Casmyn International Inc., and does not expect that the sale of its
investment in Casmyn International Inc. to WaterPur International Inc. will
be completed.
MAJOR DEVELOPMENTS DURING AND SUBSEQUENT TO THE FISCAL YEAR ENDED SEPTEMBER 30,
1998
Changes in Operations and Corporate Structure:
Effective August 1, 1998, Hanif S. Dahya and Sandro Kunzle resigned from
the Board of Directors. Mark S. Zucker, Alexander L. Cappello, Divo Milan
and John Francis were appointed to the Board of Directors on August 21, 1998.
On October 1, 1998, Amyn S. Dahya resigned as President and Chief Executive
Officer and was replaced by Mark S. Zucker. New management commenced a
comprehensive review and evaluation of the Company's existing capital
structure and business operations during the latter part of 1998, with the
objective of maximizing value for all of the Company's equity holders. As a
result, the Company began the implementation of a plan to streamline its
operations worldwide, divest its interests in all non-core businesses, and
focus its efforts on its mining operations in Zimbabwe.
The Company has implemented programs to evaluate ways to improve
production and achieve production efficiencies, increase gold reserves,
reduce capital expenditures and operating costs, maximize operating profits
and operating cash flows, and evaluate future opportunities. The Company has
reduced its executive management and corporate staff from seven to two
people, eliminating standard employee benefits and utilizing part-time
personnel as necessary. The Company has closed its Vancouver, British
Columbia, Canada corporate and administrative offices, significantly reducing
occupancy costs, as well as travel and various other corporate expenses.
Default on First Convertible Preferred Stock:
On May 15, 1998, the Company received notification from The NASDAQ
StockMarket, Inc. ("NASDAQ") that it was in default of certain listing
requirements and that NASDAQ intended to delist the Company's common stock on
May 25, 1998. The Company appealed the delisting notice and requested a
hearing with NASDAQ. The Company's common stock was ultimately delisted from
the NASDAQ SmallCap Market on July 31, 1998.
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Pursuant to the Preferred Stock Investment Agreement dated April 11,
1997 by and among the Company and various investors (the "Preferred Stock
Investment Agreement"), a technical default occurred when the Company's
common stock was delisted from NASDAQ on July 31, 1998. The Company may be
obligated to pay the holders of the First Convertible Preferred Stock a cash
penalty of 3% of the total purchase price of the First Convertible Preferred
Stock during any period in excess of 30 days that the Company's common stock
is not listed and traded on NASDAQ or a national securities exchange. The
Preferred Stock Investment Agreement provides the holders of the First
Convertible Preferred Stock the opportunity to have their shares redeemed by
the Company at the adjusted liquidation preference if the 3% penalty is not
paid within 30 days of when due. The Company believes that the exercise of
such rights by the holders of the First Convertible Preferred Stock would be
subject to legal challenge by the Company.
Since the Company's common stock was delisted from NASDAQ on July 31,
1998, the Company recorded a penalty of $839,737 through September 30, 1998,
which has not been paid. Subsequent to September 30, 1998, the Company has
repurchased or converted 598,915 shares of the First Convertible Preferred
Stock, and such selling shareholders have waived the right to claim their
proportionate share of the penalty, thus reducing the Company's corresponding
potential penalty obligation to approximately $375,000.
The Company is currently engaged in discussions with the holders of the
remaining shares of First Convertible Preferred Stock regarding various
matters, including a waiver of the penalty and of their rights to require the
Company to redeem their shares of First Convertible Preferred Stock. There
can be no assurances that the Company will be able to obtain a waiver or that
the holders of the First Convertible Preferred Stock will not exercise their
rights to require the Company to redeem their shares. Should the holders of
the First Convertible Preferred Stock demand payment of the cash penalty or
exercise their rights to require the Company to redeem their shares, and
should the Company not prevail in its challenge to any such asserted rights,
the Company may be forced to file for protection under the United States
Bankruptcy Code.
Repurchases and Conversion of First Convertible Preferred Stock:
The Company repurchased 19,948 shares of First Convertible Preferred
Stock for $25,753 during the fiscal year ended September 30, 1998.
Subsequent to September 30, 1998, the Company repurchased 598,655 shares of
First Convertible Preferred Stock for $1,221,719 and converted 260 shares of
First Convertible Preferred Stock into 5,424,792 shares of common stock,
resulting in 495,236 shares of First Convertible Preferred Stock being issued
and outstanding as of December 31, 1998.
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Financial Advisor Agreement:
On February 16, 1998, the Company entered into an agreement with a
financial advisor to render certain financial advisory and investment banking
services to the Company. The services to be provided included advice on
strategic alternatives and implementation of the proposed restructuring of
the First Convertible Preferred Stock. The Company paid a retainer fee of
$150,000 on execution of the agreement and made subsequent payments
aggregating $170,094. Efforts to restructure the First Convertible Preferred
Stock through the assistance of the financial advisor were terminated during
April 1998. Nonetheless, should the Company complete a restructuring of the
First Convertible Preferred Stock within two years from the termination date,
the financial advisor may assert that the structure or method of such
restructuring entitles it to a success fee of $1,000,000 plus potential
additional amounts based on the post-restructuring enterprise value or
trading price of the Company's common stock as stated in the agreement. If a
restructuring were to occur, the Company does not believe the financial
advisor would be entitled to this fee. Although the Company would vigorously
contest any claim for payment by the financial advisor, there can be no
assurances that the Company would be successful in this regard.
WaterPur International Inc.:
During the fiscal year ended September 30, 1995, the Company made an
equity investment in WaterPur International Inc. ("WaterPur"). WaterPur is a
public company engaged in the development, manufacture, sales and management
of water treatment, purification and depollution equipment and facilities.
WaterPur's shares are traded on the OTC Bulletin Board. Through December 31,
1998, WaterPur shared office facilities and personnel with the Company.
During the previous several fiscal years, certain officers, directors and
shareholders of the Company have also been officers, directors and
shareholders of WaterPur.
On June 29, 1995, the Company acquired a controlling interest in
WaterPur 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 shares
of WaterPur preferred stock at $2.00 per share. On September 30, 1996, the
Company elected to convert its preferred shares into common shares of
Waterpur, resulting in the Company owning approximately 24.3% of WaterPur at
that time. In addition, during the three months ended December 31, 1996, the
Company exchanged 425,750 shares of common stock of Auromar Development Corp.
owned by the Company for 1,532,700 shares of WaterPur common stock, resulting
in the Company increasing its equity interest in WaterPur to approximately
31.2%.
Effective September 30, 1997, the Company restructured its investment in
WaterPur and received an aggregate of 7,900,004
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shares of convertible preferred stock of WaterPur. The Company converted
$4,574,368 owed to the Company by WaterPur into 5,082,626 shares of
convertible preferred stock, and exchanged 5,634,756 shares of common stock
of WaterPur owned by the Company into an additional 2,817,378 shares of
convertible preferred stock. The $4,574,368 owed by WaterPur to the Company
consisted of working capital advances and services provided to WaterPur.
Each share of preferred stock is entitled to two votes per share, bears no
dividend, constitutes a senior security of WaterPur, and may be converted at
any time after twelve months from the date of distribution into two shares of
WaterPur common stock. All outstanding convertible preferred stock is
automatically converted into two shares of WaterPur common stock on the
eighteenth month from the date of distribution to the Company's shareholders.
The number of convertible preferred shares received upon conversion of the
WaterPur debt was determined based upon the closing market price of WaterPur
common stock on September 30, 1997. This restructuring was based on the
advice of independent investment banking firms representing the respective
interests of the Company and WaterPur.
In conjunction with the restructuring, the Company purchased 150,000
shares of its common stock held by WaterPur for $750,000 cash, and WaterPur
issued to the Company warrants to purchase 3,300,000 shares of WaterPur
common stock exercisable at $0.75 per share for a period of three years.
Effective September 30, 1997, the Company's Board of Directors approved
the spin-off of the 7,900,004 shares of convertible preferred stock to the
common and preferred shareholders of the Company of record on October 15,
1997, subject to compliance with regulatory requirements. Accordingly, at
September 30, 1997, the Company had an investment in WaterPur of $4,574,368,
and a corresponding dividend payable.
During the fiscal year ended September 30, 1998, due to a significant
and prolonged decrease in the market value of WaterPur's common stock,
Waterpur's inability to repay amounts borrowed from the Company, and
Waterpur's continuing need for additional loans, management of the Company
determined that there had been an impairment in the value of the investment
in WaterPur, and wrote off the entire investment in WaterPur. The
corresponding dividend payable has also been decreased to zero as a result of
the write off.
During the fiscal year ended September 30, 1998, the Company began
implementation of a plan to separate the operations, personnel and executive
management of the Company and WaterPur, which plan had been substantially
completed by December 31, 1998. In December 1998, the Board of Directors
determined not to effect the spin-off of the Company's preferred stock
investment in WaterPur for several reasons, including WaterPur's inability to
obtain regulatory approval to date and in the foreseeable future, and
WaterPur's inability to complete its annual audit and to make
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other securities filings on a timely basis. The Company is continuing to
review the WaterPur restructuring as a result of WaterPur's current financial
condition and its inability to accomplish certain actions and fulfill certain
obligations.
Loan Guaranty:
As of September 30, 1997, the Company had $5,074,659 of restricted cash
(including accrued interest of $74,659), which had been deposited with two
financial institutions under the Company's guarantees of two short-term
loans. Under agreements with such parties, the loans were secured by certain
investment accounts which contained shares of common stock of the Company.
During the three months ended March 31, 1998, the significant decline in the
price per share of the Company's common stock created an impairment in the
value of the shares of common stock in the accounts with such financial
institutions. As a result, the financial institutions proceeded to call the
guarantees provided by the Company, resulting in the Company incurring a loss
of $5,000,000.
Repayment of Short-Term Borrowings:
During February 1997, the Company arranged a $5,000,000 short-term
credit facility with Barclays Bank of Zimbabwe, with interest at LIBOR plus
2.25% per annum. As of September 30, 1997, the Company had borrowed
$4,966,160 under this credit facility. The credit facility became repayable
upon demand commencing February 1998. During the fiscal year ended September
30, 1997, the Company recognized a foreign exchange loss of $861,857 in
connection with the borrowings under this credit facility. On June 9, 1998,
Barclays Bank of Zimbabwe exercised its right to demand immediate repayment
of the outstanding balance, and on June 11, 1998, the Company paid $4,966,160
to the bank in full settlement of this obligation.
MINERAL RESOURCE DEVELOPMENT
The following glossary of mining terms and definitions related to the
discussion of the Company's mining activities which follows.
Mineral 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.
Reserve - That part of a mineral deposit which could be economically and
legally extracted or produced at the time of the reserve determination.
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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 for 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.
Inferred Resources - Additional mineralized material inferred from sampling
where the lack of data means that continuity cannot be predicted with
certainty.
Tonne - Refers to metric ton and is equal to 1.102 short tons or 2,204.622
pounds. 1.00 troy ounce per short ton equals 34.2857 grams per tonne.
MINING ACTIVITIES
The Company conducts its exploration and mining activities in Zimbabwe
through its wholly-owned subsidiary, Casmyn Mining Zimbabwe (Private) Ltd.
The Company has conducted its exploration activities in Zambia and South
Africa through its wholly-owned subsidiaries, Casmyn Mining (Zambia) Limited
(formerly Copperbelt Associates Limited) and Casmyn Mining Corporation,
respectively. Through September 30, 1998, the Company's properties and
exploration programs in South Africa and Zambia did not indicate the presence
of proven commercially viable mineral deposits and were therefore abandoned.
Zimbabwe Gold Properties:
Casmyn Mining Zimbabwe (Private) Ltd. was organized and incorporated in
Zimbabwe to acquire mineral properties and mining operations, and was granted
approval by the Zimbabwe Investment Center to invest in mining operations in
Zimbabwe on May 23, 1995. 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 pursues its
exploration and development activities in a manner designed to utilize
exploration activities to prove reserves, while at the same time developing
mining and processing capacity. The Company attempts to maintain an optimum
mine life. Through September 30, 1998, the Company had expended in excess of
$24,000,000 to purchase, explore and develop its Zimbabwe gold properties.
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On January 31, 1996, the Company acquired 100% of the shares of the
Zimbabwe Companies. The total consideration for this acquisition was
$4,864,216. The funds used to conclude this acquisition were obtained
primarily from a combination of private placements of common stock and the
proceeds from a convertible debenture. 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 purchase price of the Zimbabwe Companies were the
tangible and intangible assets of the business acquired, including primarily
gold reserves; the potential for increasing gold production of the Zimbabwe
Companies; and the related contributions that the Zimbabwe Companies could
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 to mine and process gold.
Through the acquisition of the Zimbabwe Companies, the Company owns a
100% interest in 18 gold mines that have produced in excess of 1,000,000
ounces of gold since mining commenced in the early 1900s. The Company has
implemented the modernization of the physical plant and employed various
mining technologies to improve mining efficiencies, resulting in a
significant increase in gold recovery and a reduction in average cost per
ounce of gold produced. The Company is also expanding its gold reserves
through the application of modern exploration techniques. As of September
30, 1998, the Company was operating four of the 18 mines that it had acquired
- - the Turk, Dawn, Queen's 7 and Lonely mines. As of September 30, 1998,
these properties contained aggregate proven (measured) and probable
(indicated) gold reserves of 901,490 ounces (see "ITEM 2. PROPERTIES -
ZIMBABWE - Reserves").
The Company's expansion of its mine and physical plant infrastructure at
a total cost of approximately $19,000,000 was substantially completed during
the fiscal year ended September 30, 1998. The expansion included
refurbishment of two existing mills and installation of a third new mill,
installation of a new sorting plant, new leach and gold recovery circuits,
refurbishment of three existing shafts at the Turk mine, sinking of a new
shaft at the Turk mine western extension, new tailings reprocessing plants at
the Turk and Lonely mines, construction of housing and infrastructure, and
construction and commissioning of new tailings disposal sites.
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 (see "ITEM 2. PROPERTIES - Queen's Group
of Mines"). Prior to the Company's purchase, the Queen's Group of Mines
produced over 340,000 ounces of gold at an average recovered grade of 0.44
ounces per ton (14.9 grams per tonne). The Queen's Group of Mines are
located approximately eleven kilometers south of the Turk mine and mill and
are operated under a mine plan which
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includes the Turk mine and other mining properties in the area owned by the
Company.
During September 1998, a tribute agreement was concluded with Philip
Austin Williams on the Elumba and Up to Date gold mining properties, which
requires a 5% royalty to be paid on gold production from the reprocessing of
old mill tailings from these properties. The Elumba and Up to Date
properties contain approximately 180,000 tonnes of dump material with an
estimated recoverable grade of 0.45 grams per tonne of gold. The dump
material is compatible with the ores currently being treated by the
processing facilities at the Turk mine, and the 4 kilometer distance from
these properties to the Turk mine makes the material transportable by
pipeline.
As of September 30, 1998, Steffen, Robertson and Kirsten, independent
engineering consultants, have calculated that the Company has 901,490 ounces
of proven (measured) and probable (indicated) gold reserves and approximately
296,950 ounces of inferred gold resources in its Zimbabwe properties (see
"ITEM 2. PROPERTIES - ZIMBABWE - Reserves"). As of September 30, 1997, the
Company had reported 502,499 ounces of proven/probable gold reserves.
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 a full interest in a three-year prospecting license
covering the Luswishi Dome area, which covers approximately 4,388 square
kilometers in the Zambia Copperbelt. During the fiscal year ended September
30, 1998, the Company changed the name of Copperbelt Associates Limited to
Casmyn Mining (Zambia) Limited. Previous exploration in this area has shown
the presence of copper, uranium and cobalt. The property is adjacent to some
of the largest copper mining operations in the world. Previous exploration
on this property has yielded ore grade drill intercepts of copper together
with uranium and cobalt. Through September 30, 1998, the Company had expended
approximately $800,000 on airborne and ground geophysics, geological
mapping, geochemical sampling, diamond drilling and percussion drilling.
Although the prospective formations were encountered in the drilling, there
was no economic mineralization. Since substantial additional funds would be
required to finance continuing exploration efforts, during the fiscal year
ended September 30, 1998, the Company decided to pursue a strategy of
minimizing its capital expenditures on this property through formation of a
joint venture to continue exploration efforts. The Company has signed a
letter of intent to establish a joint venture with a major mining company to
continue with the exploration of this area, but there can be no assurances
that such joint venture will be completed or that its contemplated activities
will be successfully concluded. In the interim, and in conjunction with
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the prospective joint venture partner, the Company has allowed its
prospecting license to lapse in anticipation of the prospective joint venture
partner obtaining a new prospecting license covering the same area. The
potential joint venture partner is a significant operator in Zambia and has
substantial experience and financial resources.
South Africa:
During the fiscal years ended September 30, 1995 and 1996, the Company
conducted a diamond exploration program in South Africa, primarily on the
Schweizer property located in the Schweizer-Reneke area of South Africa,
approximately 220 kilometers from the Kimberly diamond mining area. The
Company was seeking Kimberlite pipes, which are known to contain diamond
bearing deposits. Through September 30, 1998, the Company had expended
approximately $900,000 on this exploration program. The Company did not
find any Kimberlite pipes, and as of September 30, 1998, it abandoned all the
diamond prospecting contracts that it held with respect to its diamond
exploration program in South Africa and it completed reclamation work on the
exploration sites. The Company does not intend to conduct any further
diamond exploration activities in South Africa or otherwise.
Industry Overview and Certain Additional Factors:
Competition. The Company competes with large established mining
companies having substantial capabilities and greater financial and technical
resources than the Company. The Company also competes with other mining
companies in the recruitment and retention of qualified employees.
Accordingly, the Company may not be able to acquire future potential mining
properties under acceptable terms and conditions, or attract and retain
qualified employees.
Government Approval and Regulations. The exploration and mining
operations of the Company, through its wholly-owned subsidiaries, Casmyn
Mining Corporation, Casmyn Mining (Zambia) Limited and Casmyn Mining Zimbabwe
(Private) Ltd., have been conducted through its offices in South Africa and
Zimbabwe. Casmyn Mining Corporation is subject to the laws of South Africa,
which require, among other things, issuance of permits to enable the Company
to conduct its exploration activities. Casmyn Mining (Zambia) Limited has
conducted mineral exploration in Zambia under a prospecting license obtained
from the government of Zambia. The laws of Zimbabwe also require approval to
conduct exploration and mining activities generally, and Casmyn Mining
Zimbabwe (Private) Ltd. received such approval from the Zimbabwe Investment
Center on May 23, 1995.
Compliance with Environmental Laws. To date and through September 30,
1998, the cost of environmental compliance relating to mineral development
has not been material. The Company
15
<PAGE>
believes that it is in compliance with the environmental laws of the
countries in which it operates. The Company is currently reviewing proposals
for the preparation of an environmental management plan at its mines in
Zimbabwe. It is the Company's policy to reclaim disturbed sites as mining is
completed and to restore those sites to the standards required by current
Zimbabwe legislation.
Development, Construction and Mining Operations. Should the Company
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, delays in obtaining governmental
approvals, inability to obtain financing or other factors could cause delays
in developing mineral resource properties.
The business of gold, silver, copper, cobalt and uranium mining is
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.
Uncertainty of Reserve Estimate Calculations and Ability to Replace
Existing Reserves. Uncertainty exists in the determination of proven and
probable (measured and indicated) 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.
16
<PAGE>
Market Factors and Volatility. Active international markets have
historically existed for gold. The Zimbabwe government requires all gold
produced in Zimbabwe to be sold to the Zimbabwe Reserve Bank at the spot 2:00
p.m. London price on the day of delivery. There has been an active market
for copper, cobalt and uranium, which are of a commodity nature. 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 dropped
significantly in 1998, resulting in the Company revising its gold reserve
estimates to reflect the current gold price (see "ITEM 2. PROPERTIES -
ZIMBABWE - Reserves").
Need for Additional Capital. To realize the full potential of the
Company's mineral properties, through continuing exploration, development and
production, the purchase of additional properties, and the construction of
mining facilities, the Company will require substantial additional capital.
To the extent that the Company decides to fund such activities directly,
there can be no assurances that the Company will be able to secure adequate
capital on a timely basis and under acceptable terms and conditions.
Certain Tax Considerations. The Company is predominantly invested in
foreign subsidiaries. These subsidiaries are subject 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 United States Federal and
state income taxes when distributed, deemed distributed or otherwise
attributed to the Company, which is a company organized under the laws of the
State of Colorado. Complex United States tax rules apply for purposes of
determining the calculation of those United States 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 United States taxes.
Normally, all foreign income earned by a United States multinational
corporation eventually will be subject to United States tax. Income earned
by a foreign branch of a United States company is taxable currently in the
United States, and income earned by a foreign subsidiary could be subject to
United States tax either in the year distributed to the United States 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 is subject to foreign income taxes.
In order to relieve double taxation, the United States Federal tax law
generally allows United States
17
<PAGE>
corporations a credit against their United States tax liability in the year
the foreign earnings become subject to United States tax in the amount of the
foreign taxes paid on those earnings. Under complex limitation rules, the
credit is limited, in general, to the United States pre-credit tax imposed on
the United States corporation's foreign source income. Further, complex tax
rules exist for allocating and apportioning interest, research and
development expenses and certain other expense deductions between United
States and foreign sources. Limiting provisions of the source rules decrease
the amount of foreign source income many United States multinational
corporations 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 United States multinational 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 United
States tax rate.
General Political Risks. While the Company believes its relationship
with the government of Zimbabwe is satisfactory, certain third-world
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, popular unrest associated with demands for improved political,
economic and social conditions, and 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.
