UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM .............. TO................
COMMISSION FILE NUMBER 0-23402
WATERPUR INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-2863244
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification no.)
1335 GREG STREET, UNIT 104, SPARKS, NEVADA 89431
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (702) 331-5524
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF CLASS: COMMON STOCK, $0.005 PAR VALUE
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Check whether issuer (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Check if disclosure of delinquent filers pursuant to Item 405 of regulation
S-B 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-KSB or any amendment to
this Form 10-KSB. [X]
Issuer's revenue for its most current fiscal year: $1,301,575
The aggregate market value of the common stock held by non-affiliates of the
registrant as of January 7, 1998 was approximately $10,730,000 (9,776,162
shares at $1.09766 per share)
As of January 7, 1998 there were 12,500,710 shares of common stock
outstanding, par value $.005 per share.
Documents Incorporated By Reference: None
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PART I
ITEM 1: DESCRIPTION OF BUSINESS
This Form 10-KSB contains various "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which represent the
Company's expectations or beliefs concerning future events, including the
ability of the Company to secure additional debt and/or equity financing to
fund future expansion and operations. In addition, statements containing
expressions such as "believes," "anticipates," "plans" or "expects" used in
the Company's periodic reports filed with the Securities and Exchange
Commission are intended to identify forward-looking statements. The Company
cautions that these and similar statements included in this and in previously
filed periodic reports are further qualified by important factors that could
cause actual results to differ materially from those in the forward-looking
statements, including, without limitation, the following: political and
economic instability in international markets; the effect of economic
conditions; the effect of regulatory and governmental actions; fluctuations in
prices, exchange rates, tariffs and other barriers.
HISTORY OF THE COMPANY
WaterPur International Inc. ("WPUR" or the "Company", which term shall
include, unless the context so requires, its subsidiaries) was originally
incorporated under the laws of the State of Delaware on April 3, 1987, as
Arnex Investment Group, Ltd. On August 3, 1993, the name of the Company was
changed to Vector Environmental Technologies, Inc. and on June 16, 1997 the
Company's name was changed to WaterPur International Inc.
On August 24, 1993, Amyn Dahya acquired approximately 72%, or 640,000 shares,
of the issued and outstanding common stock of the Company from an unrelated
company. At that time, Mr. Dahya was elected President and Chief Executive
Officer of the Company.
The Company operates through the following active subsidiaries:
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JURISDICTION OF
ENTITY ORGANIZATION BUSINESS PURPOSE
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Vector Vietnam, Ltd. ("VVL") Vietnam Holds and manages Vietnamese
operations
Vector Venture Corp. (VVC") Canada Holds certain technologies
and licenses
Vector Manufacturing Corp. Nevada Provides purchasing and
manufacturing services
STOX Systems, Inc. Canada Holds certain technologies
</TABLE>
Other than VVC, all of the above named corporations are wholly owned by the
Company. The Company owns approximately 95% of the outstanding shares of VVC.
BUSINESS - GENERAL
The Company's principal business is to develop or acquire environmental
technologies in the areas of water treatment, purification and depollution.
WPUR has organized its business activities in four areas, all related to the
development and sale of water purification systems, safe water and related
technologies: the design, development and utilization of technologies to
address water treatment facilities which will provide rural and semi-urban
communities with a reliable supply of clean, safe water; the sale of purified
<PAGE>
water and water products through retail water stores; the development and
operation of a water bottling plant and related sales of bottled water; and
sales of personal and household water purification systems to retail and
wholesale markets.
The Company's focus is in the area of water treatment, purification and
depollution. The Company's water purification systems are designed to purify
water from rivers, lakes and other water sources using a combination of
filtration, adsorption and microbial destruction processes to produce safe and
healthy drinking water, with technical and economic efficiency that is
required for conditions which exist in developing nations.
During 1997, the Company's primary market focus was in Vietnam and the North
American consumer market. However, the Company is in the process of developing
programs in other countries and regions including India, Southern Africa and
the Commonwealth of Independent States ("CIS").
In Vietnam, the Company is actively marketing the full range of its water
related products and services.
COMMUNITY WATER SYSTEMS
The Company has expanded its product line of Community Water Systems. The
three major products are the WP 1000, WP 100S and WP 100G. These systems are
designed to meet the needs of small to medium sized communities and can supply
safe water to communities of up to 100,000 persons. The systems are low cost,
modular in design and can be configured to meet the specific site and
operating requirements. They are quickly and easily installed and can be
modified to meet the changes in raw water quality and increased demand. The
systems utilize a number of technologies depending on raw water quality
including a variety of filtration and media options, alternative tank
configuration and a range of control options.
WP 1000 Series
These systems can treat up to five thousand cubic meters per day. These are
turnkey systems which can take water from its source and deliver it to the end
user. The systems could consist of a combination of modules to include:
pre-treatment, filtration, clarification, water softening and disinfection.
Other modules are available based on local requirements such as iron and
maganese removal, radioactivity removal, fluoride removal, chemical oxidation
to oxidize organics such as petrochemicals, phenols, etc.
WP 100S
These systems can treat up to one hundred cubic meters per day. These systems
are manually operated with a filtration module which can treat high turbid
water and provide potable water.
WP 100G
In addition to the benefits of the WP 100S systems, these systems remove iron,
maganese and hardness typically found in underground water sources.
Other
In addition, the Company is able to design and implement larger systems based
on the requirements of its customer.
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During fiscal 1996, the Company installed its first WP1000 series system in
Huong Son, a Vietnamese community of approximately 10,000 people. During
fiscal 1997, the Company installed two systems in Vietnam for communities of
15,000 and 20,000 persons. Systems for an additional two communities of
10,000 and 25,000 are expected to be installed by the second quarter of fiscal
year 1998. The equipment for the systems are already in Vietnam.
The Company has received letters of intent from various Vietnamese communities
for the purchase and installation of water treatment facilities. Should these
installations take place, it will be the responsibility of the community to
operate and maintain the systems on a day to day basis, while the Company
would provide periodic maintenance and repair services under a separate
maintenance contract as is the case for systems presently in service. The
Community Water Program in Vietnam will serve as the model for the Company's
future expansion into other countries.
The Company intends to concentrate its efforts in Vietnam and the CIS markets
in fiscal 1998. Success of the Company's activities is dependent upon the
Company being able to implement a financing program that is supported by
acceptable bank guarantees. There is no assurance that such funds will be
available in the amounts necessary or under acceptable terms.
BULK WATER SYSTEMS AND SALES
The Company currently sells purified water and water products through Company
and third party operator owned retail water stores in Vietnam. This product
line uses the Company's water purification equipment and technologies to
purify water sold through stores on a point of sale basis. The purified water
is dispensed in containers provided by either the Company or the consumer.
water purification systems under a contract with Vietnam Airlines at the
Hanoi Noi Bai International Airport. These systems supply purified water to
all of Vietnam Airlines' local and international flights as well as for use
within the airport terminal.