The economies of individual countries in which the Company does business
may differ favorably or unfavorably, as well as significantly, from the
United States economy in such respects as the rate of growth of gross
national product, rate of inflation, currency stability, 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 extent, through ownership interests,
regulation or taxation, in their respective economies. Action by these
governments could have a significant adverse effect on the Company's business.
Risk of Currency Exchange Rate Fluctuations. The value of the assets of
the Company as measured in dollars may also be affected favorably or
unfavorably by fluctuations in currency
18
<PAGE>
rates and exchange control regulations. Some of the currencies of countries
in which the Company does business have experienced devaluations relative to
the United States dollar, and major adjustments have been made periodically
in certain of such currencies. In addition, certain of these countries face
significant 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 to immediately resell that
currency to the dealer. The Company conducts its foreign currency exchange
transactions on the spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market. The Company does not currently engage
in any foreign exchange hedging transactions.
Employees. The Company and its subsidiaries currently have 455
employees, of which 391 of these employees are mine workers who are covered
by the 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. The
Company has not suffered any strikes or other work stoppages, and management
believes that it relations with its employees are good.
In conjunction with the restructuring of the Company's operations and
the relocation of its corporate offices from Vancouver, British Columbia,
Canada to Los Angeles, California, the Company has significantly reduced
corporate operating costs by reducing its executive management and corporate
staff from nine to two people, eliminating standard employee benefits and
utilizing part-time personnel as necessary (see "ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS").
ITEM 2. PROPERTIES
ZIMBABWE
The Company owns 100% of 18 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 (1,463 hectares) and 10 base metal claim blocks (250 hectares), and
has received an Exclusive
19
<PAGE>
Prospecting Order that covers the prospective area around the Turk and
Charliesona mines. This gives the Company the exclusive right to prospect
and peg gold claims in an area covering 37,182 hectares for a period of three
years commencing August 1998. The Company's properties in Zimbabwe have
produced in excess of 1,000,000 ounces of gold since mining commenced in the
early 1900s. 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, Dawn and Queen's 7 mines.
Turk Mine:
General. The Turk mine is located approximately 55 kilometers north of
Bulawayo, Zimbabwe. A single lane paved road that accesses the mine is
currently being upgraded by the Zimbabwe government to a two lane highway.
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) over widths averaging
2.5 meters in a series of mineralized shear zones known as lodes. The Turk
mine has been dewatered down to the 550 meter level and current
rehabilitation and development work is being concentrated in the first 350
meters. A drilling and underground development program conducted by the
Company in 1997 and 1998 identified an open pit mineable body (the "Eli
Khulu" body) between the Incline and Armenian shafts.
The current geological ore reserves at the Turk mine are a combination
of old mill tailings that can be profitably re-processed and open pit and
underground mineable reserves.
Existing Infrastructure. The Turk mine facility includes houses for
managers and workers, mine offices and work shops. The mineral processing
facilities consist of 240 tonne and 500 tonne per day ball mills that are
currently being used to regrind 2,000 to 2,200 tonnes per day of old mill
tailings along with a dedicated 60 tonne per day hard rock mill and
associated crusher circuit and leaching/adsorption circuits, and a 250,000
square meter 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,
and one shaft which is not fully developed, 4,500 cfm of compressed air,
underground locomotives and air drive ore loaders, and underground pump
stations to dewater the mine and provide water for the treatment facilities.
Refurbishment and Construction. The Company is currently undertaking
the following projects at the Turk mine: re-equipping of the main vertical
shaft so that it is capable of hoisting 250 tonnes per day of ore and waste;
development of the electrical reticulation system to distribute 5,000 KVA of
electricity; installation of power factor correction equipment;
20
<PAGE>
installation of a water recycling system and additional water pumping
facilities; and refurbishment of the 250 tonne per day crusher. The Company
expects to complete these projects during the fiscal year ending September
30, 1999.
During the fiscal year ended September 30, 1998, the Company expended
approximately $3,350,000 on these projects and anticipates expending from
$200,000 to $400,000 on these projects during the fiscal year ending
September 30, 1999.
Exploration and Development. The Company has either completed or
currently has in progress the following exploration and development projects
at the Turk mine: surface core drilling and underground core drilling, to
delineate underground sulphide ore zones; underground primary and secondary
development to gain access to underground sulphide ore zones on levels
between 50 and 350 meters below the surface; augering and metallurgical test
work on old mill tailings dumps; and re-mapping and sampling of old
underground workings.
During the fiscal year ended September 30, 1998, the Company expended
approximately $600,000 on these projects and anticipates expending
approximately $300,000 on these projects during each of the fiscal years
ending September 30, 1999 and 2000.
Subject to a positive feasibility study on the Turk mine underground
ore, a major development of the Turk mine is estimated to require a capital
expenditure of approximately $3,000,000 to $5,000,000 over a period of 3
years, which would allow the Company to access, hoist and treat 500 to 700
tonnes per day of underground ore.
Lonely Mine:
General. The Lonely mine is 30 kilometers 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% royalty payable to Ashanti Goldfields of Zimbabwe on the gold
produced from the surface deposits that include approximately 1,100,000
metric tons of mill tailings with a gold recoverable grade of 0.32 grams per
tonne. The Company operates a 1,250 tonne per day carbon in leach processing
facility to recover gold from tailings. This carbon in leach facility can be
disassembled and moved to another site at the end of operations at the Lonely
mine site.
Existing Infrastructure. The underground infrastructure at the Lonely
mine consists of two mine shafts, hoists and headframes and staged pumping
facilities. The mineral processing facility includes a high pressure
hydraulic tailings recovery circuit, a carbon in leach plant and tailings
dam. Offices and accommodations for all workers are at the site.
21
<PAGE>
Refurbishment and Construction. The Company has completed or currently
has in progress the following projects at the Lonely mine: upgrading the
hoisting and water pumping capacity at the two shafts; upgrading the water
storage dams, construction of additional carbon in leach capacity to allow
tonnage throughput to be increased from 1,000 to 1,250 tonnes per day; and
the installation of an oxygenation system. The Company expects to complete
these projects during the fiscal year ending September 30, 1999.
During the fiscal year ended September 30, 1998, the Company expended
approximately $250,000 on these projects and anticipates expending
approximately $20,000 on these projects during the fiscal year ending
September 30, 1999.
The main water supply for the Lonely dump retreatment operation is the
flooded Lonely mine. The Company has been refurbishing the shaft equipment,
constructing pumping stations and building water storage facilities on the
surface to increase the security of the water supply to the plant. In spite
of this, there have been periods of reduced throughput to the plant because
of inadequate water supplies. The water level in the Lonely mine has now
been lowered to over 500 meters below ground surface. The long electrical
cable length and resulting voltage drop to the underground pumps has created
a practical limit of pumping depth. It is estimated that the practical limit
will be reached in May 1999 at the current rate that the water level in the
mine is dropping. The Company is planning to suspend the Lonely mine dump
retreatment operations and relocate the approximately 40 workers to the Turk
mine to allow the Lonely mine water to recharge. It is estimated that the
suspension of mining activities at the Lonely mine will last until the onset
of the rainy season in approximately November 1999. Alternative production
sources at the Turk mine are being examined to replace the lost production at
the Lonely mine. The Lonely mine currently accounts for approximately 15 -
20% of the Company's monthly gold production.
Exploration and Development. The Lonely mine is under a tribute
agreement which includes only the tailings dumps and does not include the
mineral rights to the underground ores.
Queen's Group of Mines:
General. The Queen's Group of Mines (which includes the Dawn mine) is
located 11 kilometers south of the Turk mine and is accessible via an
all-weather tar road. The Queen's Group of Mines is located on the national
electrical power grid. Prior to the Company's acquisition of the Queen's
Group of Mines, they produced over 340,000 ounces of gold at an average
recovered grade of 0.44 ounces of gold per tonne. Underground sulphide ore
and mill tailings dumps are transported to the Turk mine for treatment.
22
<PAGE>
Existing Infrastructure. The Queen's Group of Mines consists of mine
shafts and headframes, tailings dams, mine offices, workshops, mill
buildings, manager and worker housing and an elution facility.
Refurbishment and Construction. The Company has completed or currently
has in progress the following projects at the Dawn mine: equipping of the
Daily News shaft for ventilation and second access; purchase of a vacuum to
sweep coarse gold left behind in the old workings; and purchase of water jet
equipment for sweeping broken ore underground.
Exploration and Development. During the fiscal year ended September 30,
1998, the Company conducted surface trenching and drilling, and underground
mapping and sampling of sulphide ore zones. Further underground development
is scheduled to continue during the fiscal year ending September 30, 1999.
During the fiscal year ended September 30, 1998, the Company expended
approximately $260,000 on these projects and anticipates expending
approximately $30,000 on these projects during the fiscal year ending
September 30, 1999.
Charliesona Mine:
General. The Charliesona mine is located 6 kilometers northwest of the
Turk mine on an all-weather gravel road and is located on the national
electrical power grid. The ore sources for the Charliesona mine are open pit
oxide and surface mill tailings dumps.
Existing Infrastructure. The Charliesona mine consists of three
vertical mine shafts with headgear, a mill building with a 100 tonne per day
ball mill, water reservoir, CIP tanks, flotation cells and vat leach tanks.
Refurbishment and Construction. The Company has no plans for
refurbishment and the mine is under care and maintenance.
The Company has identified underground sulphide, surface oxide and mill
tailings dumps on the surface that are not currently economic to produce at
current gold prices. The Company currently has no plans to abandon the mine,
but should it decide to do so, the closure costs of the mine are not
estimated to be significant. The feasibility of using the water sources at
the Charliesona mine as a supplementary supply for the Turk Mine is currently
being examined. If such water sources were to be used, the Company would be
required to construct a pipeline from the Charliesona mine to the Turk mine,
a distance of approximately 8 kilometers.
Exploration and Development. During the fiscal year ended September 30,
1998, the Company completed surface trenching, geological mapping, and
sampling of oxide ore. Further work in
23
<PAGE>
these areas is scheduled to continue during the fiscal year ending September
30, 1999.
Ding Dong, Sandy, Peter Pan and Tiberius Mines:
General. All of these properties are on the national electrical power
grid and are accessible by all weather roads from the Turk mine. The ore
sources for these mines consist of open pit oxide and underground sulphide
mineral deposits, and mill tailings dumps.
Existing Infrastructure. These mines consist of vertical and incline
mine shafts, surface excavations and boreholes for water. There are vat
leach tanks and a crushing circuit 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; and reclamation of exploration trenches.
The sulphide and oxide deposits are not currently economic to produce at
current gold prices. The Company may transport the mill tailings dumps at
the Ding Dong mine to the Turk mine, a distance of 5 kilometers, for
treatment. The feasibility of installing a pipeline to pump the water
sources from the Ding Dong mine to the Turk mine are currently being examined.
During the fiscal year ended September 30, 1998, the Company expended
minor amounts on the these projects, and anticipates expending minor amounts
on these properties during the fiscal year ending September 30, 1999.
Exploration and Development. During the fiscal year ended September 30,
1998, the Company completed surface trenching, surface and geological
mapping, auger sampling and metallurgical test work.
Reserves:
The tables set forth below present the Company's interest in estimated
reserves of contained and recoverable ounces of gold in place at each of the
Company's mining properties as of October 31, 1998. These estimates were
prepared by the Company's geologists at the mines and were independently
verified by Steffen, Robertson and Kirsten, specialists in the field of
reserve validation, in a report dated November 1998. However, these
estimates should not be considered as an indication of future results of
operations, and are subject to adjustment based on additional information
obtained in conjunction with the Company's continuing mining activities on
the respective mining properties.
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<PAGE>
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 75%. The stated grade in the tables for the Proven and Probable
categories is for recoverable grams of gold per tonne of ore. The stated
grade for the Measured, Indicated and Inferred categories is for contained
grams of gold per tonne of ore.
The categories are based on those recommended by the Australasian Code
for Reporting Identified Mineral Resources and Ore Reserves (JORC 1996),
where an Indicated Resource has the same level of confidence as a Probable
Reserve, and the confidence in a Measured Resource is equivalent to that of a
Proven Reserve. The cut-off grades used and the economic viability of each
category has been determined based on a gold price of $300 per ounce. Proven
(Measured) and Probable (Indicated) ore reserves for all properties were
179,500 ounces and 721,990 ounces, respectively, at September 30, 1998, as
compared to 151,871 ounces and 350,628 ounces, respectively, at September 30,
1997. Total Proven (Measured) and Probable (Indicated) ore reserves were
901,490 ounces at September 30, 1998, as compared to 502,499 ounces at
September 30, 1997, an increase of 398,991 ounces or 79.4%, as a result of a
successful exploration program undertaken by the Company during the fiscal
year ended September 30, 1998 and the integration of all technical data
available to the Company. An additional 296,950 ounces of gold were
identified in the "Inferred" category (i.e., additional mineralized
material), most of which are located underground at the Turk mine.
25
<PAGE>
<TABLE>
<CAPTION>
Proven Measured
------------------------- --------------------------
Gold Gold
Grade Grade
Mass (grams/ Gold Mass (grams/ Gold
Mine (tonnes) tonne) (ounces) (tonnes) tonne) (ounces)
- ---- -------- ------ -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Hard Rock:
Turk 193,000 3.96 24,600
Angelus
External
Prospects 1,252,000 1.78 71,500
Queens
--------- ------ --------- -------
Total/
Average 1,445,000 2.07 96,100
--------- ------ --------- -------
Dumps:
Turk 2,438,000 0.57 45,060
Lonely 1,159,000 0.32 11,760
Dawn 729,000 0.71 16,080
External 67,000 0.69 1,490 255,000 1.10 9,010
--------- ------ --------- -------
Total/
Average 4,393,000 0.53 74,390 255,000 1.10 9,010
--------- ------ --------- -------
Grand
Total/
Average 4,393,000 0.53 74,390 1,790,000 1.92 105,110
--------- ------ --------- -------
--------- ------ --------- -------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Probable Indicated
------------------------- --------------------------
Gold Gold
Grade Grade
Mass (grams/ Gold Mass (grams/ Gold
Mine (tonnes) tonne) (ounces) (tonnes) tonne) (ounces)
- ---- -------- ------ -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Hard Rock:
Turk 3,570,000 5.98 686,640
Angelus 147,000 7.38 34,870
External
Prospects
Queens 3,000 4.98 480
----- --- --------- -------
Total/
Average 3,000 4.98 480 3,717,000 6.04 721,510
----- --- --------- -------
Dumps:
Turk
Lonely
Dawn
External
----- --- --------- -------
Total/
Average
----- --- --------- -------
Grand
Total/
Average 3,000 4.98 480 3,717,000 6.04 721,510
----- --- --------- -------
----- --- --------- -------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Inferred
--------------------------
Gold
Grade
Mass (grams/ Gold
Mine (tonnes) tonne) (ounces)
- ---- -------- ------ --------
<S> <C> <C> <C>
Hard Rock:
Turk 1,347,000 6.00 259,740
Angelus 33,000 7.70 8,170
External
Prospects 118,000 5.35 20,300
Queens 56,000 4.10 7,380
--------- -------
Total/
Average 1,554,000 5.92 295,590
--------- -------
Dumps:
Turk
Lonely
Dawn
External 46,000 0.92 1,360
--------- -------
Total/
Average 46,000 0.92 1,360
--------- -------
Grand
Total/
Average 1,600,000 5.77 296,950
--------- -------
--------- -------
</TABLE>
Facilities:
During the fiscal year ended September 30, 1998, the Company maintained
its corporate offices in Vancouver, British Columbia, Canada at a cost of
approximately $11,000 per month. The Company shared such office space with
WaterPur, an affiliated company. The lease for the Vancouver, British
Columbia, Canada office space was terminated effective December 14, 1998.
Effective March 1, 1999, the Company entered into a two year lease in Los
Angeles, California for its corporate offices at an initial cost of $2,000
per month (see "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS").
Casmyn Mining Corporation S.A.'s offices are located in Pretoria, South
Africa at a cost of $1,100 per month. Casmyn Mining Zimbabwe (Private)
Ltd.'s offices are located in Bulawayo, Zimbabwe at a cost of $250 per month.
Both such offices have one year leases which are renewable annually.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company may be involved in litigation arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or cash
flows.
On October 3, 1995 and October 6, 1995, the Company, through its
wholly-owned subsidiary, Casmyn Gold Corporation, entered into separate Full
Recourse Commercial Contracts in the Republic of Ghana (the "Contracts") with
Diamond Enterprise Ltd./Nana Osei Tutu and Aliff Services Ltd./David Okine
(the "Sellers") to purchase unrefined gold for final refining by and sale to
the Royal Canadian Mint. The Company advanced a total of $672,560 to the
Sellers under the Contracts, but did not receive the unrefined gold as
stipulated in the Contracts. Accordingly, the Company commenced legal
proceedings against Diamond Enterprise Ltd./Nana Osei Tutu and Aliff Services
Ltd./David Okine during 1996 in the Superior Court of Judicature in the High
Court of Justice, Republic of Ghana, for return of all monies advanced, with
interest. The Company subsequently received a judgement against Aliff
Services Ltd./David Okine for $276,000, plus accrued interest from October 3,
1995. Litigation against Diamond Enterprises Ltd./Nana Osei Tutu is
continuing.
The Company is currently unable to predict the ultimate resolution of
the Diamond Enterprise Ltd./Nana Osei Tutu litigation. Even if the Company
prevails in its litigation against both of the Sellers, there can be no
assurances that the Company will ultimately be able to recover the monies
that it advanced. As result of the uncertainties related to this litigation,
during the fiscal year ended September 30, 1996, the Company recorded a loss
on write down of assets of $672,560, to fully reserve against the advances
made to the Sellers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through
the solicitation of proxies or otherwise, during the fourth quarter of the
fiscal year ended September 30, 1998.
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<PAGE>
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information
The common stock of Casmyn Corp. is traded under the symbol "CMYN", and
since July 31, 1998 has been traded on the OTC Bulletin Board. Prior to that
date, the common stock was listed for trading on the NASDAQ SmallCap Market,
but was delisted on July 31, 1998.
The following table sets forth the range of closing prices of the
Company's common stock as quoted during the periods indicated. Such prices
reflect prices between dealers in securities and do not include any retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions. The information set forth below was obtained from the National
Quotation Bureau, Inc. and Bloomberg L.P.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fiscal Year Ended September 30, 1997:
Three months ended--
December 31, 1996 $12.50 $8.63
March 31, 1997 9.63 8.00
June 30, 1997 8.38 6.00
September 30, 1997 7.75 4.50
Fiscal Year Ended September 30, 1998:
Three months ended--
December 31, 1997 6.3750 1.6875
March 31, 1998 1.5625 0.0469
June 30, 1998 0.0313 0.0156
September 30, 1998 0.0400 0.0025
</TABLE>
The closing price of the Company's common stock on March 18, 1999 was
$.003 per share.
(b) Holders
As of September 30, 1998, the Company had 285 stockholders of record
with respect to the Company's common stock and 52 stockholders of record with
respect to the Company's First Convertible Preferred Stock, excluding shares
held in street name by brokerage firms and other nominees who hold shares for
multiple investors.
(c) Dividends
Holders of common stock are entitled to receive dividends if, as and
when declared by the Board of Directors out of funds legally available
therefor, subject to the dividend and
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liquidation rights of any preferred stock that may be issued and outstanding.
The Company has never paid cash dividends on its common stock and has no
present intention of paying cash dividends in the foreseeable future. It is
the present policy of the Board of Directors to retain all earnings to
provide for the future growth and development of the Company. However, such
policy is subject to change based on current industry and market conditions,
as well as other factors beyond the control of the Company.
(d) Sales of Unregistered Securities
Substantially all securities sold by the Company during the fiscal years
ended September 30, 1996, 1997 and 1998 have been registered, either at the
time of issuance or subsequently.
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ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated historical financial data presented below are
derived from the Company's audited consolidated financial statements for the
respective periods, and should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto and "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" appearing elsewhere in this document. All amounts shown in the
tables below are in United States dollars with thousands (000's) omitted,
except per share amounts.
<TABLE>
<CAPTION>
Fiscal Years Ended September 30,
----------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Revenues $ 4,554 $ 3,392 $ 630 $ 382 $ 601
Loss from operations (4,606) (5,417) (5,199) (6,400) (4,188)
Equity in net loss
of affiliate,
including
write-down of
investment (1) (4,574) (1,035) (3,178)
Minority interest
in net loss of
consolidated
subsidiary (1) 3,502 4,581
Loan guarantee loss (5,000)
Income (loss)
from continuing
operations (13,005) (6,793) (8,321) (3,075) 691
Net income (loss) (13,005) (6,793) (8,321) (3,042) 47
Dividends on
convertible
preferred stock (2,292) (871)
Amortization of
discount on
convertible
preferred stock (13,884) (3,826)
Preferred share
penalty (840)
Net income (loss)
applicable to
common shares (30,020) (11,490) (8,321) (3,042) 47
Net income (loss)
from continuing
operations per
common share (0.28) (0.90) (1.16) (0.40) 0.14
Net income (loss)
per common share (0.28) (0.90) (1.16) (0.40) 0.01
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
September 30,
----------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $25,095 $48,273 $ 22,317 $14,316 $3,369
Long-term debt 5,071 5,071 110
Preferred stock (2) 44,440 141
Net stockholders'
equity
(deficiency) (2) (21,597) 34,472 13,193 8,144 2,214
Cash dividends
declared per
common share
</TABLE>
- --------------
(1) The consolidated financial statements for the fiscal years ended
September 30, 1994 and 1995 include the consolidated financial statements of
WaterPur due to the Company acquiring a controlling voting interest in
WaterPur International Inc. during the fiscal year ended September 30, 1995.
The Company accounted for the acquisition of its investment in WaterPur as a
combination of entities under common control. Effective September 30, 1996,
the Company reduced its voting interest in WaterPur and as of that date
recorded its investment in WaterPur using the equity method of accounting for
its investment in WaterPur retroactive to October 1, 1995, the beginning of
such fiscal year. The consolidated financial statements for the fiscal years
ended September 30, 1996 and 1997 reflect the Company's investment in
WaterPur utilizing the equity method of accounting.
As of September 30, 1997, the effective date of the restructuring of the
Company's investment in WaterPur, the Company changed its method of
accounting for its investment in WaterPur to the cost method on the basis
that the Company would no longer have the ability to assert significant
influence over operating and financial policies of WaterPur as a result of
the proposed spin-off of the 7,900,004 shares of convertible preferred stock
to the common and preferred shareholders of the Company of record on October
15, 1997, subject to compliance with regulatory requirements. The spin-off
of the convertible preferred stock was not completed, and during the fiscal
year ended September 30, 1998, the Company wrote-off its entire investment in
WaterPur of $4,574,368.
(2) Pursuant to the Preferred Stock Investment Agreement, a technical
default occurred when the Company's common stock was delisted from NASDAQ on
July 31, 1998. The Preferred Stock Investment Agreement provides the holders
of the First Convertible Preferred Stock the opportunity to have their shares
redeemed by the Company. The Company is currently engaged in
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<PAGE>
discussions with the holders of the First Convertible Preferred Stock
regarding various matters, and the holders of the First Convertible Preferred
Stock have not exercised their rights to require the Company to redeem their
shares of First Convertible Preferred Stock.
Since the redemption of these shares of First Convertible Preferred
Stock outstanding at September 30, 1998 is outside the control of the
Company, the carrying value of the First Convertible Preferred Stock at such
date has been recorded in the consolidated financial statements at their
maximum liquidation preference of $44,440,451, and such shares have been
reclassified out of the shareholders' equity (deficiency) section of the
consolidated balance sheet. Subsequent to September 30, 1998, the Company has
repurchased or converted 598,915 shares of First Convertible Preferred Stock,
with such selling shareholders waiving the right to claim their proportionate
share of the liquidation preference, thus reducing the maximum liquidation
preference, and the Company's corresponding redemption obligation, to
approximately $20,000,000.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General Overview:
The business activities of the Company are concentrated on mineral
resource development. As of and subsequent to September 30, 1998, the
Company has been focusing on its gold mining operations in Zimbabwe. During
the fiscal years ended September 30, 1997 and 1998, the Company's primary
business focus was the acquisition, exploration and operation of precious
mineral resource properties in Zimbabwe and base metal resource properties in
Zambia. During the fiscal years ended September 30, 1995 and 1996, the
Company was also involved, to varying degrees, in acquisition and exploration
activities in South Africa and research and development related to minerals
testing, processing engineering and environmental technologies. During the
fiscal year ended September 30, 1996, 1997 and 1998, the Company financed its
business activities through the sale of its equity securities.
During the fiscal years ended September 30, 1996 and 1997, the Company's
investment in WaterPur was accounted for using the equity method of
accounting. As of September 30, 1997, the effective date of the restructuring
of its investment in WaterPur, the Company changed its method of accounting
for its investment in WaterPur to the cost method on the basis that the
Company would no longer have the ability to assert significant influence over
operating and financial policies of WaterPur as a result of the proposed
spin-off of the 7,900,004 shares of convertible preferred stock to the common
and preferred shareholders of the Company of record on October 15, 1997,
subject to compliance with regulatory requirements. Accordingly, as of
September 30, 1997, the Company had an investment in WaterPur of $4,574,368,
and a corresponding dividend payable. During the fiscal year ended September
30, 1998, due to a significant and prolonged decrease in the market value of
WaterPur's common stock, Waterpur's inability to repay amounts borrowed from
the Company, and Waterpur's continuing need for additional loans, management
of the Company determined that there had been an impairment in the value of
the investment in WaterPur, and wrote off the entire investment in WaterPur.
The corresponding dividend payable has also been decreased to zero as a
result of the write off. In addition, the Company began implementation of a
plan to separate the operations, personnel and executive management of the
Company and WaterPur, which plan had been substantially completed by December
31, 1998. During December 1998, the Board of Directors determined not to
effect the spin-off of the Company's preferred stock investment in WaterPur
for several reasons, including WaterPur's inability to obtain regulatory
approval to date and in the foreseeable future, and WaterPur's inability to
complete its annual audit and make other securities filings on a timely basis.
35
<PAGE>
Prior to September 30, 1997, the functional currency of the Company's
Zimbabwe operations had been the Zimbabwe dollar. Accordingly, balance sheet
accounts were translated into United States dollars using current exchange
rates in effect at the balance sheet date while revenue and expense accounts
were translated using the weighted average exchange rate during the reporting
period. The gains or losses resulting from such translation were recorded in
the foreign currency translation adjustment account included as part of
stockholders' equity. During the three months ended December 31, 1997, the
Zimbabwe dollar experienced devaluation in excess of 40%. This level of
devaluation is expected to have a significant impact on Zimbabwe's annual
rate of inflation, and as a result Zimbabwe may be classified as a "highly
inflationary" economy. Accordingly, the Company elected to adopt the United
States dollar as the functional currency for the Company's Zimbabwe
operations effective October 1, 1997. Pre-existing non-monetary assets and
liabilities are measured using exchange rates in effect as of October 1,
1997, and any gains or losses from holding monetary assets and liabilities
are reflected in the statement of operations for the reporting period.
Amortization and charges related to non-monetary items are recorded using
exchange rates at the time such items arose. Other revenue and expense
accounts continue to be translated using the weighted average exchange rate
during the reporting period.
On May 15, 1998, the Company received notification from The NASDAQ
StockMarket, Inc. ("NASDAQ") that it was in default of certain listing
requirements and that NASDAQ intended to delist the Company's common stock on
May 25, 1998. The Company appealed the delisting notice and requested a
hearing with NASDAQ. The Company's common stock was ultimately delisted from
the NASDAQ SmallCap Market on July 31, 1998.
Pursuant to the Preferred Stock Investment Agreement, a technical
default occurred when the Company's common stock was delisted from NASDAQ on
July 31, 1998. The Company may be obligated to pay the holders of the First
Convertible Preferred Stock a cash penalty of 3% of the total purchase price
of the First Convertible Preferred Stock during any period in excess of 30
days that the Company's common stock is not listed and traded on NASDAQ or a
national securities exchange. The Preferred Stock Investment Agreement
provides the holders of the First Convertible Preferred Stock the opportunity
to have their shares redeemed by the Company at the adjusted liquidation
preference if the 3% penalty is not paid within 30 days of when due. The
Company believes that the exercise of such rights by the holders of the First
Convertible Preferred Stock would be subject to legal challenge by the
Company.
Since the Company's common stock was delisted from NASDAQ on July 31,
1998, the Company recorded a penalty of $839,737 through September 30, 1998,
which has not been paid. Subsequent to September 30, 1998, the Company has
repurchased or converted
36
<PAGE>
598,915 shares of the First Convertible Preferred Stock, and such selling
shareholders have waived the right to claim their proportionate share of the
penalty, thus reducing the Company's corresponding potential penalty
obligation to approximately $375,000.
The Company is currently engaged in discussions with the holders of the
remaining shares of First Convertible Preferred Stock regarding various
matters, including a waiver of the penalty and of their rights to require the
Company to redeem their shares of First Convertible Preferred Stock. There
can be no assurances that the Company will be able to obtain a waiver or that
the holders of the First Convertible Preferred Stock will not exercise their
rights to require the Company to redeem their shares. Should the holders of
the First Convertible Preferred Stock demand payment of the cash penalty or
exercise their rights to require the Company to redeem their shares, and
should the Company not prevail in its challenge to any such asserted rights,
the Company may be forced to file for protection under the United States
Bankruptcy Code.
Since the redemption of these shares of First Convertible Preferred
Stock outstanding at September 30, 1998 is outside the control of the
Company, the carrying value of the First Convertible Preferred Stock at such
date has been recorded in the consolidated financial statements at their
maximum liquidation preference of $44,440,451, and such shares have been
reclassified out of the shareholders' equity (deficiency) section of the
consolidated balance sheet. Subsequent to September 30, 1998, the Company has
repurchased or converted 598,915 shares of First Convertible Preferred Stock,
with such selling shareholders waiving the right to claim their proportionate
share of the liquidation preference, thus reducing the maximum liquidation
preference, and the Company's corresponding redemption obligation, to
approximately $20,000,000.
The Company repurchased 19,948 shares of First Convertible Preferred
Stock for $25,753 during the fiscal year ended September 30, 1998.
Subsequent to September 30, 1998, the Company repurchased 598,655 shares of
First Convertible Preferred Stock for $1,221,719 and converted 260 shares of
First Convertible Preferred Stock into 5,424,792 shares of common stock,
resulting in 495,236 shares of First Convertible Preferred Stock being issued
and outstanding as of December 31, 1998.
Effective August 1, 1998, Hanif S. Dahya and Sandro Kunzle resigned from
the Board of Directors. Mark S. Zucker, Alexander L. Cappello, Divo Milan
and John Francis were appointed to the Board of Directors on August 21, 1998.
On October 1, 1998, Amyn S. Dahya resigned as President and Chief Executive
Officer and was replaced by Mark S. Zucker. New management commenced a
comprehensive review and evaluation of the Company's existing capital
structure and business operations during the latter part of 1998, with the
objective of maximizing value for all of the
37
<PAGE>
Company's equity holders. As a result, the Company began the implementation
of a plan to streamline its operations worldwide, divest its interests in all
non-core businesses, and focus its efforts on its mining operations in
Zimbabwe.
The Company has implemented programs to evaluate ways to improve
production and achieve production efficiencies, increase gold reserves,
reduce capital expenditures and operating costs, maximize operating profits
and operating cash flows, and evaluate future opportunities. The Company has
reduced its executive management and corporate staff from seven to two
people, eliminating standard employee benefits and utilizing part-time
personnel as necessary. The Company has closed its Vancouver, British
Columbia, Canada corporate and administrative offices, significantly reducing
occupancy costs, as well as travel and various other corporate expenses.
Future Outlook:
The Company's short-term plan has been to produce gold from the tailings
dumps and the surface materials, and to delay most of the higher cost
underground production until gold prices increase to a level that can justify
the requisite capital expenditures. The gold that the Company mines occurs
in sulfides, oxides and old mill tailings. The Company anticipates
38
<PAGE>
that revenues from gold sales from its Zimbabwe mining operations will exceed
mine operating expenditures during the fiscal year ending September 30, 1999,
based on current gold prices and the continued ability of the Company to
deliver and process ore at its mills. However, the Company expects that gold
production for the fiscal year ending September 30, 1999 will be
approximately 12,500 ounces, as compared to 15,378 ounces produced during the
fiscal year ended September 30, 1998. This expected decrease in gold
production of approximately 20% is a result of a continuing decrease in the
gold grade of the tailings dumps which the Company has been mining, as well
as the Company's current expectation that certain mining operations may have
to be reduced or temporarily shut-down beginning in mid-1999 as a result of a
lack of available water supplies. The Company is currently developing plans
for 1999 and beyond with respect to the development of its mining properties
and the related capital improvement budgets. Over the near-term, the Company
intends to focus on the development of its existing properties, but to
minimize capital expenditures funded directly by the Company. Although the
Company does not currently expect to engage in any property acquisitions or
exploration activities, it will consider acquisition or exploration
opportunities on a case-by-case basis. The Company expects that continued
development of its existing mining properties will result in periodic
adjustments to the Company's gold reserves and resources.
The Company currently expects that economically viable gold production
from the Dawn mine and the Lonely mine will terminate during late 1999.
These mines represent approximately one-third of the Company's current gold
production, but do not represent a significant portion of the Company's
current proven and probable gold reserves totaling 901,490 ounces (see "ITEM
2. PROPERTIES - Reserves"). It will be necessary to replace this production
in order to maintain the economies of scale necessary to produce gold at a
profit with current gold prices of approximately $290 per ounce. The Company
is evaluating several short-term options to replace such production,
including employing certain production techniques and entering into contracts
with other tailings dumps, which could extend the lives of these mines by up
to an additional two years. To expand gold production over the next few
years from surface or underground mine development, the Company is evaluating
the feasibility of accessing its proven and probable gold reserves at the
Turk mine. A major development of the Turk mine is estimated to require a
capital expenditure of approximately $3,000,000 to $5,000,000 over a period
of three years. Any such plan that the Company may adopt will require several
months of planning and lead-time prior to its implementation. Given the
current financial resources available to the Company, as well as the external
factors that affect the values and financing of mineral producing properties
in third-world countries, there can be no assurances that the Company would
be able to obtain the required capital on a timely and cost effective basis,
should the Company decide to implement a major mine development program. As
an alternative to funding
39
<PAGE>
the direct development of the mine, the Company may also consider a joint
venture or sale of its mining assets in order to preserve its capital and
maximize shareholder value.
Consolidated Results of Operations:
Fiscal Year Ended September 30, 1998 as Compared to the Fiscal Year Ended
September 30, 1997:
Revenues for the fiscal year ended September 30, 1998 were $4,554,204,
as compared to revenues of $3,392,160 for the fiscal year ended September 30,
1997. The increase in revenues of $1,162,044 was due to the sale of a greater
amount of gold, notwithstanding the lower average gold prices, i.e.,
approximately 15,378 ounces during the fiscal year ended September 30, 1998,
as compared to approximately 9,770 ounces during the fiscal year ended
September 30, 1997. The average selling price of gold for the fiscal year
ended September 30, 1998 was approximately $296 per ounce, as compared to an
average selling price of approximately $347 per ounce during the fiscal year
ended September 30, 1997. Mineral operations expenses related to gold
production were $3,342,563 for the fiscal year ended September 30, 1998 or
73.3% of revenues. Mineral operations expenses related to gold production
were $3,045,360 for the fiscal year ended September 30, 1997 or 89.8% of
revenues. The decrease in mineral operations expenses related to gold
production as a percentage of revenues in 1998 as compared to 1997 reflected
more efficient mining operations as a result of continuing improvements to
production techniques and reduced mining personnel. The average direct
production cash cost per ounce of gold was $217 in 1998 as compared to $312 in
1997.
General and administrative expenses were $2,353,886 for the fiscal year
ended September 30, 1998, as compared to $3,161,153 for the fiscal year ended
September 30, 1997, a decrease of $807,267. General and administrative
expenses decreased in 1998 as compared to 1997 as a result of the cost
reduction efforts throughout the Company's operations.
Professional services expenses were $559,156 for the fiscal year ended
September 30, 1998, as compared to $420,648 for the fiscal year ended
September 30, 1997, an increase of $138,508. Professional services increased
in 1998 as compared to 1997 primarily as a result of the Company's efforts to
restructure its outstanding preferred stock financings and the retention of a
financial advisor in that regard.
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<PAGE>
The issuance of stock options at below fair market value results in the
recognition of compensation expense, which is recorded as a charge to
operations over the option vesting period of up to six years. During the
fiscal year ended September 30, 1996, the Company issued stock options under
the 1995 Incentive Stock Option Plan at below fair market value, which
resulted in the recognition of compensation expense of $85,471 and $74,040
for the fiscal years ended September 30, 1998 and 1997, respectively, an
increase of $11,431 in 1998 as compared to 1997.
Depreciation, depletion and amortization expense was $1,333,493 for the
fiscal year ended September 30, 1998, as compared to $523,463 for the fiscal
year ended September 30, 1997, an increase of $810,030, primarily as a result
of increased mining activities in Zimbabwe in 1998 as compared to 1997.
Mineral exploration expense was $206,285 for the fiscal year ended
September 30, 1998, as compared to $1,190,239 for the fiscal year ended
September 30, 1997, a decrease of $983,954, primarily as a result of the
Company reducing its exploration efforts to concentrate on developmental
mining activities.
The Company recorded a write-down of assets of $1,279,454 during the
fiscal year ended September 30, 1998, primarily to reflect the write off of
certain mining related assets, the cost of which was determined not to be
recoverable through expected future mining operations. During the fiscal
year ended September 30, 1997, the Company recorded a write off of $394,455
related to the completion of a diamond exploration program in South Africa
under which no economically viable mineral deposits were located.
Loss from operations was $4,606,104 for the fiscal year ended September
30, 1998, as compared to a loss from operations of $5,417,198 for the fiscal
year ended September 30, 1997.
Total other expense, net was $8,398,688 for the fiscal year ended
September 30, 1998, as compared to $1,376,229 for the fiscal year ended
September 30, 1997, an increase of $7,022,459, primarily as a result of a
loan guarantee loss of $5,000,000 and a loss attributable to WaterPur of
$4,574,368 in 1998. The Company also recognized a gain on foreign exchange
of $425,382 in 1998 as compared to a loss on foreign exchange of $861,857 in
1997.
As of September 30, 1997, the Company had $5,074,659 of restricted cash
(including accrued interest of $74,659), which was deposited with two
financial institutions under the Company's guarantees of two short-term
loans. Under agreements with such parties, the loans were secured by certain
investment accounts which contained shares of common stock of the Company.
During the three months ended March 31, 1998, the significant decline in the
price per share of the Company's common stock created an impairment in the
value of the shares of common stock in the accounts with such financial
institutions. As a result, the
41
<PAGE>
financial institutions proceeded to call the guarantees provided by the
Company, resulting in the Company incurring a loss of $5,000,000.
Net loss was $13,004,792 for the fiscal year ended September 30, 1998,
as compared to a net loss of $6,793,427 for the fiscal year ended September
30, 1997.
During the fiscal year ended September 30, 1998, the Company also
recognized preferred stock dividends of $2,291,875, a preferred share penalty
of $839,737 related to the delisting of the Company's common stock from
NASDAQ on July 31, 1998, and the amortization of discount on convertible
preferred stock of $13,884,075, which is reflected as a return to the
preferred stockholders and as an increase in the loss to common stockholders.
Net loss applicable to common stockholders was $30,020,479 for the
fiscal year ended September 30, 1998, as compared to a net loss applicable to
common stockholders of $11,490,363 for the fiscal year ended September 30,
1997.
Fiscal Year Ended September 30, 1997 as Compared to the Fiscal Year Ended
September 30, 1996:
Revenues for the fiscal year ended September 30, 1997 were $3,392,160,
as compared to revenues of $630,481 for the fiscal year ended September 30,
1996. The increase in revenues of $2,761,679 was due to the sale of greater
amounts of gold, notwithstanding lower average gold prices, i.e.,
approximately 9,770 ounces during the fiscal year ended September 30, 1997,
as compared to approximately 1,600 ounces during the fiscal year ended
September 30, 1996. The average selling price of gold for the fiscal year
ended September 30, 1997 was approximately $347 per ounce, as compared to an
average selling price of approximately $394 per ounce during the fiscal year
ended September 30, 1996. Mineral operations expenses related to gold
production were $3,045,360 for the fiscal year ended September 30, 1997 or
89.8% of revenues. The Company acquired its operating gold mining properties
in Zimbabwe effective January 31, 1996, and conducted only limited gold
mining operations during the remainder of the fiscal year ended September 30,
1996. During such period, the Company concentrated on updating and improving
its Zimbabwe mining properties through a major ongoing capital improvement
program. As a result, mineral operations expenses related to gold production
were $958,561 for the fiscal year ended September 30, 1996, resulting in
direct costs of production exceeding revenues by $328,080. The average direct
production cash cost per ounce of gold was $312 in 1997 as compared to
$599 in 1996.
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<PAGE>
General and administrative expenses were $3,161,153 for the fiscal year
ended September 30, 1997, as compared to $2,377,138 for the fiscal year ended
September 30, 1996, an increase of $784,015. The increase in general and
administrative expenses was a result of the following factors: the Company
incurred increased compensation-related expenses of $362,675 for employees
and consultants as a result of the Zimbabwe mining properties being operated
for the full fiscal year ended September 30, 1997 as compared to eight months
during the fiscal year ended September 30, 1996; the Company incurred
increased travel-related expenses of $142,401 in 1997 as compared to 1996,
due to increased travel between South Africa, Zimbabwe, Zambia and the
Commonwealth of Independent States, reflecting increased business activities
and operations in those countries; the Company incurred increased insurance
costs of $93,435 in 1997 as compared to 1996, primarily as a result of the
Company obtaining increased liability and property insurance coverages; the
Company incurred increased expenses related to trade shows, investment
conferences and investor relations of $175,875 in 1997 as compared to 1996,
primarily as a result of increased efforts by the Company to create investor
awareness of and interest in the Company; other general and administrative
expenses increased by $9,629 in 1997 as compared to 1996, primarily as a
result of increased costs related to the Company's mining operations in
Zimbabwe.
Professional services expenses were $420,648 for the fiscal year ended
September 30, 1997, as compared to $318,997 for the fiscal year ended
September 30, 1996, an increase of $101,651. Professional services increased
in 1997 as compared to 1996 primarily as a result of increased costs relating
to the Company's preferred stock financings, as well as higher legal, audit,
tax and financial consulting services.