BOTTLED WATER
The Company's strategy in this product line is to utilize its technologies to
establish bottling plants in close proximity to target markets. The Company's
technology enables purification of water from municipal sources rather
than requiring a pristine natural water source from a remote location
necessitating excessive transportation requirements. Plants will be operated
both by the Company and under license by the Company.
During 1996, the Company installed and commissioned its first bottling plant
water purification systems in the Nam Ha Province of Vietnam. This
plant has an initial annual capacity of 6 million liters per year. The
capacity of the plant can be increased, on a modular basis, up to 16 million
liters per year to meet increases in demand.
The Company is presently studying opportunities for additional water bottling
plants and distribution of bottled water in Vietnam and is considering other
countries and markets where it determines its bottling plant concept is
appropriate. Identifying owner operators and/or distribution partners with
access to markets and access to financing are the critical factors to the
success of this product line.
CONSUMER AND INSTITUTIONAL PRODUCTS
The Company has developed a product line of personal and household water
purification systems. In the North American market, the Company has developed
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a line of products that enhance the quality of water provided by their
respective municipalwater utilities. In the international markets, the need
for disinfection requires the use of additional technologies such as various
resins and ozonization. The Company has used such technologies in the design
of its product line. These products include water purification systems sold
or leased to schools and hospitals in Vietnam, countertop and under counter
systems, and plastic sports water bottles that contain taste enhancing
filtration systems. The Company anticipates that marketing efforts for the
North American products will continue. It is expected that the Company's
products will be marketed through television, radio and print media. The
Company, however, plans to de-emphasize the international sale and leasing of
consumer and institutional products during 1997 due to marginal profitability
and the Company's desire to concentrate on its more profitable community water
products.
See Notes to Consolidated Financial Statements for information regarding the
Company's operations by geographic region.
OTHER TRANSACTIONS
On June 19, 1995, the Company completed the acquisition of 8,670,618 shares of
VVC common stock (approximately 95%) through the issuance of the same number
of shares of Company common stock. VVC was related to the Company through the
existence of certain common officers, directors and significant stockholders.
Therefore, the investment in VVC was accounted for as a combination of
entities under common control, which is a method similar to a pooling of
interests. Accordingly, the accompanying consolidated financial statements
include assets and liabilities of VVC at their historical cost and operations
of VVC for all periods presented.
During 1995, Casmyn Corp. ("Casmyn"), a company related through certain common
officers, directors and significant stockholders acquired a controlling
interest in the Company through the purchase of 3,000,000 of the Company's
convertible preferred shares in exchange for approximately $2,400,000 in
liabilities owing to Casmyn. On September 29, 1995, Casmyn purchased an
additional 1,000,000 convertible preferred shares of the Company at $2.00 per
share.
On September 30, 1996, Casmyn elected to convert its preferred shares into
common shares of the Company, resulting in Casmyn then owning approximately
24.3% of the Company.
During the fourth quarter of 1996, Casmyn exchanged 425,750 shares of Auromar
Development Corporation ("Auromar") common stock for 1,532,700 shares of the
Company's restricted common stock, resulting in Casmyn increasing its
percentage ownership in the Company to approximately 31.2%. The Company
recorded these shares at a value of $1,532,700 or $1.00 per share. This value
reflects a discount from the price at which WPUR common shares were trading on
the OTC Bulletin Board on the date of the transaction. These shares were
subsequently exchanged for 163,750 common shares of Casmyn resulting from the
merger of Casmyn and Auromar. The then current market value of the Casmyn
shares trading on the OTC Bulletin Board approximated the carrying value of
those shares.
Effective September 30, 1997, the Company issued 7,900,004 shares of the
Convertible Preferred Stock ("Convertible Preferred Shares") to Casmyn (the
"Restructuring") through the transactions described below. Each Preferred
Share is entitled to two votes per share, bears no dividend, constitutes a
senior security of the Company and may be converted by the holder at any time
after twelve months from the date of distribution into two shares of common
stock of the Company. All remaining Convertible Preferred Shares will be
automatically converted into two shares of common stock of the Company on the
eighteenth month from the date of distribution to the Casmyn Shareholders.
Casmyn Corp. has announced that it is distributing the 7,900,004 Convertible
Preferred Shares to its common and preferred shareholders of record as of
October 15, 1997, subject to obtaining necessary regulatory approvals. The
restructuring involved the following:
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(a) Conversion of $4,574,363 (net of $157,435 which represented the market
value of 31,487 common shares of the Company which was offset against the
total debt) of outstanding debt to Casmyn to 5,082,626 Convertible Preferred
Shares.
(b) Exchange of 5,634,756 common shares of the Company owned by Casmyn for
2,817,378 Convertible Preferred Shares of the Company. The number of
Convertible Preferred Shares to be received upon the conversion of the
outstanding debt was determined based upon the closing market price of the
Company's common stock on September 30, 1997.
(c) The sale of 150,000 shares of the Casmyn common stock held by the Company
for cash of $5.00 per share.
(d) As part of the Restructuring, the Company issued to Casmyn warrants to
purchase up to 3,300,000 shares of the Company's common stock at a price of
$.75 per share exercisable for a three year period.
The restructuring was based upon the advice of independent investment banking
firms representing the respective interests of the Company and Casmyn.
INDUSTRY OVERVIEW AND CERTAIN FACTORS RELATING TO THE COMPANY'S PROPERTIES
Marketing
The Company's marketing strategy for water purification systems is to utilize
exclusive agreements with organizations which management believes provide
contacts and expertise necessary to penetrate target markets. Initial market
focus has been directed primarily to developing nations where the need for
purified drinking water is most critical and where the Company's technology
and its commitment to developing the infrastructure necessary to assure long
term water quality has an advantage over competitive systems. The Company
expects that its consumer products will be marketed through television, radio
and print media.
Competition
With the exception of large infrastructure projects involving municipal
systems for large cities, competition relating to water treatment equipment
and services in developing countries is weak and fragmented with most
competitors offering a limited capacity in terms of technology and product
diversification. Competition in Vietnam for the Company's bottled water
products is substantial. The Company maintains a product line which utilizes
a wide variety of technologies with a strategy of matching the right product
utilizing the most effective technology to meet consumer needs. All of the
Company's products are competitively priced in all of its target markets.
Purchasing and Principal Suppliers
The raw materials used in the Company's products include filters, filter
housings, treatment media, treatment chemicals, tanks, control systems, valves
and various other plumbing supplies. Most of these components are of a
standard nature and widely available.