The issuance of stock options at below fair market value results in the
recognition of compensation expense, which is recorded as a charge to
operations over the option vesting period of up to six years. Compensatory
stock option expense was $74,040 and $364,560 for the fiscal years ended
September 30, 1997 and 1996, respectively, a decrease of $290,520 in 1997 as
compared to 1996. During the fiscal year ended September 30, 1995, the
Company issued compensatory stock options under the 1995 Stock Option Plan,
which resulted in compensation expense of $364,560 during the fiscal year
ended September 30, 1996. During the fiscal year ended September 30, 1996,
the Company issued compensatory stock options under the 1995 Incentive Stock
Option Plan, which resulted in compensation expense of $74,040 during the
fiscal year ended September 30, 1997.
Depreciation, depletion and amortization expense was $523,463 for the
fiscal year ended September 30, 1997, as compared to $232,019 for the fiscal
year ended September 30,
43
<PAGE>
1996, an increase of $291,444, primarily as a result of increased mining
activities in Zimbabwe in 1997 as compared to 1996.
Mineral exploration expense was $1,190,239 for the fiscal year ended
September 30, 1997, as compared to $906,056 for the fiscal year ended
September 30, 1996, an increase of $284,183.
During the fiscal year ended September 30, 1997, the Company recorded a
write off of $394,455 related to the completion of a diamond exploration
program in South Africa under which no economically viable mineral deposits
were located. During the fiscal year ended September 30, 1996, the Company
recorded a write down of assets of $672,560 to reserve against advances it
had previously 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 that was required
by the contracts. The Company is currently in litigation to recover the
amounts advanced, but there can be no assurances that the Company will be
successful in this regard.
Loss from operations was $5,417,198 for the fiscal year ended September
30, 1997, as compared to a loss from operations of $5,199,410 for the fiscal
year ended September 30, 1996.
Total other expense, net was $1,376,229 for the fiscal year ended
September 30, 1997, as compared to $3,121,916 for the fiscal year ended
September 30, 1996, a decrease of $1,745,687, primarily as a result of the
decrease in the loss attributable to WaterPur of $2,143,349 in 1997. The
Company also recognized a loss on foreign exchange of $861,857 in 1997, as
compared to no gain or loss on foreign exchange in 1996, as a result of the
conversion from Zimbabwe dollars to United States dollars of a short-term
bank loan recorded on the books of the Company's Zimbabwe operations.
Although the short-term loan was to be repaid by the Company in United States
dollars, generally accepted accounting principles required that the Company
recognize this loss in its consolidated statement of operations for the
fiscal year ended September 30, 1997.
Net loss was $6,793,427 for the fiscal year ended September 30, 1997, as
compared to a net loss of $8,321,326 for the fiscal year ended September 30,
1996.
During the fiscal year ended September 30, 1997, the Company also
recognized preferred stock dividends of $871,260, and the amortization of
discount on convertible preferred stock of $3,825,676, which is reflected as
a return to the preferred stockholders and as an increase in the loss to
common stockholders.
44
<PAGE>
Net loss applicable to common stockholders was $11,490,363 for the
fiscal year ended September 30, 1997, as compared to a net loss applicable to
common stockholders of $8,321,326 for the fiscal year ended September 30,
1996.
Consolidated Financial Condition - September 30, 1998:
Liquidity and Capital Resources:
Operating. The Company's cash and cash equivalents were $4,356,200 at
September 30, 1998, as compared to $18,185,515 at September 30, 1997, a
decrease of $13,829,315. The most significant components of the decrease in
cash in 1998 as compared to 1997 were the repayment of a short-term line of
credit of $4,966,160 to Barclays Bank of Zimbabwe; purchases of property and
equipment, primarily for mining operations, of $3,782,965; purchases of
marketable securities, net of sales, of $1,437,333, which had a market value
of $1,588,536 at September 30, 1998; repurchases of the Company's equity
securities, consisting primarily of common stock, of $2,062,910; and cash
used in operating activities of $1,535,566. As of September 30, 1998, the
Company's working capital was $4,658,361, as compared to $17,639,625 at
September 30, 1997, reflecting current ratios of 3.1:1 and 2.9:1,
respectively.
The Company's operations utilized cash resources of $1,535,566 during
the fiscal year ended September 30, 1998, as compared to $5,425,844 for the
fiscal year ended September 30, 1997, reflecting increased revenues and mine
profitability, and decreased operating costs. The increase in cash utilized
in 1997 as compared to 1996 was primarily due to increased expenses related
to mining operations and related administrative costs in Zimbabwe, and
increased general and administrative expenses, including investor relations
and travel expenses.
The Company's working capital resources consist primarily of cash and
cash equivalents, marketable securities, and the net cash generated from the
production and sale of gold. The Company anticipates that its working
capital resources are adequate to fund operating expenditures during the
fiscal year ending September 30, 1999, excluding any major capital
expenditures, the payment of a cash penalty to the holders of the First
Convertible Preferred Stock or the redemption of the First Convertible
Preferred Stock at the maximum redemption obligation resulting from the
technical default that occurred on July 31, 1998.
Investing. During the fiscal year ended September 30, 1998, the Company
utilized net cash in investing activities of $5,087,768, which consisted
primarily of the purchase of marketable securities, net of sales, of
$1,437,333, which had a market value of $1,588,536 at September 30, 1998, and
the purchase of property and equipment related to the Company's mining
operations in Zimbabwe of $3,782,965. During the fiscal year ended September
30, 1997, the Company utilized net cash in investing activities of
$10,186,250, which consisted primarily of
45
<PAGE>
increases in investment in and advances to WaterPur of $2,680,941 and the
purchase of property and equipment related to the Company's mining operations
in Zimbabwe of $8,427,683. During the fiscal year ended September 30, 1996,
the Company utilized net cash in investing activities of $15,746,799, which
consisted primarily of investment in and advances to WaterPur of $3,190,567,
and the purchase of property and equipment and a business related to the
Company's mining operations in Zimbabwe of $11,902,401. The Company does not
anticipate making any significant advances to WaterPur during the fiscal year
ending September 30, 1999. As of September 30, 1998, the Company did not
have any significant outstanding commitments for capital expenditures.
Financing. During the fiscal year ended September 30, 1998, the Company
utilized net cash in financing activities of $7,010,032, which consisted
primarily of the repurchase of the Company's equity securities, consisting
primarily of common stock, for $2,062,910 and the repayment of a short-term
credit facility with Barclays Bank of Zimbabwe of $4,966,160. Restricted
cash of $5,074,659 was utilized to fund the $5,000,000 payment under the loan
guarantee.
During February 1997, the Company arranged a $5,000,000 short-term
credit facility with Barclays Bank of Zimbabwe, with interest at LIBOR plus
2.25% per annum. As of September 30, 1997, the Company had borrowed
$4,966,160 under this credit facility. The credit facility became repayable
upon demand commencing February 1998. During the fiscal year ended September
30, 1997, the Company recognized a foreign exchange loss of $861,857 in
connection with the borrowings under this credit facility. On June 9, 1998,
Barclays Bank of Zimbabwe exercised its right to demand immediate repayment
of the outstanding balance, and on June 11, 1998, the Company paid $4,966,160
to the bank in full settlement of this obligation.
As of September 30, 1997, the Company had $5,074,659 of restricted cash
(including accrued interest of $74,659), which was deposited with two
financial institutions under the Company's guarantees of two short-term
loans. Under agreements with such parties, the loans were secured by certain
investment accounts which contained shares of common stock of the Company.
During the three months ended March 31, 1998, the significant decline in the
price per share of the Company's common stock created an impairment in the
value of the shares of common stock in the accounts with such financial
institutions. As a result, the financial institutions proceeded to call the
guarantees provided by the Company, resulting in the Company incurring a loss
of $5,000,000.
Inflation and Currency Matters:
Foreign operations are subject to certain risks inherent in conducting
business abroad, including price and currency exchange
46
<PAGE>
controls, and fluctuations in the relative value of currencies. Changes in
the relative value of currencies occur periodically and may, in certain
instances, materially affect the Company's results of operations.
The Company's gold production from its mining operations in Zimbabwe is
sold to the Zimbabwe Reserve Bank at the spot 2:00 p.m. London price on the
day of delivery. Settlement of gold sales are in Zimbabwe dollars at the
equivalent of the United States gold trading rate on the sale date. The spot
gold price at December 17, 1998 was $293.30 per ounce, as compared to the spot
gold price at December 17, 1997 of $283.50 per ounce.
Approximately 80% of the Company's mine operating costs incurred in
Zimbabwe are United States dollar based. The remaining 20% of mine operating
costs incurred in Zimbabwe are denominated in Zimbabwe dollars, and are
periodically subject to significant increases mandated by the Zimbabwe
government, including costs such as wages and utilities, which are two of the
major operating costs of the Company's mines.
Operating costs are affected in part by inflation rates in Zimbabwe.
Inflation in Zimbabwe was approximately 40% in 1998, 20% in 1997, 21% in 1996
and 23% in 1995. In addition, the Zimbabwe dollar fell approximately 60%
against the United States dollar during 1998, resulting in a current exchange
rate of approximately 40 Zimbabwe dollars to one United States dollar at the
end of 1998. As a result, effective October 1, 1997, the Company elected to
adopt the United States dollar as the functional currency for the Company's
Zimbabwe operations.
In response to this situation, the government of Zimbabwe is considering
several actions, including reintroducing exchange controls, pegging the
exchange rate at below free market rates, and banning remittance of profits
from Zimbabwe. On an unofficial basis, the Zimbabwe government has also
recently implemented policies designed to restrict the ability of companies
to convert Zimbabwe dollars into foreign currencies and transfer such amounts
out of Zimbabwe. Although the Company is currently able to convert Zimbabwe
dollars into United States dollars and transfer such amounts to the United
States, there can be no assurances that the Company will be able to continue
to do so in the future.
Environmental Matters:
Management believes that the Company complies with all national and
local environmental protection laws and regulations in the jurisdictions in
which it operates. During the fiscal years ended September 30, 1996, 1997
and 1998, compliance with the provisions of all national and local
environmental laws and
47
<PAGE>
regulations did not have a material effect upon earnings, capital
expenditures or the competitive position of the Company.
Year 2000 Issue:
The Year 2000 Issue results from the fact that certain computer programs
have been written using two digits rather than four digits to designate the
applicable year. Computer programs that have sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
Based on a recent internal assessment, the Company does not believe that the
cost to modify its existing software and/or convert to new software will be
significant.
New Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board issued Statement
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"), which is
effective for financial statements issued for fiscal years beginning after
December 15, 1997. SFAS No. 130 establishes standards for the reporting and
display of comprehensive income, its components and accumulated balances in a
full set of general purpose financial statements. SFAS No. 130 defines
comprehensive income to include all changes in equity except those resulting
from investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is presented with the same
prominence as other financial statements. The Company will adopt SFAS No.
130 for its fiscal year beginning October 1, 1998, and does not anticipate
that adoption of SFAS No. 130 will have a material effect on its financial
statement presentation and disclosures. Under SFAS No. 130, the Company will
report the change in the foreign currency translation adjustment as a
component of comprehensive income.
In June 1997, the Financial Accounting Standards Board issued Statement
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"), which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise", and which is effective for
financial statements issued for fiscal years beginning after December 15,
1997. SFAS No. 131 establishes standards for the way that public companies
report information about operating segments in annual financial statements
and requires reporting of selected information about operating segments in
interim financial statements issued to the public. SFAS No. 131 also
establishes standards for disclosures by public companies regarding
information about their major customers, operating segments,
48
<PAGE>
products and services, and the geographic areas in which they operate. SFAS
No. 131 defines operating segments as components of an enterprise about which
separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and
in assessing performance. SFAS No. 131 requires comparative information for
earlier years to be restated. The Company will adopt SFAS No. 131 for its
fiscal year beginning October 1, 1998, and does not anticipate that adoption
of SFAS No. 131 will have a material effect on its financial statement
presentation and disclosures.
In February 1998, the Financial Accounting Standards Board issued
Statement No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("SFAS No. 132"), which is effective for financial
statements issued for fiscal years beginning after December 15, 1997. SFAS
No. 132 revises employers' disclosures about pension and other postretirement
benefit plans. SFAS No. 132 requires comparative information for earlier
years to be restated. The Company will adopt SFAS No. 132 for its fiscal year
beginning October 1, 1998, and does not anticipate that adoption of SFAS No.
132 will have a material effect on its financial statement presentation and
disclosures.
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133"), which is effective for financial statements for all fiscal
quarters of all fiscal years beginning after June 15, 1999. SFAS No. 133
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an
entity recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. SFAS No. 133 also
addresses the accounting for hedging activities. The Company will adopt SFAS
No. 133 for its fiscal year beginning October 1, 1999, and does not
anticipate that adoption of SFAS No. 133 will have a material effect on its
financial statement presentation and disclosures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements are listed at "ITEM 14. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K".
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
49
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following tables and text set forth the names and ages of all
directors and executive officers of the Company as of January 20, 1999. The
Board of Directors of the Company is comprised of only one class. All of the
directors will serve until the next annual meeting of shareholders and until
their successors are elected and qualified, or until their earlier death,
retirement, resignation or removal. Executive officers serve at the
discretion of the Board of Directors, and are appointed to serve until the
first Board of Directors meeting following the annual meeting of
shareholders. Also provided is a brief description of the business
experience of each director and executive officer during the past five years
and an indication of directorships held by each director in other companies
subject to the reporting requirements under the Federal securities laws.
DIRECTORS
<TABLE>
<CAPTION>
Date Elected
Name Age as Director
- ---- --- -----------
<S> <C> <C>
Amyn S. Dahya (2) 41 August 1994
Selwyn Kossuth (1)(2) 62 September 26, 1997
Alexander L. Cappello (1)(2) 43 August 1, 1998
Divo Milan 42 August 21, 1998
Mark S. Zucker (1)(2) 37 August 1, 1998
</TABLE>
- -----------------------
(1) Member of audit committee.
(2) Member of compensation committee.
Edmund L. de Rothschild resigned from the Board of Directors effective
February 27, 1998. Hanif S. Dahya and Sandro Kunzle resigned from the Board
of Directors on August 1, 1998. John Francis was appointed to the Board of
Directors on August 21, 1998 and resigned on December 28, 1998.
50
<PAGE>
EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES
<TABLE>
<CAPTION>
Date Elected
Name Age Position as Officer
- ---- --- -------- -----------
<S> <C> <C> <C>
Executive Officers:
Amyn S. Dahya 41 President and August 1994
Chief Executive
Officer (1)
Mark S. Zucker 37 President and October 1,
Chief Executive 1998
Officer
Robert N. 46 Chief Financial November 20,
Weingarten Officer and 1998
Secretary
Certain Significant Employees:
Gregory J. 42 Managing Director April 1994
Gosson of Mining
Ian R. Saunders 32 General Manager of May 1996
Mining Operations
and Chief
Metallurgist
</TABLE>
- ---------------------
(1) Amyn S. Dahya resigned as President and Chief Executive Officer of the
Company effective October 1, 1998.
Biographies of Directors, Executive Officers and Certain Significant
Employees:
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 . In 1987, he founded the Casmyn Group of Companies,
specializing in mineral and environmental engineering, which he has developed
for the previous eleven years. Mr. Dahya serves on the board of directors of
WaterPur International Inc., a publicly-held company, where he also holds
executive management positions.
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 Glen Ardith Frazer Corp. He is a
consultant to the Investment Funds Institute of Canada. During his
distinguished career, Mr.
51
<PAGE>
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 is also an English barrister.
Alexander L. Cappello. Mr. Cappello is the Chairman and Chief Executive
Officer of Cappello Group, Inc., an international merchant banking firm that
specializes in raising equity capital for public companies through private
placements. Cappello Group, Inc. conducts its private placement activities
through Cappello Capital Corp., an NASD-licensed broker-dealer. He has over
20 years experience in all aspects of corporate finance, investment banking,
merchant banking and venture capital both in the United States and overseas.
Mr. Cappello received a Bachelor of Science degree from the Marshall School
of Business at the University of Southern California in 1977
Divo Milan. Mr. Milan has been the Chief Executive Officer of Investigacion
Estrategica, a merchant banker located in Mexico City, Mexico, since 1987.
He has over 20 years experience in all aspects of corporate finance,
investment banking, merchant banking and venture capital in Mexico and South
America. Mr. Milan is a member of the board of directors of Banca Quadrum
and Banco Bital, both of which are publicly-held companies.
Mark S. Zucker. Since 1996, Mr. Zucker has been the President of Anvil
Investors, Inc., an investment advisory firm. From 1991 through April 1996,
Mr. Zucker was a founder and Senior Vice President of Libra Investments,
Inc., an investment banking firm specializing in high yield and defaulted
debt securities. Prior to 1991, Mr. Zucker worked as an investment banker at
Dillon, Read & Co., Inc. and Chanin & Company, Inc. Mr. Zucker is a
Chartered Financial Analyst. He received a Bachelor of Science Degree from
the Wharton School and a Bachelor of Arts Degree from the University of
Pennsylvania in 1983.
Robert N. Weingarten. From July 1992 to present, Mr. Weingarten has been the
sole shareholder of Resource One Group, Inc., a financial consulting and
advisory company. From January 1, 1997 through July 31, 1997, Mr. Weingarten
was a principal in Chelsea Capital Corporation, a merchant banking firm.
Since 1979, Mr. Weingarten has served as a consultant to numerous public
companies in various stages of development, operation or reorganization. Mr.
Weingarten currently serves as an officer and director of GolfGear
International, Inc., a publicly-held company. Mr. Weingarten received an
M.B.A. degree in Finance from the University of Southern California in 1975
and a B.A. degree in Accounting from the University of Washington in 1974.
52
<PAGE>
Gregory J. Gosson. Dr. Gosson joined the Company in April 1994, and is the
Managing Director of the Company's property acquisitions and mining and
exploration activities in Africa. Dr. Gosson has been involved in the mining
industry since 1977 and has managed projects in the United States, Canada,
the Caribbean, Southeast Asia, New Zealand and South Africa. Prior to
joining the Company in 1994, Dr. Gosson was Chief Geologist for Plexus
Resources in the United States. Dr. Gosson is a graduate of Queen's
University, Canada, and obtained his Ph.D. in Geology from Victoria
University, New Zealand. Dr. Gosson has substantial experience in base and
precious metal deposits, precious stones, coal and the oil and gas industry.
Ian R. Saunders. Mr. Saunders joined the Company in May 1996 as Chief
Metallurgist and became General Manager of the Company's Zimbabwe gold mining
operations in October 1997. Mr. Saunders received his B.Sc. (Chemical)
Engineering degree from the University of Cape Town, South Africa. Prior to
joining the Company, Mr. Saunders worked in the South African gold mining
industry for three years with Johannesburg Consolidated Investments and two
years as Group Metallurgist for Falcon Gold Zimbabwe Limited. He has also
worked as an independent metallurgical consultant for six years.
Family Relationships among Directors and Executive Officers:
Although there are currently no family relationships among directors and
executive officers, during the fiscal year ended September 30, 1998, Hanif S.
Dahya, the brother of Amyn S. Dahya, was a member of the Board of Directors,
and Karima Dahya, the wife of Amyn S. Dahya, was an employee of the Company.
Compliance with Section 16(a) of the Exchange Act:
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company under Rule 16a-3(e) during the fiscal year ended
September 30, 1998 and Form 5 and amendments thereto furnished to the Company
with respect to the fiscal year ended September 30, 1998, and any written
representations, no persons who were either a director, officer or beneficial
owner of more than 10% of the Company's common stock registered pursuant to
Section 12 at any time during the fiscal year ended September 30, 1998 failed
to file on a timely basis reports required by Section 16(a) during the fiscal
year ended September 30, 1998, except as follows: Amyn S. Dahya filed a Form
4 in April 1998 relating to the disposition of 632,694 shares of common stock
on January 1, 1998, arising from a restructuring of his ownership in Dahya
Holdings, Inc.
ITEM 11. EXECUTIVE COMPENSATION
53
<PAGE>
The following table sets forth the compensation paid by the Company to
the named executive officers during the last three fiscal years. No other
executive officers received total annual compensation exceeding $100,000
during such period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Fiscal
Year
Name and Ended
Principal September Other Annual
Position 30, Salary Bonus Compensation
- -------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Amyn S. Dahya (1) 1998 $224,700 $ $49,495(2)
President and 1997 150,000 340,000 79,200(2)
Chief Executive 1996 150,000 267,700
Officer
</TABLE>
- ------------------
(1) Amyn S. Dahya resigned as President and Chief Executive Officer of the
Company effective October 1, 1998. Mr. Dahya's compensation for the fiscal
year ended September 30, 1998 consisted of compensation at the rate of
$150,000 per year for the period from October 1, 1997 through December 31,
1997, and $249,600 per year for the period from January 1, 1998 through
September 30, 1998. In conjunction with his resignation effective October 1,
1998, Mr. Dahya's existing compensation agreements with the Company were
terminated, and the Company entered into a new one year Services Agreement
with Mr. Dahya's corporation for $100,000 effective October 1, 1998 (see
"Compensation Committee Report on Executive Compensation - Fiscal Year Ended
September 30, 1998").
(2) Consists of premiums paid by the Company on a life insurance policy for
Amyn S. Dahya. The policy is owned by Mr. Dahya, with the Company and his
wife as the named beneficiaries.
Compensation Agreements:
The Company has not entered into any long-term employment or consulting
contracts with its officers or directors.
Selwyn Kossuth, a director of the Company, is paid an annual consulting
fee of approximately $26,000.
Mark S. Zucker was appointed President and Chief Executive Officer of
the Company effective October 1, 1998 at an annual compensation rate of
$250,000 per year.
54
<PAGE>
Robert N. Weingarten was appointed as Chief Financial Officer and
Secretary of the Company effective November 20, 1998 at an annual
compensation rate of $120,000 per year.
Severance Agreements:
Effective March 23, 1998, the Company entered into severance agreements
with Amyn S. Dahya, Gregory J. Gosson, Ian R. Saunders and another employee
expiring on May 31, 1999, which provided for certain compensation and
benefits in the event that their employment was terminated as result of a
change in control of the Company. Mr. Dahya's severance agreement was
superseded by a new one year Services Agreement with Mr. Dahya's corporation
for $100,000 effective October 1, 1998. The remaining severance agreements
provide for aggregate compensation of up to $525,000.
Board of Directors:
Directors receive no compensation for serving on the Board of Directors,
but are reimbursed for any out-of-pocket expenses incurred in attending board
meetings.
Stock Option - Amyn S. Dahya:
During October 1995, Amyn S. Dahya was granted a stock option to
purchase 1,000,000 shares of common stock at an exercise price of $7.00 per
share, which was equal to the market price per share at the date of grant.
This stock option expires on September 30, 2000, and vests over a period of
two years, with one-third vesting at the grant date, and one-third on each
anniversary of the grant date. As of September 30, 1998, this stock option
was fully vested, and had not been exercised.
Stock Option - Mark S. Zucker:
Effective January 18, 1999, the Board of Directors of the Company
granted Mark S. Zucker, the President and Chief Executive Officer of the
Company, an option to purchase 75,807 shares of First Convertible Preferred
Stock, exercisable immediately at an exercise price of $2.00 per share
through December 23, 1999, subject to annual renewal if not terminated by the
Board of Directors.
Stock Option/SAR Grants to Executive Officers:
During the fiscal year ended September 30, 1998, the Company did not
grant any stock options or SARs to its executive officers.
55
<PAGE>
Aggregated Option/SAR Exercises in the Last Fiscal Year and Fiscal Year-End
Option/SAR Values:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares at September at September
Acquired 30, 1998 - 30, 1998 -
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Amyn S.
Dahya 0 0 1,000,000/0 0/0
</TABLE>
Long-Term Incentive Plans:
The Company has no long-term incentive plans.
Stock Option Plans:
1995 Incentive 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 were increased from 800,000 to 1,500,000 upon approval by the
Company's shareholders at the annual meeting held on 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
Compensation Committee. The Compensation 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 three 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, the optionee has the right to
exercise the accrued options within thirty days of such termination. Upon
death, the optionee's estate or heirs have one year to exercise such options.
56
<PAGE>
Options granted under the ISOP are not transferrable other than by will
or by the laws of descent and distribution. The ISOP provides that the
number of shares and the option price will be adjusted on a pro-rata basis
for stock splits and stock dividends.
Options must be granted within five 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 fiscal 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 up to six years.
Certain of the options granted under the ISOP were compensatory in nature and
resulted in aggregate compensation expense of $576,250, of which nil, $74,040
and $85,471 were charged to operations during the fiscal years ended
September 30, 1996, 1997 and 1998, respectively. During the fiscal year
ended September 30, 1997, there were no options granted under the ISOP and
60,000 options were canceled. During the fiscal year ended September 30,
1998, 182,500 options were granted under the ISOP exercisable at $5.00 per
share, and 260,000 options were canceled.
1995 Non-Qualified Stock Option Plan. During 1995, the Company 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 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 vested 100% on the grant date, 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. Options granted under the
SOP were compensatory in nature and resulted in aggregate compensation
expense of $1,220,160, of which $855,600 and $364,560 were recorded as
compensation expense during the fiscal years ended September 30, 1995 and
1996, respectively. During the fiscal years ended September 30, 1996, 1997
and 1998, 10,000, 116,000 and 68,000 options, respectively, were exercised.
The SOP is administered by the Board of Directors through the Compensation
Committee, which determines which persons will receive options under the SOP,
the number of shares that may be
57
<PAGE>
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 SOP are not transferable other than by will or
by the laws of descent and distribution. The SOP provides that the number of
shares and the option price will be adjusted on a pro rata basis for stock
splits and dividends.
1997 Directors Stock Option Plan. On January 17, 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. The DSOP was approved by the Company's
shareholders at the annual meeting held on June 16, 1997. Options granted
under the DSOP are considered to be non-statutory stock options for tax
purposes.
During the fiscal year ended September 30, 1997, 275,000 options were
granted and 100,000 options were canceled under the DSOP. During the fiscal
year ended September 30, 1998, 100,000 options were granted and 175,000
options were canceled under the DSOP. The options granted during the fiscal
year ended 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. The
options granted during the fiscal year ended September 30, 1998 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 one-third per year.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions:
The current members of the Compensation Committee are Amyn S. Dahya,
Selwyn Kossuth, Alexander L. Cappello and Mark S. Zucker. As of September
30, 1997, the Compensation Committee consisted of Hanif S. Dahya and Sandro
Kunzle. On November 6, 1997, Selwyn Kossuth was appointed to the
Compensation Committee. As a result of the resignation of Hanif S. Dahya and
Sandro Kunzle from the Board of Directors on August 1, 1998, Amyn s. Dahya,
Alexander L. Cappello and Mark S. Zucker were appointed to the Compensation
Committee on October 8, 1998. During the fiscal year ended September 30,
1998, Sandro Kunzle served as a director of WaterPur, a public company of
which Amyn S. Dahya is an officer, director and major shareholder. Amyn S.
Dahya was the Company's President and Chief Executive Officer during the
fiscal year ended September 30, 1998. Hanif S. Dahya is the brother of Amyn
S. Dahya.
Compensation Committee Report on Executive Compensation - Fiscal Year Ended
September 30, 1998:
58
<PAGE>
The Company's compensation program for its executive officers is
administered and reviewed by the Compensation Committee of the Board of
Directors. Historically, executive compensation consisted of a combination
of base salary and discretionary bonuses. Individual compensation levels are
designed to reflect individual responsibilities, performance and experience,
as well as Company performance. The determination of discretionary bonuses
is based on various factors, including implementation of the Company's
business plan, acquisition of assets, development of corporate opportunities
and completion of financings.
The Compensation Committee also believes that executives should have a
substantial equity ownership, both through direct share ownership and through
stock options, to provide long-term incentives which link executive
compensation to the Company's long-term performance and return to its
stockholders. The Company also believes that non-employee directors should
have an equity interest in the Company. In that regard, the Company has
adopted the 1995 Incentive Stock Option Plan, the 1995 Non-Qualified Stock
Option Plan and the 1997 Directors Stock Option Plan.
Effective January 1, 1998, the Compensation Committee increased Amyn S.
Dahya's annual compensation from $150,000 to $249,600 in recognition of his
efforts with regard to the development of the Company's business. During
1998, prior to the appointment of new management (see "ITEM 1.
BUSINESS - MAJOR DEVELOPMENTS DURING AND SUBSEQUENT TO THE FISCAL YEAR ENDED
SEPTEMBER 30, 1998 - Changes in Operations and Corporate Structure"), Mr.
Dahya also entered into a Severance Agreement and a Services Agreement with
the Company. The Severance Agreement provided for Mr. Dahya to receive an
amount equal to three times the average annual salary paid to him during the
five calendar years ending before a change in control of the Company. The
Services Agreement provided for Mr. Dahya to receive, through his
corporation, a base annual salary of $249,600 for a period of five years with
annual cost of living increases, a CN$5,000,000 life insurance policy, and
various incentive compensation and benefits. In conjunction with Mr. Dahya's
resignation as the Company's President and Chief Executive Officer effective
October 1, 1998, the Severance Agreement and the Services Agreement were
terminated, and the Company entered into a new one year Services Agreement
with Mr. Dahya's corporation for $100,000 effective October 1, 1998.
Comparative Shareholder Return Performance Graph:
The graph below compares the cumulative total shareholder return on the
Company's common stock against the cumulative total shareholder return on the
S & P Corporate - 500 Stock Index and the S & P Gold Index, assuming that
$100 was invested on September 30, 1994 in the Company's common stock and in
the stocks comprising the S & P Corporate - 500 Index and the S & P Gold
Index, and also assuming the reinvestment of all dividends.
59
<PAGE>
The historical stock price performance of the Company's common stock is not
necessarily indicative of future price performance.
<TABLE>
<CAPTION>
Fiscal S & P
Year Corporate
Ended - 500 S & P
September Stock Gold Casmyn
30, Index Index Corp.
- --- ----- ----- -----
<S> <C> <C> <C>
1994 100 100 100
1995 133 95 99
1996 160 92 150
1997 210 57 58
1998 266 43 *
</TABLE>
- --------------------
*Less than $1.00.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As used in this section, the term beneficial ownership with respect to a
security is defined by Rule 13d-3 under the Securities Exchange Act of 1934,
as amended, as consisting of sole or shared voting power (including the power
to vote or direct the vote) and/or sole or shared investment power (including
the power to dispose of or direct the disposition of) with respect to the
security through any contract, arrangement, understanding, relationship or
otherwise, subject to community property laws where applicable.
As of March 18, 1999, 223,181,006 shares of common stock were issued and
outstanding. There are no other classes of voting securities currently
authorized or outstanding. Although the First Convertible Preferred Stock is
currently convertible into common stock of the Company, the conversion price
is subject to adjustment under certain circumstances, which requires
application of a complex formula which varies according to date, trading
volume and conversions by other holders of First Convertible Preferred Stock,
and is subject to various other factors and limitations. Accordingly, at the
present time, the number of shares of common stock issuable upon conversion
is not determinable. The Preferred Stock Investment Agreement also specifies
that no shareholder of First Convertible Preferred Stock shall be entitled to
convert any such shares into common stock of the Company if following
conversion of such First Convertible Preferred Stock the investor and its
affiliates shall be the beneficial owners of 10% or more of the common stock
of the Company.
The following table sets forth, as of March 18, 1999: (a) the names and
addresses of each beneficial owner of more than
60
<PAGE>
five percent (5%) of the Company's common stock known to the Company, the
number of shares of common stock beneficially owned by each such person, and
the percent of the Company's common stock so owned; and (b) the names and
addresses of each director and executive officer, the number of shares of
common stock beneficially owned, and the percentage of the Company's common
stock so owned, by each such person, and by all directors and executive
officers of the Company as a group. Each person has sole voting and
investment power with respect to the shares of common stock, except as other
wise indicated. Beneficial ownership consists of a direct interest in the
shares of common stock, except as otherwise indicated.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent of Shares
of Beneficial Owner Beneficial Ownership of Common Stock
- ------------------- -------------------- -----------------
<S> <C> <C>
Mark S. Zucker(6) 34,019,870 (1) 15.2
Amyn S. Dahya(6) 5,201,134 (2) 2.3
Selwyn Kossuth(6) - -
Alexander L. Cappello(6) 2,247,775 (3) 1.0
Divo Milan(6) 2,999,027 (4) 1.3
Robert N. Weingarten(6) - -
All Directors and
Executive Officers
as a Group (6 persons) 44,467,806 (5) 19.8
</TABLE>
- ----------------------
(1) The shares of common stock are owned of record by Anvil Investment
Partners, L.P., a Delaware limited partnership. Anvil Investors, Inc., a
Delaware corporation, is the general partner of Anvil Investment Partners,
L.P. Mark S. Zucker, the President and Chief Executive officer of the
Company, is the controlling shareholder of Anvil Investors, Inc.
Anvil Investment Partners, L.P. also owns 66,408 shares of First
Convertible Preferred Stock. Effective January 18, 1999, the Board of
Directors of the Company granted Mark S. Zucker an option to purchase 75,807
shares of First Convertible Preferred Stock, exercisable immediately at an
exercise price of $2.00 per share through December 23, 1999, subject to
annual renewal if not terminated by the Board of Directors.
61
<PAGE>
(2) Includes 400,000 shares owned by Dahya Holdings, Inc., 1,807,750 shares
owned by Bismillah Children's Foundation Ltd., and 1,000,000 shares issuable
upon exercise of immediately exercisable stock options. Excludes 632,694
shares owned by a former subsidiary of Dahya Holdings, Inc., a foreign
corporation. Amyn S. Dahya is the sole shareholder of Dahya Holdings, Inc.
Mansoor Dahya, the uncle of Amyn S. Dahya, is the owner of the former
subsidiary of Dahya Holdings, Inc., and may be deemed to be the beneficial
owner of such shares. Bismillah Children's Foundation Ltd. is a
non-profit/charitable foreign corporation that is managed by a five member
board of directors, of which Amyn S. Dahya, Karima Dahya, the wife of Amyn S.
Dahya, and Hanif S. Dahya, the brother of Amyn S. Dahya, are three of the
five trustees. A majority vote is required for the board of directors to
take any actions on behalf of the foundation.
(3) Includes 2,247,775 shares of common stock owned by Linda Cappello,
Alexander L. Cappello's wife, as to which Mr. Cappello disclaims beneficial
ownership. Excludes 3,539 shares of First Convertible Preferred Stock owned
by Linda Cappello and 2,422 shares of First Convertible Preferred Stock owned
by Gerald K. Cappello, Mr. Cappello's brother, who is the President of
Cappello Capital Corp., as to which Mr. Cappello disclaims beneficial
ownership. Also excludes warrants to purchase 75,026 shares of First
Convertible Preferred Stock owned by Linda Cappello, as to which Mr. Cappello
disclaims beneficial ownership. Such warrants were issued to Cappello Group,
Inc. in conjunction with the sale of the First Convertible Preferred Stock
during the fiscal year ended September 30, 1996, prior to the date of Mr.
Cappello's appointment to the Board of Directors.
(4) The beneficiaries of Karpnale Investment PTE Ltd. are the sons of Divo
Milan. Mr. Milan does not have investment or voting power with respect to
such shares, and accordingly, disclaims any beneficial interest in such
shares. Karpnale Investment PTE Ltd. also owns 19,632 shares of First
Convertible Preferred Stock.
(5) Includes 1,000,000 shares of common stock issuable upon exercise of
immediately exercisable stock options.
(6) The address of each such person is c/o the Company, 28720 Canwood
Street, Suite 207, Agoura Hills, California 91301.
Changes in Control:
The Company is unaware of any contract or other arrangement, the
operation of which may at a subsequent date result in a change in control of
the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended September 30, 1998, a subsidiary of
WaterPur provided office services aggregating $162,000 to the Company on a
cost-recovery basis. As of September 30, 1998, the Company recorded a
reserve for uncollectibility of $216,628
62
<PAGE>
for amounts advanced to WaterPur during the fiscal year ended September 30,
1998.
During the fiscal year ended September 30, 1998, the Company paid
premiums of $49,495 on a life insurance policy for Amyn S. Dahya.
The policy is owned by Mr. Dahya, with the Company and his wife as the named
beneficiaries.
During the fiscal year ended September 30, 1998, the Company paid
consulting fees of $53,000 to Hanif S. Dahya, a director of the Company. Mr.
Dahya resigned as a director of the Company on August 1, 1998.
During the fiscal year ended September 30, 1998, the Company paid
consulting fees of approximately $15,000 to Sandro Kunzle, a director of the
Company. Mr. Kunzle resigned as a director of the Company on August 1, 1998.
During the fiscal year ended September 30, 1998, the Company paid
consulting fees of approximately $26,000 to Selwyn Kossuth, a director of the
Company.
Mark S. Zucker was appointed as the Company's President and Chief
Executive Officer effective October 1, 1998. Mr. Zucker was paid $70,833
during the fiscal year ended September 30, 1998 for consulting services
rendered to the Company's Board of Directors in conjunction with the
Company's efforts to restructure its operations and capital structure.
During the fiscal year ended September 30, 1997, Al-Karim Haji, the
Company's former Chief Financial Officer, exercised stock options to purchase
7,500 shares of common stock at $5.00 per share. The $37,500 exercise price
was loaned to Mr. Haji by the Company. On March 17, 1998, the Company
forgave and wrote off the $37,500 owed to the Company by Mr. Haji. Mr. Haji
was the Company's Chief Financial Officer from November 7, 1997 until his
resignation on April 9, 1998. Prior to his appointment as Chief Financial
Officer, Mr. Haji was the Company's Director of Finance.
63
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements of Casmyn Corp. and
subsidiaries are filed with and as part of this report:
Independent Auditors' Report -
Deloitte & Touche LLP
Consolidated Balance Sheets -
September 30, 1998 and 1997
Consolidated Statements of Operations -
For the Years Ended September 30,
1998, 1997 and 1996
Consolidated Statements of Stockholders'
Equity (Deficiency) - For the Years
Ended September 30, 1998, 1997 and 1996
Consolidated Statements of Cash Flows -
For the Years Ended September 30,
1998, 1997 and 1996
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
Schedules have been omitted because they are not required or are not
applicable or the information required to be set forth therein either is not
material or is included in the consolidated financial statements or the notes
thereto.
(a)(3) Exhibits
A list of exhibits required to be filed as part of this report is set
forth in the Index to Exhibits, which immediately precedes such exhibits, and
is incorporated herein by reference.
(b) Reports on Form 8-K: The Company did not file any Current Reports
on Form 8-K during or related to the three months ended September 30, 1998.
64
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CASMYN CORP.
-------------------
(Registrant)
Date: March 26, 1999 By: /s/ MARK S. ZUCKER
-------------------
Mark S. Zucker
President and Chief
Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
Date: March 26, 1999 By: /s/ MARK S. ZUCKER
-------------------------
Mark S. Zucker
President, Chief
Executive Officer
and Director
Date: March 30, 1999 By: /s/ AMYN S. DAHYA
-------------------------
Amyn S. Dahya
Director
Date: March 25, 1999 By: /s/ SELWYN KOSSUTH
-------------------------
Selwyn Kossuth
Director
Date: March 26, 1999 By: /s/ ALEXANDER L. CAPPELLO
-------------------------
Alexander L. Cappello
Director
Date: March 26, 1999 By: /s/ DIVO MILAN
-------------------------
Divo Milan
Director
Date: March 26, 1999 By: /s/ ROBERT N. WEINGARTEN
-------------------------
Robert N. Weingarten
Chief Financial Officer
65
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
CASMYN CORP. AND SUBSIDIARIES
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Casmyn Corp.
We have audited the consolidated balance sheets of Casmyn Corp. and subsidiaries
(collectively, the "Company") as at September 30, 1998 and 1997 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,
1998. 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 Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at September 30,
1998 and 1997 and the results of their operations and their cash flows for each
of the years in the three year period ended September 30, 1998 in accordance
with accounting principles generally accepted in the United States.
/s/ Deloitte & Touche LLP
Chartered Accountants
Vancouver, British Columbia
December 31, 1998
COMMENTS BY AUDITORS FOR UNITED STATES READERS ON CANADA --
UNITED STATES REPORTING DIFFERENCES
In the United States, reporting standards for auditors would require the
addition of an explanatory paragraph following the opinion paragraph when the
financial statements are affected by a significant uncertainty such as referred
to in Note 13 regarding the Corporation's ability to continue as a going
concern. Our report to the stockholders dated December 31, 1998 is expressed in
accordance with Canadian reporting standards which do not permit a reference to
such uncertainties in the auditors' report when the uncertainties are adequately
disclosed in the financial statements.