<PAGE>
The Company maintains relationships with several principal suppliers and
subcontractors due to quality considerations and in order to avail itself of
volume pricing. No supplier is currently considered a sole source.
Alternative suppliers with acceptable technology and quality have been
identified for all critical components.
Patents, Copyrights and Licenses
The Company holds a patent relating to the design of one of its countertop
water purification cartridges.
Technologies relating to water purification and treatment and hazardous
material storage, while proprietary, are based on know how and trade secrets
and are not generally patented. The Company does not intend to patent these
technologies due to the nature of the technologies and the level of public
disclosure involved in the patent process.
Need for Additional Financing
As shown in the financial statements for the years ended September 30, 1997,
1996 and 1995, the Company incurred losses of $4,325,654, $3,962,346 and
$3,365,801. These factors, among others, may indicate that the Company's
continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
obtain financing, and ultimately obtain profitability. (See "Management's
Discussion and Analysis or Plan of Operation"). To fully develop markets for
its products, the Company will require substantial additional financing.
There is no assurance that the Company will be able to secure such financing
on acceptable terms.
Certain Tax Considerations
The Company is predominantly invested in foreign subsidiaries. Those
subsidiaries are subjected to taxes imposed on them in the foreign
jurisdictions in which they operate and in which they are organized. Further,
their income is subject to US federal and state income taxes when distributed,
deemed distributed or otherwise attributed to, the Company, which is a US
corporation. Complex US tax rules apply for purposes of determining the
calculation of those US taxes, the availability of a credit for any foreign
taxes imposed on the foreign subsidiaries or the Company and the timing of the
imposition of US tax.
Normally, all foreign income earned by a US multinational company eventually
will be subject to US tax. Income earned by a foreign branch of a US company
is taxable currently in the US, and income earned by a foreign subsidiary
could be subject to US tax either in the year distributed to the US as a
dividend or in the year earned by means of Subpart F, foreign personal holding
company or other federal tax rules requiring current recognition of certain
income earned by foreign subsidiaries.
Income earned in foreign countries often is subject to foreign income taxes.
In order to relieve double taxation, the US federal tax law generally allows
US corporations a credit against their US tax liability in the year the
foreign earnings become subject to US tax in the amount of the foreign taxes
paid on those earnings. The credit is limited, however, under complex
limitation rules, to, in general, the US (pre-credit) tax imposed on the US
corporation's foreign source income. Further, complex rules exist for
allocating and apportioning interest, research and development expenses and
certain other expense deductions between US and foreign sources. Limiting
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provisions of the source rules decrease the amount of foreign source income
many US multinationals can generate. Reduced foreign source income results in
a smaller foreign tax credit limitation, as the limitation is based on the
ratio of foreign source net income to total net income.
These rules can prevent US multinationals from crediting all of the foreign
taxes they pay. To the extent that foreign taxes are not creditable, foreign
source income bears a tax burden higher than the US tax rate.
General Political Risks
The Company is actively engaged in business activities in Vietnam and
anticipates conducting business in various other countries in the future. The
political situation in these countries introduces a certain degree of risk.
The governments exercise control over licensing, importing and exporting,
which may impact on the Company's ability to carry out its business
activities.
Government Approval/Regulations
The products of the Company are significantly impacted by environmental,
health and import/export related government regulations and programs.
In many instances these regulations and programs provide strength to the
Company's marketing efforts. The Diamond RainTM water purification systems
help rural communities in developing and developed countries meet World
Health Organization and governmental standards for drinking water quality.
Anticipated costs relating to government approvals, other than those
encountered in the normal course of business, are considered minimal.
Research and Development
The Company is committed to ongoing research and development. The Company
spent $202,916, $675,891 and $185,053 on research and development activities
during fiscal years ended September 30, 1997, 1996 and 1995, respectively.
During the past year the Company devoted substantially all of its research and
development efforts toward the review and development of water purification
systems and technologies. While a broad line of water purification systems
has been developed, continued research and development in this area is
ongoing. This research is expected to produce additional product offerings,
address new problem areas, reduce the capital cost and maintenance of
equipment and improve efficiency.
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ITEM 2: DESCRIPTION OF PROPERTY
Nam Ha, Vietnam, Bottling Plant
VVL's bottling plant is located on approximately 0.5 acres, in the city of Nam
Dinh, in the Nam Ha province of Vietnam which is approximately 180 kilometers
south of the capital city of Hanoi. The building, a 7,800 square foot masonry
structure, houses the plant which was completed in April 1996. A 4,000 gallon
underground tank serves as a buffer for the plant's feed water. Various
smaller buildings are located on the property that house support equipment and
supplies. These facilities are under a lease agreement at a cost of
approximately $6,900 per year expiring in 2014.
The bottling and office activities are contained in a climate controlled area
which is partitioned from warehouse operations. The bottling area is
approximately 1,800 square feet and contains all process equipment for filling
filtration and purification equipment, purified water storage tanks, a
bottle rinser and the bottle fill line. The portion of the line where bottles
are filled and capped is further segregated into a "clean room." In this
critical area, filtered air is injected to maintain a positive air pressure so
as to prevent contamination of the finished product.
The plant is equipped with a laboratory where trained quality assurance
personnel monitor water quality. In the lab, various tests are conducted
including tests for microbiological contamination. Water samples and testing
records are also maintained in this area. Another portion of the warehouse
contains blow molding operations.
Other
The Company headquarters are located in Sparks, Nevada in office space leased
by Casmyn. These operations occupy approximately 4,000 square feet of a 6,500
square foot unit which includes office and laboratory facilities. In
addition, the Company has engineering and managerial staff located in
Vancouver, Canada in a portion of a 6,036 square foot high rise office
building leased by Casmyn Corp. The Company reimburses Casmyn for the space
occupied by the engineering and managerial staff. These facilities are
adequate for the current level of operations and sufficient office and
laboratory space is conveniently located to support future growth.
VVL occupies office space in Ho Chi Minh City under a lease at an approximate
cost of $5,000 per month. This facility includes offices, temporary living
quarters and product show rooms. VVL also operates five retail water stores
in Ho Chi Minh City and Ha Noi.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material litigation, whether pending or
threatened, to which it is or may become a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is publicly traded in the over-the-counter market
and is listed on the OTC Bulletin Board maintained by members of the National
Association of Securities Dealers, Inc. under the symbol "WPUR". The
following table sets forth the range of approximate high and low bid
quotations since October 1, 1995, which represent prices between dealers, do
not include retail markups, markdowns or commissions and may not represent
actual transactions. The prices are based upon information obtained from the
National Daily Quotation Service published by the National Daily Quotation
Bureau, Inc.