/s/ Deloitte & Touche LLP
Chartered Accountants
Vancouver, British Columbia
December 31, 1998
<PAGE>
CASMYN CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30,
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 4,356,200 $ 18,185,515
Restricted cash (Note 2) - 5,074,659
Marketable securities (Note 3) 1,588,536 2,096,704
Accounts receivable 301,456 511,135
Inventories 643,135 751,299
Prepaid expenses and other current assets 20,830 247,560
- ----------------------------------------------------------------------------------------------------------------------------------
6,910,157 26,866,872
INVESTMENT IN AFFILIATE (Note 6) - 4,574,368
PROPERTY AND EQUIPMENT, net (Note 9) 18,161,502 16,676,347
OTHER ASSETS 23,262 155,792
- ----------------------------------------------------------------------------------------------------------------------------------
$ 25,094,921 $ 48,273,379
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable $ 518,823 $ 1,253,164
Short-term borrowings (Note 4) - 4,966,160
Liability for purchase of marketable securities (Note 3) - 2,096,704
Accrued liabilities 893,236 852,801
Preferred share penalty 839,737 -
Current portion of long-term debt (Note 11) - 58,418
- ----------------------------------------------------------------------------------------------------------------------------------
2,251,796 9,227,247
DIVIDEND PAYABLE (Note 6) - 4,574,368
- ----------------------------------------------------------------------------------------------------------------------------------
2,251,796 13,801,615
- ----------------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 14, 15 and 19)
REDEEMABLE FIRST CONVERTIBLE
PREFERRED STOCK (NOTE 13) 44,440,451 -
- ----------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIENCY) (NOTE 12)
Preferred stock
Authorized: 20,000,000 shares; $0.10 par value
1,084,347 shares (1997 - 1,406,962 shares)
Liquidation preference - $44,440,451 (1997 - $38,999,726) (Note 13) - 140,697
Common stock
Authorized: 300,000,000 common shares; $0.04 par value
Issued and outstanding
217,751,710 shares (1997 - 13,195,227 shares) 8,710,068 527,809
Additional paid-in capital 29,272,294 65,586,052
Accumulated deficit (55,866,898) (28,453,840)
Accumulated foreign currency translation adjustment (3,712,790) (3,328,954)
- ----------------------------------------------------------------------------------------------------------------------------------
(21,597,326) 34,471,764
- ----------------------------------------------------------------------------------------------------------------------------------
$ 25,094,921 $ 48,273,379
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
CASMYN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
-------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Gold sales $ 4,554,204 $ 3,392,160 $ 630,481
- ----------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Mineral production 3,342,563 3,045,360 958,561
General and administrative expenses 2,353,886 3,161,153 2,377,138
Professional services 559,156 420,648 318,997
Compensatory stock option expense 85,471 74,040 364,560
Depreciation, depletion and amortization 1,333,493 523,463 232,019
Mineral exploration expense 206,285 1,190,239 906,056
Write-down of assets (Notes 7 and 8) 1,279,454 394,455 672,560
- ----------------------------------------------------------------------------------------------------------------------------------
9,160,308 8,809,358 5,829,891
- ----------------------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (4,606,104) (5,417,198) (5,199,410)
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Equity in net loss of affiliate, including write-off of investment (4,574,368) (1,034,604) (3,177,953)
Minority interest in net loss of consolidated subsidiary 125,200 35,780 -
Gain (loss) on foreign exchange 425,382 (861,857) -
Gain on sale of investments 143,304 126,000 -
Interest income, net 502,892 257,404 47,463
Loan guarantee loss (Note 2) (5,000,000) - -
Other (expense) income, net (21,098) 101,048 8,574
- ----------------------------------------------------------------------------------------------------------------------------------
(8,398,688) (1,376,229) (3,121,916)
- ----------------------------------------------------------------------------------------------------------------------------------
NET LOSS $(13,004,792) $(6,793,427) $(8,321,326)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
LOSS APPLICABLE TO COMMON STOCKHOLDERS
Net loss $(13,004,792) $(6,793,427) $(8,321,326)
Less: dividends on convertible preferred stock (2,291,875) (871,260) -
Less: amortization of discount on convertible preferred
stock (Note 12) (13,884,075) (3,825,676) -
Less: preferred share penalty (Note 13) (839,737) - -
- ----------------------------------------------------------------------------------------------------------------------------------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS $(30,020,479) $(11,490,363) $(8,321,326)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
LOSS PER COMMON SHARE -
BASIC AND DILUTED $ (0.28) $ (0.90) $ (1.16)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 109,012,453 12,811,670 7,148,742
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
CASMYN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY (DEFICIENCY)
YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Number of Common Number of Preferred
common shares preferred shares
shares amount shares amount
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1995 8,604,637 $ 344,185 - $ -
- --------------------------------------------------------------------------------------------------------------------------------
Conversion of common stock
into preferred stock (2,707,000) (108,280) - 270,700
Private placement of units 1,159,091 46,364 - -
Shares issued in lieu of interest 7,302 292 - -
Compensatory stock option expense - - - -
Exercise of stock options 40,000 1,600 - -
Acquisition of WestAmerica (Note 17) 606,061 24,243 - -
Rescission of acquisition of WestAmerica
(Note 17) (606,061) (24,243) - -
Conversion of preferred stock into
common stock 2,707,000 108,280 - (270,700)
Acquisition of Auromar (Note 7) 2,701,103 108,044 - -
Foreign currency translation adjustment - - - -
Net loss - - - -
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, 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 - -
Compensatory stock option expense - - - -
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 into stock 594,856 23,794 83,467 8,347
Preferred stock penalty - - 11,686 1,169
Amortization of conversion discount on
convertible preferred stock (Note 12) - - - -
Preferred stock dividend - - 38,631 3,863
Conversion of preferred stock
into common stock 67,965 2,719 (11,907) (1,191)
Dividend payable for spin-off of
investment in WaterPur - - - -
Repurchased common stock (Note 1(a)) (181,487) (7,260) - -
Foreign currency translation adjustment - - - -
Net loss - - - -
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1997 13,195,227 $ 527,809 1,406,962 $ 140,697
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Additional Foreign currency
paid-in Accumulated translation
capital deficit adjustment Total
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1995 $ 11,859,844 $ (4,067,783) $ 7,350 $ 8,143,596
- --------------------------------------------------------------------------------------------------------------------------------
Conversion of common stock
into preferred stock (162,420) - - -
Private placement of units 12,929,319 - - 12,975,683
Shares issued in lieu of interest 120,600 - - 120,892
Compensatory stock option expense 364,560 - - 364,560
Exercise of stock options 198,800 - - 200,400
Acquisition of WestAmerica (Note 17) 6,755,459 - - 6,779,702
Rescission of acquisition of WestAmerica
(Note 17) (6,755,459) - - (6,779,702)
Conversion of preferred stock into
common stock 162,420 - - -
Acquisition of Auromar (Note 7) 262,245 - - 370,289
Foreign currency translation adjustment - - (661,153) (661,153)
Net loss - (8,321,326) - (8,321,326)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1996 25,735,368 (12,389,109) (653,803) 13,192,941
- --------------------------------------------------------------------------------------------------------------------------------
Adjustment of Auromar acquisition 6,977 - - -
Private placement of units 1,404,300 - - 1,410,500
Issuance of shares for services 225,561 - - 226,561
Compensatory stock option expense 74,040 - - 74,040
Exercise of stock options 344,720 - - 352,140
Shares issued in lieu of interest 88,271 - - 88,699
Private placement 29,053,553 - - 29,182,062
Conversion of convertible
debt into stock 4,767,859 - - 4,800,000
Preferred stock penalty (1,169) - - -
Amortization of conversion discount on
convertible preferred stock (Note 12) 3,825,676 (3,825,676) - -
Preferred stock dividend 961,912 (871,260) - 94,515
Conversion of preferred stock
into common stock (841) - - 687
Dividend payable for spin-off of
investment in WaterPur - (4,574,368) - (4,574,368)
Repurchased common stock (Note 1(a)) (900,175) - - (907,435)
Foreign currency translation adjustment - - (2,675,151) (2,675,151)
Net loss - (6,793,427) - (6,793,427)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1997 $ 65,586,052 $(28,453,840) $ (3,328,954) $ 34,471,764
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
<PAGE>
CASMYN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY (DEFICIENCY) (CONTINUED)
YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Number of Common Number of Preferred
common shares preferred shares
shares amount shares amount
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1997 13,195,227 $ 527,809 1,406,962 $ 140,697
- -----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options 69,923 2,797 - -
Conversion of preferred
stock into common stock 204,889,060 8,195,562 (394,342) (39,434)
Recission of dividend payable - - - -
Preferred stock dividend - - 91,675 9,166
Preferred stock penalty - - - -
Amortization of conversion discount on
convertible preferred stock (Note 12) - - - -
Compensatory stock option expense - - - -
Repurchased preferred stock - - (19,948) (1,995)
Repurchased common stock (Note 12) (402,500) (16,100) - -
Foreign currency translation adjustment - - - -
Reclassification of liquidation preference
of preferred stock (Note 13) - - - (108,434)
Net loss - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1998 217,751,710 $ 8,710,068 1,084,347 $ -
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Additional Foreign currency
paid-in Accumulated translation
capital deficit adjustment Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1997 $ 65,586,052 $(28,453,840) $ (3,328,954) $ 34,471,764
- -----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options - - - 2,797
Conversion of preferred
stock into common stock (8,156,128) - - -
Recission of dividend payable - 4,574,368 - 4,574,368
Preferred stock dividend 2,282,709 (2,291,875) - -
Preferred stock penalty - (839,737) - (839,737)
Amortization of conversion discount on -
convertible preferred stock (Note 12) 13,884,075 (13,884,075) - -
Compensatory stock option expense 85,471 - - 85,471
Repurchased preferred stock (23,758) - - (25,753)
Repurchased common stock (Note 12) (54,110) (1,966,947) - (2,037,157)
Foreign currency translation adjustment - - (383,836) (383,836)
Reclassification of liquidation preference
of preferred stock (Note 13) (44,332,017) - - (44,440,451)
Net loss - (13,004,792) - (13,004,792)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1998 $ 29,272,294 $(55,866,898) $ (3,712,790) $(21,597,326)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
CASMYN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $(13,004,792) $ (6,793,427) $ (8,321,326)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation, depletion and amortization 1,333,493 523,463 232,019
(Gain) loss on foreign currency translation (425,382) 861,857 -
Equity in net loss of affiliate, including write-off
of investment 4,574,368 1,034,604 3,177,953
Write-down of assets (Notes 7 and 8) 1,279,454 394,455 672,560
Gain on sale of investments (143,304) (126,000) -
Loan guarantee loss 5,000,000 - -
Compensatory stock option expense 85,471 74,040 364,560
Amortization of debt issue costs - 30,000 60,000
Other non-cash expense - 315,260 120,892
Changes in operating assets and liabilities:
(Increase) decrease in: 124,837 (449,523) (215,335)
Accounts receivable
Inventories 108,164 (393,024) 255,269
Amounts due from related parties - 145,276 (323,587)
Prepaid expenses and other current assets 226,730 (155,179) (123,900)
Increase (decrease) in: (734,341) (643,782) 857,922
Accounts payable
Accrued liabilities 39,736 (243,864) 252,282
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (1,535,566) (5,425,844) (2,990,691)
- -----------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of business, net of cash acquired - - (4,354,428)
Decrease in cash due to deconsolidation
of investment in WPUR - - (459,708)
Proceeds from sale of other assets - 900,000 -
(Increase) decrease in other assets 132,530 22,374 (194,123)
Increase in investment in and advances to affiliate - (2,680,941) (3,190,567)
Purchase of property and equipment (3,782,965) (8,427,683) (7,547,973)
Purchase of marketable securities (2,088,175) - -
Proceeds from sale of marketable securities 650,842 - -
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (5,087,768) (10,186,250) (15,746,799)
- -----------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of common stock - 1,410,500 17,725,685
Issuance of common stock on exercise of
stock options 2,797 352,140 200,400
Issuance of preferred stock - 29,277,264 -
(Payment) proceeds from line of credit (4,966,160) 4,966,160 -
(Increase) decrease in restricted cash 5,074,659 (5,074,659) -
Payment under loan guarantee (5,000,000) - -
Repayments of long-term debt (58,418) (120,283) (154,003)
Purchase and retirement of common stock (2,037,157) (750,000) -
Purchase and retirement of preferred stock (25,753) - -
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (7,010,032) 30,061,122 17,772,082
- -----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and
cash equivalents (195,949) (309,707) 72,657
- -----------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (13,829,315) 14,139,321 (892,751)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 18,185,515 4,046,194 4,938,945
- -----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 4,356,200 $ 18,185,515 $ 4,046,194
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
<PAGE>
CASMYN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C>
CASH PAID FOR INTEREST $ - $ 145,349 $ 147,169
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for services $ - $ 226,561 $ -
Issuance of common stock for payment of interest - 88,699 120,892
(Write down of) investment in affiliate received for
repayment of debt (4,574,368) 4,574,368 -
Recission of (dividend payable for) spin-off of investment in
affiliate 4,574,368 (4,574,368) -
Issuance of preferred shares for payment of dividend 2,291,875 871,260 -
Investment in marketable securities for accrued liability - 2,096,704 -
Conversion of debenture to preferred stock and common
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 13,884,075 3,825,676 -
Reduction of investment in and payable to joint venture (Note 16) - 623,000 -
Acquisition of common stock for repayment of amounts
due from affiliate - 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 8,195,742 2,719 270,700
Preferred share penalty 839,737 - -
Issuance of common stock to acquire WestAmerica (Note 17) - - 6,779,702
Rescission of acquisition of WestAmerica (Note 17) - - 6,779,702
Adjustment of acquisition of Auromar - 6,977 -
Property and equipment purchased and financed by
accounts payable and accrued liabilities - - 1,051,896
Decrease in investment in WPUR and increase in
advances to WPUR for dividends on WPUR preferred stock - - 237,500
- -----------------------------------------------------------------------------------------------------------------------------
* PURCHASE OF BUSINESSES, NET OF CASH ACQUIRED:
Working capital, other than cash $ - $ - $ (108,227)
Mineral properties - - (4,945,600)
Property and equipment - - (896,516)
Accrued taxes on acquisition - - 993,660
Capital lease obligations - - 231,966
Stock issued - - 370,289
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used to acquire businesses $ - $ - $(4,354,428)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
** 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
Current assets $ - $ - $ 439,673
Investment in affiliate - - (654,853)
Property and equipment - - 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>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
CASMYN CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
(a) 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).
During the fiscal years ended September 30, 1998 and 1997, the
Company's primary business focus was the acquisition, exploration and
operation of precious mineral resource properties in Zimbabwe and
base metal resource properties in Zambia. During the fiscal years
ended September 30, 1996 and 1995, the Company was also involved, to
varying degrees, in the acquisition and exploration of precious metal
resource properties in South Africa, precious stone properties in
South Africa, and research and development related to minerals
testing, processing engineering and environmental technologies. The
Company has conducted such operations through various subsidiaries.
On June 29, 1995, the Company acquired an equity interest in WaterPur
International Inc. ("WPUR") through the acquisition of WPUR Preferred
Shares. WPUR was, at that time, related to Casmyn through certain
common officers, directors and significant stockholders.
WPUR performs research and development of water purification
technologies in addition to marketing and designing water
purification and treatment equipment. Through September 30, 1998,
the Company shared offices, personnel and certain facilities with
WPUR and accordingly actual costs related to these offices,
personnel and facilities were allocated accordingly.
Under the terms of the WPUR Preferred Shares, effective September 30,
1996, the Company converted those WPUR 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 also exchanged 425,750 common shares of Auromar held as
an investment for 1,532,700 common shares of WPUR thereby increasing
its percentage ownership in WPUR to approximately 31.2% at September
30, 1996.
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a) ORGANIZATION (CONTINUED)
Effective September 30, 1997, the Company received 7,900,004 shares
of WPUR Convertible Preferred Stock ("WPUR Convertible Preferred
Shares") 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 were acquired and offset
against the total debt) of outstanding debt of WPUR (the "WPUR
Debt") to 5,082,626 WPUR Convertible Preferred Shares; and (b) the
exchange of 5,634,756 common shares of WPUR owned by the Company for
2,817,378 WPUR Convertible Preferred Shares. Each WPUR Convertible
Preferred Share confers to the holder 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
WPUR 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 WPUR 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 interests of
the Company and WPUR.
In conjunction with the restructuring, the Company reacquired and
cancelled shares of its common stock, consisting of 150,000 shares
purchased from WPUR for $750,000 and 31,487 shares acquired by
offsetting a portion of WPUR debt to the Company. In addition,
WaterPur issued to the Company warrants to purchase 3,300,000 shares
of WaterPur common stock exercisable at $0.75 per share for a period
of three years.
Effective September 30, 1997, the Company's Board of Directors
approved the spin-off of the 7,900,004 shares of convertible
preferred stock to the common and preferred shareholders of the
Company of record on October 15, 1997, subject to compliance with
regulatory requirements (see Note 6). Accordingly, at September 30,
1997, the Company had an investment in WaterPur of $4,574,368, and a
corresponding dividend payable.
(b) BASIS OF PRESENTATION
Prior to October 1, 1995, WPUR was a consolidated subsidiary of the
Company. As of October 1, 1995, the Company's investment in WPUR was
accounted for using the equity method of accounting. On September
30, 1997, the effective date of the Restructuring, the Company
changed its method of accounting for its investment in WPUR to the
cost method on the basis that the Company would no longer have the
ability to exercise significant influence over the operating and
financial policies of WPUR as a result of the proposed spin-off.
During the year ended September 30, 1998, the investment in WPUR was
written-off.
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) 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.
(d) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
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,
liabilities, commitments and contingencies at the date of the
financial statements and the reported amounts of revenues and
expenses during each reporting period.
(e) CERTAIN SIGNIFICANT ESTIMATES
The most significant estimates used by management in preparing the
accompanying financial statements include estimates of future metal
prices and recoverable reserves for assessing the carrying value of
mineral properties, plant and equipment and for the purpose of
computing depletion and depreciation changes.
(f) CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS AND RISKS
Substantially all of the Company's assets and operations are
concentrated on mineral resource development in Zimbabwe. The
Company must currently sell all gold production from these
operations to the Zimbabwe government at the world gold spot price
and receives payment in Zimbabwe dollars. Operating costs are
affected in part by inflation rates in Zimbabwe, as approximately
20% of mine operating costs incurred in Zimbabwe are denominated in
Zimbabwe dollars. In addition, certain costs are periodically
subject to significant increases mandated by the Zimbabwe
government, including costs such as wages and utilities which are
two of the major operating costs of the Company's mines.
As a result of significant inflation over the past few years in
Zimbabwe and a 60% devaluation of the Zimbabwe dollar against the
United States dollar in 1998, the government of Zimbabwe is
considering several actions, including reintroducing exchange
controls, pegging the exchange rate at below free market rates, and
banning remittances of profits from Zimbabwe. Although the Company
is currently able to convert Zimbabwe dollars into United States
dollars and transfer such amounts to the United States, there can be
no assurance that the Company will be able to continue to do so in
the future.
In addition, third world 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
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
confiscating 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 Zimbabwe.
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of the Company's
foreign subsidiaries in Zambia and South Africa are measured using
local currency as the functional currency. Assets and liabilities of
these subsidiaries are translated into United States dollars at the
exchange rate in effect at each year end. Statement of operations
accounts are translated into United States dollars at the weighted
average rate of exchange prevailing during each year. Translation
adjustments arising from differences in exchange rates from year to
year are included in the accumulated foreign currency translation
adjustments account in stockholders' equity (deficiency).
Prior to October 1, 1997, the functional currency of the Company's
Zimbabwe operations had been the Zimbabwe dollar. Accordingly,
balance sheet accounts were translated into United States dollars
using the exchange rate in effect at the balance sheet date while
revenue and expense accounts were translated using the weighted
average exchange rate prevailing during each year. The gains or
losses resulting from such translation were recorded in the foreign
exchange translation adjustment account in stockholders' equity.
During the quarter ended December 31, 1997, the Zimbabwe currency
experienced devaluation in excess of 40%. As a result of the
significant devaluations experienced during that period and for the
year ended September 30, 1998, and the resultant pressure on the
Zimbabwe annual rate of inflation, management believes that the
Zimbabwe currency is no longer appropriate for use as a functional
currency. As a result, the United States dollar has been adopted as
the functional currency for the Company's Zimbabwe operations,
effective October 1, 1997. The non-monetary assets and liabilities
are translated into United States dollars at historical rates, which
for the pre-existing balances was using the rate in effect at
October 1, 1997. Amortization and other charges related to
non-monetary items are translated into United States dollars using
those same exchange rates. Other revenue and expense accounts
continue to be translated using the weighted average exchange rate
prevailing during the reporting period. Translation adjustments
arising from the Zimbabwe operations are reflected in the statement
of operations.
(h) CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the
Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents. As of
September 30, 1998 and 1997, bank balances held in excess of
federally insured limits were $Nil and $124,827, respectively.
(i) INVENTORIES
Inventories consist of mining supplies and are stated at the lower
of cost or replacement cost. Cost is determined using the first-in,
first-out method.
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) PROPERTY AND EQUIPMENT
MINERAL PROPERTIES
Mineral properties are initially carried 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. Ongoing 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 any related
capitalized costs.
The Company reviews the carrying value of each property on a regular
basis. This review generally is made by reference to the timing of
exploration and/or development work, work programs proposed, the
exploration results achieved by the Company and by others and, in
the case of producing properties, the estimated future operating
results and net cash flows. When the carrying value of a property is
estimated to exceed its net recoverable amount, the excess is
charged to operations.
BUILDINGS
Prior to 1998, buildings were depreciated on a straight-line basis
over their estimated useful lives of forty years. During the year
ended September 30, 1998, management reevaluated the remaining
useful life of the buildings to be 18 years. This change in an
accounting estimate resulted in an additional depreciation charge of
$150,000 being recorded for 1998.
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.
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) REVENUE RECOGNITION
Revenue from the sale of gold production is recognized when the
quantity, price and delivery are reasonably assured.
(l) LOSS PER SHARE
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 128 ("SFAS No. 128") for the year ended
September 30, 1998 and has calculated the basic loss per share
information for all periods presented as prescribed by SFAS No. 128.
The calculation of the diluted loss per share has been omitted as
the assumed conversion, exercise or contingent issuance of
securities would have an anti-dilutive effect on the loss per share.
(m) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that the carrying value of the Company's cash
and cash equivalents, restricted cash, marketable securities,
accounts receivable and accounts payable, short-term borrowings,
accrued liabilities, liability for purchase of marketable
securities, and current portion of long-term debt as of September
30, 1998 and 1997 approximate fair values due to the demand or short
term nature of those instruments. The carrying value of the
investment in affiliate and dividends payable at September 30, 1998
and 1997 approximated their market values of $Nil (1997 -
$4,574,368).
(n) RECLASSIFICATION
Certain amounts in the 1996 and 1997 consolidated financial
statements and notes thereto have been reclassified to conform to
the 1998 presentation.
(o) RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued
Statement No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS No. 130"),
which is effective for financial statements issued for fiscal years
beginning after December 15, 1997. SFAS No. 130 establishes
standards for the reporting and display of comprehensive income, its
components and accumulated balances in a full set of general purpose
financial statements. SFAS No. 130 defines comprehensive income to
include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required
to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statements that is
presented with the same prominence as other financial statements.
The Company will adopt SFAS No. 130 for its fiscal year beginning
October 1, 1998, and does not anticipate that adoption of SFAS No.
130 will have a material effect on its financial statement
presentation and disclosures. Under SFAS No. 130, the Company will
report the change in the foreign currency translation adjustment as
a component of comprehensive income.