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High Low
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Quarter from October 1, 1995 to December 31, 1995 $3.50 $1.94
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Quarter from January 1, 1996 to March 31, 1996 $2.50 $1.69
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Quarter from April 1, 1996 to June 30, 1996 $2.75 $1.44
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Quarter from July 1, 1996 to September 30, 1996 $1.88 $1.13
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Quarter from October 1, 1996 to December 31, 1996 $1.72 $0.95
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Quarter from January 1, 1997 to March 31, 1997 $0.98 $0.61
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Quarter from April 1, 1997 to June 30, 1997 $0.66 $0.33
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Quarter from July 1, 1997 to September 30, 1997 $0.78 $0.41
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On January 7, 1998, the closing bid quotation for the Company's common stock
was $1.09766 per share. As of September 30, 1997, there were 575 shareholders
of record of the Company's common stock (including brokerage firms and/or
other nominees who may hold shares for multiple investors).
Holders of common stock are entitled to receive dividends if, as and when
declared by the Board of Directors out of funds legally available subject to
the dividend and liquidation rights of any preferred stock that may be issued.
The Company has never paid cash dividends on its common stock and does not
anticipate doing so in the foreseeable future. Rather, the Company has
determined to utilize any earnings in the expansion of its business. Such
policy is subject to change, based on current industry and market conditions,
as well as other factors beyond the control of the Company.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
During the years ended September 30, 1997, 1996 and 1995, after discontinuing
its metal fabrication segment, the Company has operated principally in one
business segment, the development and sale of environmental technologies,
principally water purification ("water purification"). (See Note 2 of Notes to
the Consolidated Financial Statements.)
Due to the operating losses of the Company or the availability of net
operating loss carryforwards, there were no provisions for income taxes
recorded in the consolidated financial statements for the years ended
September 30, 1997, 1996 and 1995.
Results of Operations
Year Ended September 30, 1997 Compared to the Year Ended September 30. 1996
Sales for the year ended September 30, 1997 were $1,301,575 compared to
$1,017,071 for the year ended September 30, 1996, a net increase of $284,504.
An increase of $387,862 in sales was due to the commissioning of two community
water purification plants in Vietnam, which was offset by decreases of sales
in other water purification products in Vietnam ($57,799) and other locations
($45,559). These changes in sales results reflect the Company's repositioning
its focus from consumer and institutional products, which generally carry
lower profit margins, to community water purification systems, which have
higher sales values and profit margins.
Cost of goods sold for the year ended September 30, 1997 amounted to
$1,024,319, resulting in a gross profit of $277,256 (or 21%). The gross
profit was offset by a valuation reserve of $365,734 for obsolete consumer
water filtration and purification inventory items, bringing a negative margin
of $88,478 for the year. This compared to a gross profit of $160,521 (or 16%)
for the year ended September 30, 1996. The improvement of gross profit, net
of valuation reserves, was attributable to the increase in sales of community
water purification plants. The valuation reserve was provided to recognize a
decrease in value of the Company's consumer products inventory which is being
liquidated.
Total cost and expenses decreased $729,444, from $4,252,238 for the year ended
September 30, 1996 to $3,522,794 for the year ended September 30, 1997. This
decrease was a result of the Company's efforts to contain costs and to
re-align its marketing and business activities. Salary and compensation
expense decreased $700,962 and marketing and promotional expenses decreased
$233,848. These decreases were partially offset by an increase of $245,923 in
office and consulting expenses associated with the creation of an engineering
team in the Company's Canadian offices. Depreciation and amortization
increased $25,744 reflecting increases in the Company's capital assets.
Research and development costs decreased $472,975 due to high levels of
activities in the year ended September 30, 1996 related to introduction of new
product lines in North America and commissioning of the water bottling plant
and the pilot community water plant in Vietnam. There was a charge of
$406,674 to income for sales returns and allowances due to the return of
products by a distributor in Vietnam as part of a new territorial distribution
plan.
Other expense for the year ended September 30, 1997 amounted to $714,382,
compared to an income of $129,371 for the year ended September 30, 1996. The
change is mainly attributable to losses in disposition of shares of Casmyn
pursuant to restructuring of the Company's debts and equity interest (see Note
8 in the Notes to the Consolidated Financial Statements); and interest income
earned from investment of surplus funds during 1996.
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Year Ended September 30, 1996 Compared to the Year Ended September 30, 1995
Sales for the year ended September 30, 1996 were $1,017,071 compared to
$382,158 for the year ended September 30, 1995. The $634,913 increase was due
to higher sales volume of water purification products in Vietnam ($195,659)
and the United Arab Emirates ($215,564), and sales of bottled water in Vietnam
from the Company's water bottling plant ($261,658) which commenced operations
in June 1996. These amounts were offset by lower sales volume in North
America of water purification products in 1996 compared to 1995 ($37,968).
The gross profit for the year ended September 30, 1996 was $160,521
(approximately 16%) compared to $81,406 (approximately 21%) in the year ended
September 30, 1995. The gross loss of $107,431 in the fiscal year ended
September 30, 1995 was due to writing off $188,837 of obsolete water
purification inventory items. These write-offs were related to products and
related supplies that the Company discontinued during the fiscal year ended
September 30, 1995.
Costs and expenses were $4,252,238 for the year ended September 30, 1996,
compared to $3,161,994 for the year ended September 30, 1995, an increase of
$1,090,244. Selling, general and administrative expenses increased $495,589
to $3,440,258. Compensation and benefits increased $343,525 for the year
ended September 30, 1996 compared to the year ended September 30, 1995 due
primarily to higher staff levels primarily in Vietnam staff and support
personnel. Advertising and marketing costs increased $24,341 for the year
ended September 30, 1996 compared to the year ended September 30, 1995 due
principally to increased costs relating to development of the Company's new
water purification product line which was introduced in North American market
in the current fiscal year. Travel related expenses increased by $191,331 in
the fiscal year ended September 30, 1996 as compared to the year ended
September 30, 1995 due to market development activities in India, Ghana,
Vietnam and the United Arab Emirates required for on-going business in those
countries. Other general and administrative expenses decreased $63,608 for
the year ended September 30, 1996 compared to the year ended September 30,
1995 due primarily to decreased professional and consulting expenses.
Research and development expenses for the year ended September 30, 1996 were
$675,891 compared to $185,053 for the year ended September 30, 1995 an
increase of $490,838 due to increased research, product design, testing and
product certification costs relating to the Company's North American product
line which was introduced in the current fiscal year, the commissioning of the
Vietnam bottling plant and the Houng Son community water system. Depreciation
and amortization expense increased $103,817 for the year ended September 30,
1996 due to increased fixed assets in the Company's water bottling plant in
Vietnam.