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o) RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
In June 1997, the Financial Accounting Standards Board issued
Statement No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION ("SFAS No. 131"), which supersedes SFAS No. 14,
FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE, and which
is effective for financial statements issued for fiscal years
beginning after December 15, 1997. SFAS No. 131 establishes
standards for the way that public companies report information about
operating segments in annual financial statements and requires
reporting of selected information about operating segments in
interim financial statements issued to the public. SFAS No. 131 also
establishes standards for disclosures by public companies regarding
information about their major customers, operating segments,
products and services, and the geographic areas in which they
operate. SFAS No. 131 defines operating segments as components of an
enterprise about which separate financial information is available
that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
SFAS No. 131 requires comparative information for earlier years to
be restarted. The Company will adopt SFAS No. 131 for its fiscal
year beginning October 1, 1998, and does not anticipate that
adoption of SFAS No. 131 will have a material effect on its
financial statement presentation and disclosures.
In February 1998, the Financial Accounting Standards Board issued
Statement No. 132, EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER
POSTRETIREMENT BENEFITS ("SFAS No. 132"), which is effective for
financial statements issued for fiscal years beginning after
December 15, 1997. SFAS No. 132 revises employers' disclosures
about pension and other postretirement benefit plans. SFAS No. 132
requires comparative information for earlier years to be restated.
The Company will adopt SFAS No. 132 for its fiscal year beginning
October 1, 1998, and does not anticipate that adoption of SFAS
No. 132 will have a material effect on its financial statement
presentation and disclosures.
In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES ("SFAS No. 133"), which is effective for financial
statements for all fiscal quarters of all fiscal years beginning
after June 15, 1999. SFAS No. 133 standardizes the accounting for
derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity recognize
those items as assets or liabilities in the statement of financial
position and measure them at fair value. SFAS No. 133 also addresses
the accounting for hedging activities. The Company will adopt SFAS
No. 133 for its fiscal year beginning October 1, 1999, and does not
anticipate that adoption of SFAS No. 133 will have a material effect
on its financial statement presentation and disclosures.
<PAGE>
2. RESTRICTED CASH
As of September 30, 1997, the Company had $5,074,659 of restricted cash
(including accrued interest of $74,659), which had been deposited with
two financial institutions under the Company's guarantees of two
short-term loans. Under agreements with such parties, the loans were
secured by certain investment accounts which contained shares of common
stock of the Company. During the three months ended March 31, 1998, the
significant decline in the price per share of the Company's common stock
created an impairment in the value of the shares of common stock in the
accounts with such financial institutions. As a result, the financial
institutions proceeded to call the guarantees provided by the Company,
resulting in the Company incurring a loss of $5,000,000.
3. MARKETABLE SECURITIES
At September 30, 1998 and 1997, the Company's marketable securities
consisted of United States government backed mortgage securities, all of
which are classified as available-for-sale as defined by Statement of
Financing Accounting Standards No. 115 ("SFAS No. 115"), ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. Such investments are
stated at market value which approximates cost.
4. SHORT TERM BORROWINGS
During February 1997, the Company arranged a $5,000,000 short-term credit
facility with Barclays Bank of Zimbabwe, with interest at LIBOR plus
2.25% per annum. As of September 30, 1997, the Company had borrowed
$4,966,160 under this credit facility. The credit facility became
repayable upon demand commencing February 1998. During the year ended
September 30, 1998, Barclays Bank of Zimbabwe exercised its right to
demand immediate repayment of the outstanding balance, and the Company
paid $4,966,160 to the bank in full settlement of this obligation.
5. BUSINESS SEGMENTS
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"). 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
producing operations were shut down during a plant modernization and
expansion program, the first phase of which was substantially completed
in September 1996. During fiscal 1997 and 1996, the Company operated in
water purification through its equity investment in WPUR.
<PAGE>
5. BUSINESS SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Water Corporate
Mining Purification and other Consolidated
------------------- ------------------ -------------- ------------------
(in thousands)
<S> <C> <C> <C> <C>
1998
Revenues $ 4,554 $ - $ - $ 4,554
Loss from operations (1,305) - (3,301) (4,606)
Equity in net loss of affiliate
including write-off of investment - (4,574) - (4,574)
Identifiable assets 19,534 - 5,561 25,095
Depreciation, depletion and
amortization 1,299 - 34 1,333
Capital expenditures 3,783 - - 3,783
1997
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 7,415 - 133 7,548
</TABLE>
<PAGE>
5. BUSINESS SEGMENTS (CONTINUED)
The Company has operations based in North America and Africa. The table
below presents information as to the Company's operations by geographic
region.
<TABLE>
<CAPTION>
Africa North America Other Consolidated
------------------ ---------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C> <C>
1998
Revenues $ 4,554 $ - $ - $ 4,554
Loss from operations (1,305) (2,922) (379) (4,606)
Equity in net loss of affiliate
including write-down of investment - (4,574) - (4,574)
Identifiable assets 19,534 5,561 - 25,095
1997
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
</TABLE>
6. INVESTMENT IN AFFILIATE
The Company's investment in affiliate at September 30, 1998 and 1997
consists of the following:
<TABLE>
<CAPTION>
1998 1997
------ -----------
<S> <C> <C>
Investment in WPUR $ - $4,574,368
- -------------------------------------------------------------------------------
</TABLE>
As described in Note 1(a), 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 WPUR 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 also
exchanged its 5,634,756 common shares of WPUR (approximately 31.2% of the
outstanding common shares of WPUR) for 2,817,378 WPUR Convertible
Preferred Shares. These transactions resulted in the Company owning
7,900,004 WPUR Convertible Preferred Shares.
<PAGE>
6. INVESTMENT IN AFFILIATE (CONTINUED)
Also, effective September 30, 1997, the Company's Board of Directors
announced the spin-off of all the 7,900,004 WPUR 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,
subject to regulatory approval. As such, the financial statements as at
September 30, 1997 included an investment in WPUR and a corresponding
dividend payable in the amount of $4,574,368.
During the fiscal year ended September 30, 1998, due to a significant and
prolonged decrease in the market value of WaterPur's common stock,
WaterPur's inability to repay amounts borrowed from the Company, and
WaterPur's continuing need for additional loans, management of the
Company determined that there had been an impairment in the value of the
investment in WaterPur, and wrote off the entire investment in WaterPur.
The corresponding dividend payable has also been decreased to zero as a
result of the write-off. In December 1998, the Board of Directors
determined not to effect the spin-off of the Company's preferred stock
investment in WaterPur for several reasons, including WaterPur's
inability to obtain regulatory approval to date and in the foreseeable
future, and WaterPur's inability to complete its annual audit and to make
other securities filings on a timely basis.
As discussed in Note 1, as of October 1, 1995, the Company recorded its
investment in WPUR using the equity method and has applied this method of
accounting from that date to the date of the restructuring, September 30,
1997. Subsequent to that date, the Company changed its method of
accounting for its investment in WPUR to the cost method. 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>
During the fiscal year ended September 30, 1998, the investment in WPUR
was written off to reflect an impairment in value.
<PAGE>
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 including 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 included
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>
<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 was a prospecting license covering certain
properties in the Zambian Copperbelt. The purchase price of $65,700 was
written-off during the year ended September 30, 1998, as a decision was
made to abandon rights to the property. The Company is currently
evaluating alternative opportunities with this property.
<PAGE>
7. ACQUISITIONS (CONTINUED)
SOUTH AFRICA
Effective August 12, 1996, pursuant to approval of a Plan of Arrangement
by the Supreme Court of British Columbia, Canada, the Company acquired
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. The Company had previously acquired the other 50%
interest in the mineral properties. The purchase price was allocated to
the net assets as follows:
<TABLE>
<S> <C>
Working capital (including cash acquired of $172,987) $169,620
Property and equipment 4,442
Mineral properties 196,227
- --------------------------------------------------------------------------------------------------------------
$370,289
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
During the year ended September 30, 1996, the Company exchanged
425,750 common shares of Auromar for 1,531,700 common shares of WPUR. The
WPUR shares were recorded at $204,227, the equivalent book value of the
Auromar shares.
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 wrote-off $394,455 in mineral exploration costs related to these
properties in the year ended September 30, 1997. The Company does not
intend to conduct any further diamond exploration activities in South
Africa or otherwise.
8. WRITE-DOWNS 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 by and sale
to the Royal Canadian Mint. 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.
As a result 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 during the fiscal year ended September 30,
1996.
During the year ended September 30, 1998, the following assets were also
written-off as follows:
<TABLE>
<S> <C>
Mine development and equipment in Zimbabwe $ 842,064
Mineral property interests 164,208
Other assets 273,182
- --------------------------------------------------------------------------------
$1,279,454
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
9. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at September 30:
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
<S> <C> <C>
Mineral properties $9,357,726 $9,316,277
Buildings 1,918,802 1,802,242
Mining production equipment 8,324,818 5,452,757
Automotive equipment - mining 343,599 444,315
Furniture, fixtures and office equipment 246,625 294,327
Leasehold improvements - 63,004
- --------------------------------------------------------------------------------------------------------------------
20,191,570 17,372,922
Accumulated depreciation, depletion and amortization (2,030,068) (696,575)
- --------------------------------------------------------------------------------------------------------------------
$18,161,502 $16,676,347
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
10. RELATED PARTY TRANSACTIONS
Related party transactions for the year ended September 30, 1998 are as
follows:
(a) Office and consulting service costs incurred on behalf of the
Company on a cost-recovery basis of $162,000 (1997 - $219,449; 1996
- $211,708) paid to WPUR, a company with directors in common during
such periods.
(b) Consulting fees paid to officers, directors, relatives of directors
and companies controlled by directors of $430,214 (1997 - $Nil; 1996
- $74,456).
(c) Life insurance premiums of a director of the Company of $49,495
(1997 - $79,200; 1996 - $Nil).
(d) Capital expenditures to a company in common with a director of
Casmyn Mining Zimbabwe (Private) Ltd. of $Nil (1997 - $1,375,605;
1996 - $602,000).
(e) An officer of the Company exercised stock options with a value of
$37,500. Subsequently the officer of the Company resigned and the
amount receivable was forgiven.
(f) The Company recorded a full reserve for uncollectiblity related to
advances of $216,628 (1997 - $Nil; 1996 - $Nil) to WPUR, a company
with directors in common during such periods.
<PAGE>
11. LONG-TERM
Long-term debt consists of the following at September 30:
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Capital leases $ - $ 58,418
Less current portion - (58,418)
- ---------------------------------------------------------------------------------------------------------------
Long-term portion $ - $ -
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
12. CAPITAL STOCK
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 common stock, plus one warrant. Two warrants plus $13.00
entitled the holder to purchase one share of the Company's common stock.
The warrants were exercisable for a period of two years and have expired.
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 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 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 were exercisable for a period of two years and have
expired subsequent to September 30, 1998.
TREASURY
In addition to the 181,487 shares of common stock described in Note 1(a),
the Company repurchased and cancelled 402,500 shares of common stock
during the year ended September 30, 1998.
PREFERRED STOCK
The Board of Directors is vested with the authority to divide the
authorized 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 shares of First Convertible Preferred Stock, $0.10 par value
("Convertible Preferred Stock").
<PAGE>
12. CAPITAL STOCK (CONTINUED)
PREFERRED STOCK (CONTINUED)
The Convertible Preferred Stock is 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. During the year ended September 30, 1998, the
Company recorded a charge to retained earnings and a corresponding
increase to additional paid-in capital of $13,884,075 (1997 -
$3,825,676), which represents the discount amount recognized. This amount
has been accounted for as a return to the preferred shareholders and as
an increase in the loss applicable to common shareholders. The Company
also issued a total of 91,675 shares (1997 - 38,631 shares) of
Convertible Preferred Stock as payment of the 8% dividend due on the
Convertible Preferred stock through September 30, 1998.
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 other issue 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 a previously issued convertible debenture. 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.
The Company issued an additional 11,686 shares of Convertible Preferred
Stock 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.
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 (after cash fees to the placement agents and
other issue expenses).
Each share of Convertible Preferred Stock is entitled to a dividend of 8%
per annum to be paid in additional shares of Convertible Preferred Stock
and is 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 a certain
trading price and trading 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 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.
<PAGE>
12. CAPITAL STOCK (CONTINUED)
PREFERRED STOCK (CONTINUED)
The Company repurchased 19,948 shares of Convertible Preferred Stock for
$25,753 during the fiscal year ended September 30, 1998. Subsequent to
September 30, 1998, the Company repurchased 598,655 shares of Convertible
Preferred Stock for $1,221,719 and converted 260 shares of Convertible
Preferred Stock into 5,424,792 shares of common stock, resulting in
495,141 shares of Convertible Preferred Stock being issued and
outstanding as of December 31, 1998.
STOCK OPTIONS
The FASB issued Statement of Financial Accounting Standards No. 123
("SFAS No. 123"), ACCOUNTING FOR AWARDS OF STOCK-BASED COMPENSATION TO
EMPLOYEES to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed by Accounting
Principles Board ("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 No. 123 on the net loss and loss per
share.
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 on 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 under the ISOP 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. These options are
exercisable for a term of five years from the date of vesting and vest on
varying terms over periods of up to six years. Certain of these options
were compensatory and resulted in total compensation of $85,471, $74,040
and $nil being recorded as compensation expense during 1998, 1997 and
1996, respectively.
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 compensation expense of nil being recorded for the fiscal
years ended in 1998 and 1997, and $364,560 for the fiscal year ended in
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.
<PAGE>
12. CAPITAL STOCK (CONTINUED)
STOCK OPTIONS (CONTINUED)
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 had 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 one-third per year beginning on 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 of 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, 1998, 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 volatilities of 65%, 37%
and 37%, respectively. Had compensation costs for grants made under the
SOP, ISOP, DSOP and the other stock options been determined under SFAS
123, the Company would have recorded approximately $117,000, $589,000 and
$531,000 as additional compensation expense for the years ended September
30, 1998, 1997 and 1996, respectively, resulting in a net loss of
$(13,121,792), $(7,382,427) and $(8,852,326) for the years ended
September 30, 1998, 1997 and 1996, respectively.
Had the Company recorded compensation expense related to those options
under SFAS 123, the loss per common share would have been $(0.28),
$(0.94) and $(1.24) for the years ended September 30, 1998, 1997 and
1996, respectively.
<PAGE>
12. CAPITAL STOCK (CONTINUED)
STOCK OPTIONS (CONTINUED)
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
Weighted Weighted
average average
option price option price Available
per share Outstanding per share Exercisable for grant
--------------- ---------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1995 ISOP
September 30, 1995, balance $ 5.00 765,000 - 35,000
Became exercisable - - 191,250 -
Cancelled 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 $ 5.00 161,250 130,000
Became exercisable - - 143,750 -
Cancelled 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 5.15 175,500 890,000
Became exercisable - - 147,625 -
Cancelled 5.00 (260,000) 5.00 (66,250) 260,000
Granted 5.00 182,500 - (182,500)
- --------------------------------------------------------------------------------------------------------------------------------
September 30, 1998, balance 5.35 458,000 5.31 256,875 967,500
- --------------------------------------------------------------------------------------------------------------------------------
1995 SOP
September 30, 1995 balance 0.04 246,000 0.04 123,000 4,000
Became exercisable - - 123,000 -
Exercised 0.04 (10,000) (10,000) -
- --------------------------------------------------------------------------------------------------------------------------------
September 30, 1996, balance 0.04 236,000 0.04 236,000 4,000
Exercised 0.04 (116,000) (116,000) -
- --------------------------------------------------------------------------------------------------------------------------------
September 30, 1997, balance 0.04 120,000 0.04 120,000 4,000
Exercised 0.04 (68,000) (68,000) -
Cancelled 0.04 (2,000) (2,000) 2,000
- --------------------------------------------------------------------------------------------------------------------------------
September 30, 1998, balance 0.04 50,000 0.04 50,000 6,000
- --------------------------------------------------------------------------------------------------------------------------------
1997 DSOP
September 30, 1995, balance - - - -
Granted 9.00 275,000 - 75,000
Cancelled - (100,000) - 100,000
- --------------------------------------------------------------------------------------------------------------------------------
September 30, 1997, balance 9.00 175,000 - 175,000
Granted 9.00 100,000 - (100,000)
Cancelled - (175,000) - 175,000
- --------------------------------------------------------------------------------------------------------------------------------
September 30, 1998, balance 9.00 100,000 - 250,000
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL SEPTEMBER 30, 1998 $ 5.51 608,000 $ 4.45 306,875 1,223,500
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
12. CAPITAL STOCK (CONTINUED)
STOCK OPTIONS (CONTINUED)
<TABLE>
<CAPTION>
Weighted Weighted
average average
option price option price Available
per share Outstanding per share Exercisable for grant
--------------- ---------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
OTHER STOCK OPTIONS
September 30, 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 -
Became exercisable - - 334,000 -
- -------------------------------------------------------------------------------------------------------------------------
September 30, 1998, balance $ 7.00 1,000,000 $ 7.00 1,000,000 -
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
13. CONVERTIBLE PREFERRED SHARE PENALTY
Pursuant to the Preferred Stock Investment Agreement, a technical default
occurred when the Company's common stock was delisted from NASDAQ on July
31, 1998. The Company may be obligated to pay the holders of the First
Convertible Preferred Stock ("Convertible Preferred Stock") a cash
penalty of 3% of the total purchase price of the Convertible Preferred
Stock during any period in excess of 30 days that the Company's common
stock is not listed and traded on NASDAQ or a national securities
exchange. The Preferred Stock Investment Agreement provides the holders
of the Convertible Preferred Stock the opportunity to have their shares
redeemed by the Company at the adjusted liquidation preference if the 3%
penalty is not paid within 30 days of when due. The Company believes that
the exercise of such rights by the holders of the Convertible Preferred
Stock would be subject to legal challenge by the Company.
Since the Company's common stock was delisted from NASDAQ on July 31,
1998, the Company recorded a penalty of $839,737 through September 30,
1998, which has not been paid. Subsequent to September 30, 1998, the
Company has repurchased or converted 598,915 shares of the Convertible
Preferred Stock, and such selling shareholders have waived the right to
claim their proportionate share of the penalty, thus reducing the
Company's corresponding potential penalty obligation to approximately
$375,000 as at December 31, 1998.
<PAGE>
13. CONVERTIBLE PREFERRED SHARE PENALTY (CONTINUED)
The Company is currently engaged in discussions with the holders of the
remaining shares of Convertible Preferred Stock regarding various
matters, including a waiver of the penalty and of their rights to require
the Company to redeem their shares of Convertible Preferred Stock. There
can be no assurances that the Company will be able to obtain a waiver or
that the holders of the Convertible Preferred Stock will not exercise
their rights to require the Company to redeem their shares. Should the
holders of the Convertible Preferred Stock demand payment of the cash
penalty or exercise their rights to require the Company to redeem their
shares, and should the Company not prevail in its challenge to any such
asserted rights, the Company may be forced to file for protection under
the United States Bankruptcy Code.
Since the redemption of these shares of Convertible Preferred Stock
outstanding at September 30, 1998 is outside the control of the Company,
the carrying value of the Convertible Preferred Stock at such date has
been recorded in the consolidated financial statements at their maximum
liquidation preference of $44,440,451, and such shares have been
reclassified out of the shareholders' equity (deficiency) section of the
consolidated balance sheet. Subsequent to September 30, 1998, the Company
has repurchased or converted 598,915 shares of Convertible Preferred
Stock, with such selling shareholders waiving the right to claim their
proportionate share of the liquidation preference, thus reducing the
maximum liquidation preference, and the Company's corresponding
redemption obligation, to approximately $20,000,000, as at December 31,
1998.
Although the consolidated financial statements have been prepared on the
basis of accounting principles applicable to a going concern, the rights
of the holders of the Convertible Preferred Stock to require the Company
to redeem their shares creates uncertainty with respect to the validity
of this assumption. If the going concern assumption was determined to not
be appropriate for these consolidated financial statements, then
adjustments may be necessary to the carrying values of assets and
liabilities, the reported net loss and the balance sheet classifications
used, and these adjustments may be material.
14. INCOME TAXES
A reconciliation of the income tax benefit (provision) with amounts
determined by applying the statutory United States Federal income tax
rate to the consolidated loss before income taxes for the years ended
September 30, is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------
<S> <C> <C> <C>
Tax benefit (provision) at U.S. statutory rate $ 4,376,677 $ 2,377,699 $ 2,912,464
Operating losses with no current tax benefit (2,241,437) (2,372,449) (2,910,437)
Permanent differences (2,135,240) (5,250) (2,027)
- --------------------------------------------------------------------------------------------------------------
$ - $ - $ -
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
14. INCOME TAXES (CONTINUED)
The Company's deferred tax assets and liabilities as of September 30, are
as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------------
<S> <C> <C>
Deferred tax assets
Difference between book and tax basis of property $ 1,750 $ 33,790
Difference between tax basis and book basis of investment 1,532,466 -
Net operating loss carryforwards 2,713,480 3,073,823
Foreign loss carryforwards 1,618,500 1,379,450
Capitalized organization and start-up costs 135,099 146,515
Capitalized exploration costs - 201,342
Other 20,000 20,000
- --------------------------------------------------------------------------------------------------------------
6,021,295 4,854,920
Valuation allowance (6,021,295) (4,854,920)
- --------------------------------------------------------------------------------------------------------------
$ - $ -
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
A 100% valuation allowance has been provided as management cannot
currently determine whether it is more likely than not that the deferred
tax assets will be realized.
The Company and 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. Operating loss carryforwards for United States tax
purposes of approximately $7,753,000 at September 30, 1998 expire in
various years through 2012. The Company also has foreign operating loss
carryforwards of approximately $4,600,000, the utilization of which may
be subject to certain restrictions.
Due to the restrictions imposed by the Internal Revenue Code regarding
substantial changes in ownership of companies with loss carryforwards,
the utilization of the Company's United States net operating losses may
be limited as a result of changes in the stock ownership.
The Company has recently been advised of the results of an examination
report prepared by the Internal Revenue Service with respect to certain
transactions during 1994 between the Company and a former officer of
the Company. The findings, which indicate a tax liability of
approximately $2,000,000, including penalties and interest, are
preliminary in nature. The Company intends to contest this matter, and
is currently in the process of preparing its response. As this matter
is in an early stage, its ultimate resolution is not determinable at
this time.
15. OPERATING LEASES
The Company has obligations under operating leases for offices and
facilities. Minimum annual lease payments for the next three years until
the leases expire are as follows:
<TABLE>
<S> <C>
1999 $14,000
2000 24,420
2001 10,300
- ----------------------------------------------------------------------------------------------
$48,720
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
Related rental expense was $50,030, $31,380 and $48,381 for the years
ended September 30, 1998, 1997 and 1996, respectively.
<PAGE>
16. 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 and 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's common stock and a release from the
remaining $623,000 of its commitment. The Company has recorded its
investment in the restricted shares of Newgold at its estimated fair
value of $1,000.
17. 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, 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.
18. COMMITMENTS AND CONTINGENCIES
On February 16, 1998, the Company entered into an agreement with a
financial advisor to render certain financial advisory and investment
banking services to the Company. The services to be provided included
advice on strategic alternatives and implementation of the proposed
restructuring of the Convertible Preferred Stock. The Company paid a
retainer fee of $150,000 on execution of the agreement and made
subsequent payments aggregating $170,094. Efforts to restructure the
Convertible Preferred Stock through the assistance of the financial
advisor were terminated during April 1998. Nonetheless, should the
Company complete a restructuring of the Convertible Preferred Stock
within two years from the termination date, the financial advisor may
assert that the structure or method of such restructuring entitles it to
a success fee of $1,000,000 plus potential additional amounts based on
the post restructuring enterprise value or trading price of the Company's
stock as stated in the agreement. If a restructuring were to occur, the
Company does not believe that the financial advisor would be entitled to
this fee. Although the Company would vigorously contest any claim for
payment by the financial advisor, there can be no assurances that the
Company would be successful in this regard.
<PAGE>
18. COMMITMENTS AND CONTINGENCIES (CONTINUED)
SEVERANCE AGREEMENT COMPENSATION
Pursuant to Severance Agreements dated March 23, 1998, certain employees
of the Company are entitled to compensation in the event that their
employment is terminated as a result of a change in control. Under the
terms of the Severance Agreements, the Company may be liable to pay
severance payments of up to $525,000 and employee benefits for 18 months
after the date of termination, and all legal fees and expenses incurred
as a result of such termination. The provisions of the Severance
Agreements expire on May 31, 1999.
19. SUBSEQUENT EVENTS
SERVICES AGREEMENT
On October 1, 1998, the Company entered into a service agreement with a
company controlled by a director of the Company for the services of that
director. The agreement provides for annual payments of $100,000, and is
for a term of one year commencing October 1, 1998. The agreement
continues indefinitely thereafter, and can be terminated by either party
with thirty days notice.
PREFERRED SHARE BUYBACK
From October 1, 1998 to December 31, 1998, pursuant to various agreements
negotiated with certain holders of the Convertible Preferred Stock, the
Company repurchased 598,655 shares of Convertible Preferred Stock for
consideration of $1,221,719.
PREFERRED SHARE PENALTY
As of December 31, 1998, the Company remains delisted from NASDAQ. In
accordance with the Convertible Preferred Stock Agreement, approximately
$1,100,000 of additional penalties to the holders of the Convertible
Preferred Stock have accrued from October 1, 1998 through December 31,
1998.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------ -----------------------
<S> <C>
3.1 Amended and restated articles of incorporation,
previously filed as an exhibit to the Company's
Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1994, and incorporated herein by
reference. (P)
3.2 Bylaws, previously filed as an exhibit to the
Company's Annual Report on Form 10-KSB for the
fiscal year ended September 30, 1994, and
incorporated herein by reference. (P)
10.1 Matabeleland Minerals, Private Limited, Zimbabwe
purchase agreement, previously filed as an exhibit
to the Company's Current Report on Form 8-K dated
February 15, 1996, and incorporated herein by
reference. (P)
10.2 Casmyn Corp. 1995 Incentive Stock Option Plan,
previously filed as an exhibit to the Company's
Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1995, and incorporated herein by
reference. (P)(C)
10.3 Casmyn Corp. 1995 Non-Qualified Stock Option Plan,
previously filed as an exhibit to the Company's
Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1995, and incorporated herein by
reference. (P)(C)
10.10 Form of Preferred Stock Investment Agreement dated
April 11, 1997, previously filed as an exhibit to
the Company's Registration Statement on Form S-3
dated July 24, 1997, and incorporated herein by
reference.
10.11 Form of Preferred Stock Investment Agreement dated
September 2, 1997, previously filed as an exhibit to
the Company's Registration Statement on Form S-3
dated September 22, 1997, and incorporated herein by
reference.
10.12 Casmyn Corp. 1997 Directors Stock Option Plan (C)
21 Subsidiaries of the Company
23 Consent of Independent Auditors
27 Financial Data Schedule (E)
</TABLE>
- ---------------------
<PAGE>
(P) Indicates that the document was originally filed with the Securities and
Exchange Commission in paper form and that there have been no changes or
amendments to the document which would require filing of the document
electronically with this Annual Report on Form 10-K.
(C) Indicates compensatory plan, agreement or arrangement.
(E) Indicates electronic filing only.
<PAGE>
CASMYN CORP.
1997 DIRECTORS' STOCK OPTION PLAN
1. PURPOSE
The purposes of this 1997 Directors' Stock Option Plan ("1997 DIRECTORS'
PLAN") are to: (i) retain, reward, and motivate directors, (collectively
referred to herein as ("OPTIONEES") of CASMYN CORP. ("CASMYN"), (ii)
encourage stock ownership by OPTIONEES by providing a means to acquire shares
of the Common Stock or to increase their stock holdings, (iii) provide a
greater community of interest between OPTIONEES and CASMYN'S stockholders by
permitting CASMYN to grant Stock Options ("OPTIONS") to eligible OPTIONEES,
as provided in Section 3 hereof.
It is intended that the OPTIONS granted under the DIRECTORS' PLAN shall not
comply with the regulations for "incentive stock options" provided for in
Section 422 of the Internal Revenue Code, and regulations thereunder, as the
same may be hereinafter amended from time to time (such laws and regulations
are hereinafter referred to as the "CODE").
2. ADMINISTRATION
Subject to Section 5(a) hereof, the 1997 DIRECTORS' PLAN shall be
administered by the Board of Directors ("BOARD") of CASMYN which is
authorized, subject to the provisions of the 1997 DIRECTORS' PLAN, to
establish rules and regulations governing the 1997 DIRECTORS' PLAN, to
appoint such agents as it deems appropriate for the proper administration of
the 1997 DIRECTORS' PLAN, and to delegate such authority to administer the
1997 DIRECTORS' PLAN to a committee of the Board ("COMMITTEE"). Any
questions of interpretation of the 1997 DIRECTORS' PLAN as determined by the
BOARD or COMMITTEE shall be final and binding upon all persons.
3. PARTICIPANTS
The OPTIONEES eligible to receive OPTIONS under the 1997 DIRECTORS' PLAN
shall be determined from time to time at the sole discretion of the BOARD or
COMMITTEE.
4. SHARES RESERVED UNDER THE 1997 DIRECTORS' PLAN
Subject to the Provisions of Section 6 of the 1997 DIRECTORS' PLAN, the
maximum number of shares for which OPTIONS may be granted under the 1997
DIRECTORS' PLAN is 300,000 shares of Common Stock, $.04 par value per share,
of CASMYN.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
5. OPTIONS
Options may be granted from time to time from January 17, 1997 until January
16, 2007, subject to the following provisions:
(a) Notwithstanding anything to the contrary, to the extent necessary to
comply with the requirements of Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (or any
successor thereto), the 1997 DIRECTORS' PLAN shall be administered by the
Board, or at the option of the Board, a committee of two or more Non-Employee
Directors appointed by the Board. Stock Option Agreements ("Option
Agreements"), in the form as approved by the members of the BOARD or
COMMITTEE, and containing such terms and conditions not inconsistent with the
provisions of this 1997 DIRECTORS' PLAN as shall have been determined by the
BOARD or COMMITTEE, may be executed on behalf of CASMYN by the President,
Treasurer, or Chief Executive Officer of CASMYN. The BOARD or COMMITTEE shall
have complete authority to construe, interpret and administer the provisions
of the 1997 DIRECTORS' PLAN and the provisions of the Option Agreements
relating to the options granted hereunder to prescribe, amend and rescind
rules and regulations pertaining to the 1997 DIRECTORS' PLAN and to make all
other determinations necessary or deemed advisable in the administration of
the 1997 DIRECTORS' PLAN.
The determinations, interpretations and constructions made by the BOARD or
COMMITTEE shall be final and conclusive.
(b) No OPTION may be exercised after January 16, 2007. All unexercised
OPTIONS expire after said date.
(c) The option price per share of a OPTION grated under the 1997 DIRECTORS'
PLAN shall be determined by the BOARD or COMMITTEE at the time of grant.
(d) No OPTION under this 1997 DIRECTORS' PLAN may be transferable by the
Optionee other than by the Optionee's will or by the laws of descent and
distribution, and no Option can be exercised during the lifetime of the
Optionee except by the Optionee, his guardian or attorney-in-fact.
(e) OPTIONS shall expire as specifically provided for under the terms of the
Option Agreement.
(f) The BOARD or COMMITTEE, may at any time, at its discretion and in such
manner as it deems appropriate, agree to waive or modify any of the terms of
any outstanding OPTIONS, provided that any such modification shall be subject
to the consent of the Optionee and that any such waiver or modification shall
be in accordance with the terms of the 1997 DIRECTORS' PLAN.
(g) All shares purchased under OPTIONS shall be paid in full, including any
related taxes or tax withholdings, at the time of purchase. Shares acquired
by exercise of OPTIONS shall be
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
paid as provided for in the applicable Option Agreement. The exercise of
options may be subject to Federal and State income tax and income tax
withholding by CASMYN. The OPTIONS granted under the DIRECTORS' PLAN, may be
subject to vesting provisions as described in the Option Agreement. Vested
OPTIONS may be exercised in whole or in part. If exercised in part, OPTIONS
must be exercised in minimum increments of 1,000 shares.
6. ADJUSTMENT PROVISIONS
(a) If CASMYN shall at any time change the number of issued shares of Common
Stock without new consideration to CASMYN (such as stock dividends, stock
splits, or stock exchange but excluding stock grants), the total number of
shares reserved for issuance under this 1997 DIRECTORS' PLAN and the number
of shares covered by each outstanding OPTION shall be adjusted so that the
aggregate consideration payable to CASMYN and the value of each OPTION shall
not be changed.
(b) If a dissolution or liquidation of CASMYN shall occur, the BOARD, or the
COMMITTEE, may accelerate the vesting and/or expiration of all or any portion
of the OPTIONS granted under this DIRECTORS' PLAN. CASMYN shall give notice
of the proposed dissolution of CASMYN and shall notify the Optionee of their
right to exercise such options (including any OPTIONS which have been
accelerated by the Board) within a period not to exceed sixty days of the
mailing of the notice, provided that such sixty day exercise period shall not
not extend the exercise date of any OPTION beyond January 16, 2007. Any
OPTIONS which are not exercised within the notice period shall terminate upon
the dissolution or liquidation of CASMYN.
(c) If the outstanding shares of CASMYN shall be exchanged for other shares
of CASMYN, or of another corporation by reason of merger, consolidation or
other recapitalization, or in the event of any other material change in the
capital stock of CASMYN by reason of any reclassification, reorganization,
recapitalization or otherwise, there shall be a proportionate and equitable
adjustment of the terms of the OPTION with respect to the amount and class of
shares remaining subject to the OPTION and the purchase price to be paid
thereof, as follows: if the outstanding shares of CASMYN shall be exchanged
for other stock of CASMYN or of another corporation, the Optionee shall be
entitled to purchase, pursuant to his OPTION, such number of shares of the
CASMYN or of such other corporation as were exchangeable for the number of
shares of CASMYN which the Optionee would have been entitled to purchase,
except for such action, and the cash consideration payable per share shall be
proportionately and equitably adjusted at the discretion of the BOARD or
COMMITTEE.
(d) If, as a result of any of the events specified herein, the BOARD or
COMMITTEE, shall be of the opinion that the other provisions of this Section
6 will not effect an equitable and proportionate adjustment of the terms of
the OPTION with respect to the amount and class of shares remaining subject
thereto and the purchase price to be paid, there shall be made such other or
further adjustments in the terms of the OPTION as shall be necessary in the
opinion of the BOARD or COMMITTEE to effect an equitable and proportionate
adjustment of the terms of the OPTION or OPTIONS.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
7. PURCHASE FOR INVESTMENT
Each OPTIONEE receiving shares upon exercise of an OPTION may be required by
CASMYN to furnish a representation that the shares are being acquired for
investment and not with a view to disposition if CASMYN, in its sole
discretion, determines that such representation is required to insure that
the resale or other disposition of the shares would not involve a violation
of the Securities Act of 1933, as amended, or of any other applicable laws.
CASMYN reserves the right to place a legend on the certificates for shares
delivered pursuant to the DIRECTORS' PLAN and to issue stop transfers or
similar instructions to the transfer agent which CASMYN, in its sole
discretion, deems necessary and proper to assure compliance with (a) any such
representations, or (b) any federal or state law.
8. COMPLIANCE WITH SECURITIES LAWS
No certificate for shares shall be delivered upon the exercising of an OPTION
until CASMYN has taken action which is required to comply with the provisions
of the Securities Act of 1933, as amended, the Securities Exchange Act of
1934 as amended, any other applicable laws and with the requirements of any
exchange on which the Common Stock may, at the time be listed.
9. MODIFICATIONS, AND TERMINATION OF THE 1997 DIRECTORS' PLAN
The BOARD reserves the right to terminate, amend or modify the 1997
DIRECTORS' PLAN at any time. The approval of the stockholders will not be
required for the actions of the Board, which in its sole discretion, are
necessary for the fair and equitable administration of the DIRECTORS' PLAN.
10. EFFECTIVE DATE OF THE 1997 DIRECTORS' PLAN
The 1997 DIRECTORS' PLAN shall become effective on January 17, 1997.
11. GOVERNING LAW
All questions arising with respect to the provisions of the 1997 DIRECTORS'
PLAN shall be determined by application of the laws of the state of Nevada,
except to the extent that Nevada law is preempted by federal statute.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Number of Shares _________________
Date of Grant ____________________
1997 DIRECTORS STOCK OPTION AGREEMENT
AGREEMENT made this _____ day of ____________________, 1997, between
________________________________________ (the "OPTIONEE"), and CASMYN
CORP., a Colorado Corporation, ("COMPANY").
1. GRANT OF OPTION. The COMPANY, pursuant to the provisions of the 1997
Directors' Stock Option Plan ("1997 DIRECTORS' PLAN"), set forth as
Attachment A hereto, hereby grants to the Optionee, subject to the terms
and conditions set forth or incorporated herein, an Option to Purchase
from the COMPANY all or any part of an aggregate of __________ Common
Shares, as such Common Shares are now constituted, at the purchase price
of $_____ (__________) per share. The provisions of the 1997 DIRECTORS'
PLAN governing the terms and conditions of the Option granted hereby are
incorporated in full herein by reference.
2. EXERCISE. The Option evidenced hereby shall be exercisable in whole or
in part (but only in multiples of 1,000 Shares unless such exercise is
as to the remaining balance of this Option) on or after _______________,
__________ and on or before _______________, __________ subject to early
termination as provided in Optionee's acknowledgement (Expiration Date),
provided that the cumulative number of Common Shares as to which this
Option may be exercised shall not exceed the following amounts:
<TABLE>
<CAPTION>
CUMULATIVE NUMBER PRIOR TO DATE
OF SHARES (NOT INCLUSIVE OF)
----------------- ------------------
<S> <C>
</TABLE>
The Option evidenced hereby shall be exercisable by the delivery to and
receipt by the COMPANY of (i) a written notice of election to exercise,
in the form set forth in Attachment B hereto, specifying the number of
Shares to be purchased; (ii) accompanied by payment of the full purchase
price thereof in cash or certified check payable to the order of CASMYN
CORP. and (iii) by return of this Stock Option Agreement for endorsement
of exercise by the COMPANY on Schedule I hereof.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3. TRANSFERABILITY. The Option evidenced hereby is not assignable or
transferable by the Optionee other than by the Optionee's will or by the
laws of descent and distribution, as provided in Paragraph 5d of the
1997 DIRECTORS' PLAN.
CASMYN CORP.
By: _______________________
President
ATTEST:
_______________________________
Secretary
Optionee hereby acknowledges receipt of a copy of the 1997 DIRECTORS' PLAN,
attached hereto and accepts this Option subject to each and every term and
provision of such 1997 DIRECTORS' PLAN. Optionee hereby agrees to accept as
binding, conclusive and final, all decisions or interpretations of the Board
of Directors or the Committee of the Board of Directors administering the
1997 DIRECTORS' PLAN on any questions arising under such 1997 DIRECTORS'
PLAN. Optionee recognizes that if Optionee's service on the Board of
Directors shall be terminated with or without cause, or by the Optionee, all
of Optionee's rights hereunder shall thereupon terminate with respect to all
unvested Options.
Dated: _______________________________________________________________________
Optionee
_______________________________________
Print Name
_______________________________________
_______________________________________
_______________________________________
Social Security No.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ATTACHMENT B
(SUGGESTED FORM OF LETTER TO BE USED FOR NOTIFICATION OF ELECTION TO
EXERCISE. PLEASE DO NOT USE THIS PAGE, BUT FOLLOW THIS FORM IN A SEPARATELY
TYPED LETTER.)
Date: _______________________
Treasurer
CASMYN CORP.
1335 Greg Street #104
Sparks, NV 89431
Dear Sir:
In accordance with paragraph 2 of the Stock Option Agreement evidencing the
Option granted to me on _______________ under the CASMYN CORP. 1997
Directors' Stock Option Plan, I hereby elect to exercise this Option to the
extent of _______________ Common Shares.
Enclosed is a certified check payable to the order of "CASMYN CORP." in the
amount of $ _______________ as the purchase price of $ _____________ for the
Shares which I have elected to purchase and (ii) the original Stock Option
Agreement for endorsement by the COMPANY as to exercise on Schedule I thereof.
When the certificate for Common Shares which I have elected to purchase has
been issued, please deliver it to me, along with my endorsed Stock Option
Agreement in the event there remains an unexercised balance of Shares under
the Option, at the following address:
_________________________
_________________________
Address
Very truly yours,
_________________________
Signature of Optionee
_________________________
Print Name
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Optionee ____________________ Date of Grant __________________________
SCHEDULE I
<TABLE>
<CAPTION>
UNEXERCISED ISSUING
SHARES PAYMENT SHARES OFFICER
DATE PURCHASED RECEIVED REMAINING INITIALS
- ------- ------------ ----------- -------------- -----------
<S> <C> <C> <C> <C>
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
State or Other
Jurisdiction of
Name of Incorporation Percentage
Subsidiary or Organization Owned
- ---------- --------------- -----
<S> <C> <C>
Casmyn Mining Nevada 100
Corporation
Casmyn Corporation Nevada 100
of South Africa, Ltd.
Casmyn International Nevada 100
Ltd.
Vector South Africa Nevada 100
Casmyn Mining Zambia 100
(Zambia) Ltd.
Casmyn-Ages Ghana 100
Mining Company
Limited
Casmyn Bahamas 55
International Inc.
Casmyn Gold Bahamas 100
Corporation
Auromar British 100
Development Columbia,
Corporation Canada
Casmyn Mining Zimbabwe 100
Zimbabwe (Private)
Ltd.
Matabeleland Zimbabwe 100
Minerals (Private)
Limited
Greenhorn Mines Zimbabwe 100
(Private) Limited
Turk Mines (Private) Zimbabwe 100
Limited
Morveen Mining Zimbabwe 100
(Private) Limited
Motapa Minerals Zimbabwe 100
(Private) Limited
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Casmyn Corp.'s
Registration Statement on Form S-8 dated August 27, 1996 of our report dated
December 31, 1998 with reference to our audit of the consolidated financial
statements of Casmyn Corp. as of September 30, 1998 and 1997 and for the
three years then ended, which report is included in Casmyn Corp.'s Annual
Report on Form 10-K for the fiscal year ended September 30, 1998.
/s/ Deloitte & Touche LLP
Chartered Accountants
Vancouver, British Columbia
March 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<CASH> 4,356,200
<SECURITIES> 1,588,536
<RECEIVABLES> 301,456
<ALLOWANCES> 0
<INVENTORY> 643,135
<CURRENT-ASSETS> 6,910,157
<PP&E> 20,191,570
<DEPRECIATION> 2,030,068
<TOTAL-ASSETS> 25,094,921
<CURRENT-LIABILITIES> 2,251,796
<BONDS> 0
0
44,440,451
<COMMON> 8,710,068
<OTHER-SE> (30,307,394)
<TOTAL-LIABILITY-AND-EQUITY> 25,094,921
<SALES> 4,554,204
<TOTAL-REVENUES> 4,554,204
<CGS> 3,342,563
<TOTAL-COSTS> 3,342,563
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (13,004,792)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,004,792)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,004,792)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