Other income (expense) was $129,371 in the year ended September 30, 1996
compared to other expense of $128,805 in the year ended September 30, 1995,
due mainly to the Company receiving interest income on investments in the
current year and lower interest expense on amounts due to Casmyn Corp. in
fiscal 1996 compared to 1995.
Capital Resources and Liquidity
At September 30, 1997, the Company had working capital of $2,192,968,
including $864,759 in cash and cash equivalents. The major source of the
working capital was generated from the restructuring of the Company's debts
and equity interest as well as disposal of its investment in Casmyn (see Note
8 in the Notes to the Consolidated Financial Statements). The series of
transactions involved in the restructuring, which took effect on September 30,
1997, generated $750,000 in cash and extinguished $4,574,363 of current debts
owed to Casmyn.
At September 30, 1996, the Company had working capital of $82,682, including
$327,553 in cash and restricted investments. The major source of working
<PAGE>
capital was generated from financing, which comprised private placements of
shares in common and preferred stock. For the year ended September 30, 1996,
the Company received cash of $4,375,000 from private placements.
The following is a discussion of the principal sources and uses of cash and
cash equivalents for the Company in fiscal 1997.
Net Cash Provided by (Used in) Operating Activities. Net cash provided by
operating activities was $71,753 in 1997 compared to net cash used of
$4,109,494 in 1996. The increase in cash from operating activities was due to
increase in advance from affiliates and reduction in inventory levels, net of
an increase in accounts receivable. In addition, there were increases in such
non-cash expense items as write down of inventory and loss on sale of assets
totaling $1,156,932, which had no impact to cash flow even though they
increased the net loss for the year. The increase in the net cash used in
operations in 1996 was due principally to the increase in inventory levels and
accounts receivable related to Vietnam and North American sales activities and
the net loss due to increased costs and expenses relating to sales of water
purification systems. Net cash used in operating activities was $2,015,209
for the year ended September 30, 1995, due primarily to $3,365,801 in losses
from operations related to sales of water purification systems offset by
increases in advances from related parties and decreases in various asset
accounts.
Net Cash Provided by (Used in) Investing Activities. Net cash provided by
investing activities was $866,694 in 1997 compared to net cash used of
$916,160 in 1996. The increase in cash was due to proceeds from sales of
investment in affiliate ($898,095) pursuant to the September 30, 1997
restructuring as discussed above and the release of a restricted investment
asset ($250,000). On the other hand, there was no disposition of assets in
1996 and assets ($250,000) was pledged as collateral for the line of credit
established during the same year. In addition, net cash used in purchases of
investment and fixed assets amounted to $281,401 in 1997 compared to $666,160.
In 1995, the Company received $191,709 from the sale of assets, which was
offset by cash purchases of property and equipment in the amount of $90,710,
providing a net cash of $100,999 from investing activities.
Net Cash Provided by Financing Activities. Net cash used by financing
activities was $185,000 in 1997 compared to net cash increase of $4,643,500 in
1996. During 1997, the Company repaid its $235,000 line of credit and
received $50,000 from issuance of common shares as result of 99,500 stock
options exercised during the year. During 1996, the Company received
$4,375,000 from the issuance of preferred and common stock in private
placements. In addition, the Company received $235,000 from borrowings under
a line of credit and $33,500 from the exercise of stock options. These
activities resulted in net cash provided by financing activities of $4,643,500
in the year ended September 30, 1996. During 1995, the Company received
$1,325,660 from the issuance of common stock of the Company and VVC in private
placements
Management anticipates that the net use of cash by operations will increase
during the foreseeable future due to expenditures relating to the development
of various markets for the Company's water purification products and
technologies, particularly in the CIS and Asia. The Company is actively
pursuing private placement opportunities to meet its future cash requirements,
it will use proceeds from private placements of its common stock to fund the
on-going activities in the short term and anticipates that it will be able to
secure a debt financing source to fund longer term projects. As evidence of
the Company's ability to secure debt and/or equity financing, on September 11,
1995, in an exempt private transaction the Company sold 500,000 shares of its
restricted common stock for $1,000,000. On September 29, 1995, in an exempt
private transaction the Company sold 1,000,000 units to Societe Generale for
$2,375,000 ($2.50 per share, net of an investment banking fee of $125,000).
Each unit including one common share and one-half warrant to purchase an
additional 500,000 shares of Common stock at $3.00 per share. Also on
September 29, 1995, in an exempt private transaction the Company sold
<PAGE>
1,000,000 shares of preferred stock to Casmyn for $2,000,000. The Company
used the proceeds from the private placements to fund production and marketing
activities as well as for general corporate purposes.
During the year ended September 30, 1997, the Company has relied upon short
term working capital loans from Casmyn to fund its cash needs. Effective
September 30, 1997, the Company settled its obligations to Casmyn through the
issuance of 5,082,626 shares of Convertible Preferred Stock and sold 150,000
shares of Casmyn Corp. common stock to Casmyn for $750,000 (see Note 8). In
addition, Casmyn exchanged 5,634,756 common shares (representing approximately
a 31.2% ownership interest in the Company) for 2,817,378 shares of Convertible
Preferred Stock. Effective September 30, 1997, Casmyn Corp. declared a
dividend of the 7,900,004 shares of Convertible Preferred Stock to its common
and preferred shareholders of record on October 15, 1997. The result of these
transactions is that as of September 30, 1997 Casmyn Corp. no longer holds an
equity ownership position in the Company. As part of the above transactions,
the Company issued 3,300,000 warrants to Casmyn Corp. at an exercise price of
$0.75, these warrants are exercisable for a period of three years.
The Company is currently in a negative cash flow position and is funding
current operations through its cash balances and turnover of current assets.
The Company believes that its present cash reserves and current assets are
sufficient to fund operations through the quarter ending June 30, 1998.
The Company's future growth and continued existence is dependent upon it
being able to secure additional financing in the form of debt or equity or a
combination thereof. The Company anticipates that a water utility project in
the CIS recently awarded to Casmyn Corp. for which the Company will be a
subcontractor will provide positive cash flows for the Company. The Company is
also discussing financing
programs with several banks to fund the Community Water Program discussed
above. There is no assurance, however, that such funds will be available in
the future in amounts, or on terms, acceptable to the Company.
The Company is organized with a relatively small, highly trained management
and professional staff and anticipates that the overall staff level will
remain low in the foreseeable future. The Company utilizes research,
technical and management services provided by Casmyn to develop commercial
applications for water purification technologies. Casmyn bills the Company
for these services at rates approximating cost recovery. Casmyn billed the
Company $242,726, $285,730, and $223,677 for these services for the years
ended September 30, 1997, 1996, and 1995, respectively. The Company believes
that this arrangement will not require a significant investment by the Company
in either personnel or facilities.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), Earnings Per
Share. The statement is effective for financial statements of the Company for
periods ending after December 15, 1997, including interim periods. SFAS No.
128 establishes standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common stock or potential
common stock. This statement simplifies the standards for computing earnings
per share previously found in APB Opinion No. 15, Earnings Per Share, and
makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the fully diluted EPS computation. The
Company will adopt the new statement for its fiscal year ending September 30,
1998, and anticipates that earnings per share calculations will not be
significantly different from those previously calculated.
<PAGE>
The FASB recently issued Statement of Financial Accounting Standards No. 130
("SFAS 130"), Reporting Comprehensive Income, which is effective for fiscal
years beginning after December 15, 1997. SFAS 130 establishes standards for
reporting and displaying comprehensive income and its components in a full set
of general-purpose financial statements. The Company will adopt the new
statement for its fiscal year beginning October 1, 1998, and anticipates that
adoption will not have a significant impact on its consolidated financial
statements.
The FASB recently issued Statement of Financial Accounting Standard No. 131
("SFAS 131"), Disclosure About Segments of an Enterprise and Related
Information, which is effective for fiscal years beginning after December 15,
1997. SFAS 131 establishes standards for segment reporting in the financial
statements. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company will
adopt the new statement for its fiscal year beginning October 1, 1998 and
anticipates that providing required disclosures will not result in
significantly different information than that which is disclosed in Note 4 in
the Notes to the Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
<S> <C> <C>
The following financial statements are filed as part of this Report: Page
----
Consolidated Financial Statements of WaterPur International Inc.
Independent Auditors' Report. 17
Consolidated Balance Sheets as of September 30, 1997 and 1996 18
Consolidated Statements of Operations for the Years Ended
September 30, 1997, 1996 and 1995. 19
Consolidated Statements of Stockholders' Equity (Deficiency)
for the Years Ended September 30, 1997, 1996 and 1995 20
Consolidated Statements of Cash Flows for the Years
Ended September 30, 1997, 1996 and 1995 21
Notes to the Consolidated Financial Statements. 22
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of WaterPur International Inc.
We have audited the accompanying consolidated balance sheets of WaterPur
International Inc. and subsidiaries (collectively, the "Company") as of
September 30, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity (deficiency), and cash flows for each of the
three years in the period ended September 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at September
30, 1997 and 1996, and the results of their operations and their cash flows
for each of the three years in the period ended September 30, 1997 in
conformity with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 10 to the consolidated financial statements, the Company's recurring
losses from operations raises substantial doubt about its ability to continue
as a going concern. Management's plans concerning this matter is also
described in Note 10. The consolidated financial statements do not contain
any adjustments that might result from the outcome of this uncertainty.
Deloitte & Touche,
Chartered Accountants
Vancouver, Canada
December 15, 1997
<PAGE>
<TABLE>
<CAPTION>
WATERPUR INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
- ------------------------------------------------------------------------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $864,759 $ 77,553
Restricted investments - 250,000
Accounts receivable, net of allowance
for doubtful accounts of 475,856 232,802
39,214 and $88,837
Inventories 1,443,738 2,122,641
Other assets 109,041 58,962
Total current assets 2,893,394 2,741,958
------------------------
INVESTMENT IN AFFILIATES 6,453 1,715,950
PROPERTY AND EQUIPMENT, NET 560,583 577,657
OTHER ASSETS 5,089 42,243
------------------------
TOTAL ASSETS $3,465,519 $5,077,808
=========================
==========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $313,145 $367,904
Accrued liabilities 150,674 213,447
Due to related parties, net 36,520 1,772,852
Line of credit - 235,000
Other Liabilities 200,087 70,073
---------------------
Total current liabilities 700,426 2,659,276
---------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
5% Cumulative convertible preferred stock,
$.00001 par value;10,000,000 shares authorized;
7,900,004 and nil shares issued and outstanding,
liquidation preference $3,555,002 and $nil 79 -
Common stock, $.005 par value; 25,000,000 shares
authorized; 12,500,710 and 18,035,966 shares
issued and outstanding 62,504 90,180
Additional paid-in capital 22,614,494 17,962,534
Accumulated deficit (19,969,346) (15,643,692)
Foreign currency translation adjustment 57,362 9,510
------------------------
Total stockholders' equity 2,765,093 2,418,532
------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,465,519 $5,077,808
========================
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WATERPUR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
1997 1996 1995
- ------------------------------------------------------------------------------
SALES $1,301,575 $1,017,071 $ 382,158
COST OF GOODS SOLD 1,024,319 856,550 300,752
VALUATION RESERVE FOR INVENTORY 365,734 - 188,837
-------------------------------------
GROSS PROFIT (LOSS) (88,478) 160,521 ( 107,431)
-------------------------------------
COSTS AND EXPENSES:
Selling, general and administrative
expense 2,751,371 3,440,258 2,944,669
Depreciation and amortization 161,833 136,089 32,272
Research and development 202,916 675,891 185,053
Sales returns and allowances 406,674 - -
-------------------------------------
Total cost and expenses 3,522,794 4,252,238 3,161,994
-------------------------------------
LOSS FROM OPERATIONS ( 3,611,272) (4,091,717) ( 3,269,425)
OTHER INCOME (EXPENSE):
Loss on sale of investment in affiliate ( 791,198) - -
Other income (expense) 76,816 129,371 ( 128,805)
-------------------------------------
( 714,382) 129,371 ( 128,805)
-------------------------------------
LOSS FROM CONTINUING OPERATIONS (4,325,654) (3,962,346) (3,398,230)
-------------------------------------
DISCONTINUED OPERATIONS:
Loss from discontinued operations - - ( 77,354)
Gain on disposal of discontinued operations - - 109,783
-------------------------------------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS - - 32,429
-------------------------------------
NET LOSS $(4,325,654) $(3,962,346) $(3,365,801)
=====================================
- ------------------------------------------------------------------------------
LOSS PER COMMON SHARE:
Net loss from continuing operations $(4,325,654) $(3,962,346) $(3,398,230)
Dividends on cumulative preferred
stock - ( 200,000) ( 37,500)
-------------------------------------
Net loss from continuing
operations applicable to
common shares $(4,325,654) $(4,162,346) $(3,435,730)
=====================================
Loss per common share from
continuing operations $ (0.24) $ (0.33) $ (0.31)
Loss per common share from
discontinued operations - - -
-------------------------------------
NET LOSS PER COMMON SHARE $ (0.24) $ (0.33) $ (0.31)
=====================================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 18,115,181 12,480,178 11,032,179
=====================================
- ------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial
statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WATERPUR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
Number Number Additional
of Common Common of Preferred Preferred Paid-in
Shares Stock Shares Stock Capital
<S> <C> <C> <C> <C> <C>
----------- --------- ------------- ----------- ------------
BALANCES AT SEPTEMBER 30, 1994 10,623,556 $ 53,118 - $ - $ 7,879,761
----------- --------- ------------- ----------- ------------
Private placement 500,000 2,500 - - 997,500
Private placement of units 1,000,000 5,000 - - 2,370,000
Issuance of shares for services 100,000 500 - - 199,500
Exercise of VVC warrants 221,210 1,106 - - 324,554
Issuance of compensatory stock
options - - - - 99,500
Preferred stock:
Issued for retirement of debt - - 3,000,000 30 2,378,445
Issued for cash - - 1,000,000 10 1,999,990
Foreign currency translation
adjustment - - - - -
Net loss - - - - -
----------- --------- ------------- ----------- ------------
BALANCES AT SEPTEMBER 30, 1995 12,444,766 62,224 4,000,000 40 16,249,250
----------- --------- ------------- ----------- ------------
Issuance of shares for services 25,000 125 - - 24,875
Exercise of stock options 33,500 167 - - 33,333
Conversion to common shares 4,000,000 20,000 (4,000,000) ( 40) ( 19,960)
Shares issued in exchange for
investment in affiliated
company 1,532,700 7,664 - - 1,525,036
Collection of subscription
receivable - - - - 150,000
Net loss - - - - -
Dividend declared on convertible
preferred stock - - - - -
----------- --------- ------------- ----------- ------------
BALANCES AT SEPTEMBER 30, 1996 18,035,966 $ 90,180 - $ - $17,962,534
----------- --------- ------------- ----------- ------------
Exercise of stock options 99,500 498 49,502
Preferred Stock:
Issued for retirement of deb t5,082,626 51 4,574,312
Conversion of common shares (5,634,756) (28,174) 2,817,378 28 28,146
Foreign currency translation
adjustment
Net Loss
----------- --------- ------------- ----------- ------------
BALANCES AT SEPTEMBER 30, 1997 12,500,710 $ 62,504 7,900,004 $ 79 $22,614,494
=========== ========= ============= =========== ============
</TABLE>
<TABLE>
<CAPTION>
Table Continued
Foreign Total
Currency Stockholders'
Accumulated Translation Equity
Deficit Adjustment (Deficiency)
<S> <C> <C> <C>
------------- ------------ ---------------
BALANCES AT SEPTEMBER 30, 1994 $ (8,078,045) $ 8,724 $ (136,442)
------------- ------------ ---------------
Private placement 1,000,000
Private placement of units 2,375,000
Issuance of shares for services - - 200,000
Exercise of VVC warrants - - 325,660
Issuance of compensatory stock
options - - 99,500
Preferred stock:
Issued for retirement of debt - - 2,378,475
Issued for cash - - 2,000,000
Foreign currency translation
adjustment - 786 786
Net loss (3,365,801) - (3,365,801)
------------- ------------ ---------------
BALANCES AT SEPTEMBER 30, 1995 (11,443,846) 9,510 4,877,178
------------- ------------ ---------------
Issuance of shares for services - - 25,000
Exercise of stock options - - 33,500
Conversion to common shares - - -
Shares issued in exchange for
investment in affiliated company - - 1,532,700
Collection of subscription
receivable - - 150,000
Net loss ( 3,962,346) - ( 3,962,346)
Dividend declared on convertible
preferred stock ( 237,500) - ( 237,500)
------------- ------------ ---------------
BALANCES AT SEPTEMBER 30, 1996 $(15,643,692) $ 9,510 $ 2,418,532
------------- ------------ ---------------
Exercise of stock options 50,000
Preferred Stock:
Issued for retirement of debt 4,574,363
Conversion of common shares -
Foreign currency translation
adjustment 47,852 47,852
Net loss (4,325,654) (4,325,654)
------------- ------------ ---------------
BALANCES AT SEPTEMBER 30, 1997 $(19,969,346) $ 57,362 $ 2,765,093
============= ============ ===============
<FN>
The accompanying notes are an integral part of these consolidated financial
statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WATERPUR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<S> <C> <C> <C>
-----------------------------------
1997 1996 1995
-----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $(4,325,654)$(3,962,346)$(3,365,801)
ADJUSTMENTS TO RECONCILE NET LOSS
TO NET CASH USED IN OPERATING ACTIVITIES:
Depreciation and amortization 161,833 136,089 32,272
Write down of inventory 365,734
Loss on sale of investment in affiliate 791,198
Gain on disposal of discontinued operations - - ( 109,783)
Other non-cash expense (49,623) 25,000 299,658
(Increase) decrease in accounts receivable (180,210) ( 215,350) 110,334
(Increase) decrease in inventories 313,169 (1,714,072) 143,210
(Increase) decrease in prepaid expenses
and other assets (12,642) 43,690 ( 74,043)
Increase (decrease) in accounts payable
and accrued liabilities 12,482 262,188 ( 36,664)
Increase in advances from related
parties 2,995,466 1,315,307 985,608
-----------------------------------
Net cash provided by (used in)
operating activities 71,753 (4,109,494) (2,015,209)
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment in affiliate ( 136,215) ( 33,250) -
Proceeds from sale of investment in
affiliate 898,051 - -
Proceeds from sale of assets - - 191,709
Decrease (increase) in restricted
investments 250,000 ( 250,000) -
Decrease in other assets - 35,647 -
Purchase of property and equipment ( 145,142) ( 668,557) ( 90,710)
-----------------------------------
Net cash provided by (used in) investing
activities 866,694 ( 916,160) 100,999
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock - 2,375,000 1,000,000
Issuance of preferred stock - 2,000,000 -
Issuance of VVC common stock - - 325,660
Issuance of common stock for exercise
of stock options 50,000 33,500 -
(Decrease) increase in line of credit (235,000) 235,000 -
-----------------------------------
Net cash provided by (used in)
financing activities (185,000) 4,643,500 1,325,660
-----------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS 33,759 - 786
-----------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 787,206 ( 382,154) ( 587,764)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 77,553 459,707 1,047,471
-----------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $864,759 $77,553 $459,707
===================================
CASH PAID FOR INTEREST $11,697 $41,037 $ -
===================================
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for subscription
receivable $ - $ - $2,375,000
Issuance of preferred stock for
repayment of debt to related party 4,574,363 - 2,378,475
Issuance of preferred stock
for subscriptions receivable - - 2,000,000
Issuance of common stock for
services - 25,000 200,000
Issuance of common stock to
acquire assets - - -
Issuance of common stock
for investment in affiliate - 1,532,700 -
Receipt of investment in
affiliate for repayment of
subscription receivable - 150,000 -
Increase in due to related
party for dividends on
preferred stock - 237,500 -
Conversion of preferred
stock to common stock - 20,000 -
Conversion of common stock
to preferred stock 2,535,640 - -
Decrease in investment in
affiliates for repayment
of debt to related party 157,435 - -
<FN>
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
<PAGE>
WATERPUR INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GOING CONCERN MATTERS
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements during the years ended September 30, 1997, 1996 and 1995, the
Company incurred losses of $4,325,654, $3,962,346 and $3,365,801. These
factors among others may indicate that the Company will be unable to continue
as a going concern for a reasonable period of time. The financial statements
do not include any adjustments relating to the recoverability of assets and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to generate sufficient cash flow to meet
its obligations on a timely basis, to obtain financing as may be required, and
ultimately obtain profitability. The Company is actively pursuing equity
financing through additional private placements and is discussing project
finance possibilities with financial institutions for its water projects.
2. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
WaterPur International, Inc. ("WPUR" or the "Company", formerly, Vector
Environmental Technologies, Inc.) was incorporated in Delaware on April 3,
1987. The Company operates through its 95% owned subsidiary, Vector Venture
Corp. ("VVC"), which holds certain technologies and licenses and various
wholly owned subsidiaries: Vector Manufacturing Corp. ("VMC") which provides
purchasing and manufacturing services; Vector Vietnam, Ltd., which holds the
Vietnamese business license and manages the Vietnamese operations; and STOX
Systems, Inc., which markets hazardous materials storage systems.
On June 19, 1995, the Company completed the acquisition of 8,670,618 shares of
VVC common stock (approximately 95%) through the issuance of the same number
of shares of Company common stock. VVC was related to the Company through the
existence of certain common officers, directors and significant stockholders.
Therefore, the investment in VVC was accounted for as a combination of
entities under common control, which is a method similar to a pooling of
interests. The accompanying consolidated financial statements include assets
and liabilities of VVC at their historical cost and the operations of VVC for
all periods presented.
On June 29, 1995, WPUR issued 3,000,000 5%, cumulative, convertible, voting
preferred shares ("Preferred Shares") in exchange for approximately $2,400,000
in debts owed by WPUR to Casmyn Corp. ("Casmyn"). On September 29, 1995,
Casmyn purchased an additional 1,000,000 Preferred Shares at $2.00 per share.
WPUR is related to Casmyn through the existence of certain officers, directors
and significant stockholders. Each Preferred Share was convertible, at
Casmyn's option, into one share of WPUR common stock. The provisions of the
Preferred Shares gave Casmyn effective voting control of WPUR with a 56.25%
voting majority. Effective September 30, 1996, Casmyn converted these
Preferred Shares into common shares thereby relinquishing voting control over
WPUR. The conversion of the preferred shares into common shares resulted in
Casmyn holding a 24.3% equity interest in the Company. During the fourth
quarter of 1996, WPUR issued 1,532,700 of its restricted common shares to
Casmyn in exchange for 425,750 shares of Auromar Development Corporation
("Auromar") common stock held as an investment by Casmyn, thereby increasing
Casmyn's percentage ownership in the Company to approximately 31.2% at
September 30, 1996.
Effective September 30, 1997, the Company issued 7,900,004 shares of
Convertible Preferred Stock ("Convertible Preferred Shares") to Casmyn as a
result of the following transactions (the "Restructuring"). The Company
restructured its debt and equity interest held by Casmyn through (a) the
conversion of $4,574,363 (net of $157,435 which represents the market value of
31,487 common shares of Casmyn which was offset against the total debt) of
outstanding debt to 5,082,626 Convertible Preferred Shares; and (b) the
exchange of 5,634,756 common shares of the Company owned by Casmyn for
2,817,378 Convertible Preferred Shares. Each Preferred Share is entitled to
two votes per share, bears no dividend, constitutes a senior security of the
Company and may be converted by the holder at any time after twelve months
from the date of distribution into two shares of the Common Stock. All
remaining Convertible Preferred Shares will be automatically converted into
two common shares on the eighteenth month from the distribution date. The
number of Convertible Preferred Shares to be received upon the conversion of
<PAGE>
the outstanding debt was determined based upon the closing market price of the
Company's common stock on September 30, 1997. The Restructuring was based
upon the advise of independent investment banking firms representing the
respective interests of the Company and Casmyn.
Additionally, the Company issued to Casmyn warrants to purchase up to
3,300,000 common shares at a price of $.75 per share exercisable for a three
year period.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of WPUR and its
wholly or majority owned subsidiaries (collectively, the "Company"). All
intercompany transactions and balances have been eliminated on consolidation.
DISCONTINUED OPERATIONS
In 1995, VMC discontinued its metal fabrication business. The results of the
metal fabrication operations have been reported separately as discontinued
operations in the accompanying consolidated statements of operations for the
year ended September 30, 1995. Sales for the metal fabrication segment were
$12,379 for the year ended September 30, 1995. After discontinuing its metal
fabrication segment, the Company has operated principally in one business
segment, the development and sale of environmental technologies, principally
water purification.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all short-term investments with a maturity of three months or less
at the date of purchase to be cash equivalents. As of September 30, 1997 and
1996, bank balances held in excess of Federally insured limits were $615,896
and $99,217, respectively.
RESTRICTED INVESTMENTS
At September 30, 1996, the Company had $250,000 of cash invested in short term
money market funds that represented collateral for outstanding borrowings
under a line of credit (see Note 7). The investments are stated at cost which
approximates market value.
PROPERTY AND EQUIPMENT
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.
INVESTMENT IN AFFILIATES
The investment in affiliates as of September 30, 1996, consisted principally
of the Company's investment in the common stock of Casmym Corp. Such common
shares were acquired when the Auromar shares owned by the Company were
exchanged for Casmyn common shares in the merger between Auromar and Casmyn.
Such shares were recorded at an exchange value which approximated market.
<PAGE>
REVENUE RECOGNITION
Revenues from sale of water purification equipment are recognized when goods
are shipped to customers.
LOSS PER SHARE
Loss per common share is computed on the basis of the weighted average number
of outstanding common shares and common stock equivalents, when dilutive.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method. Cost includes material, labor and
manufacturing overhead costs
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of the Company's foreign
subsidiaries are measured using local currency as the functional currency.
Assets and liabilities of these subsidiaries are translated into US dollars at
the exchange rate in effect at each year end. Income statement accounts are
translated into US dollars at the average rate of exchange prevailing during
the year. Translation adjustments arising from differences in exchange rates
from period to period are included in the accumulated foreign currency
translation adjustments account in stockholders' equity.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the 1996 and 1995 consolidated financial statements and
notes thereto have been reclassified to conform with the 1997 presentation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes, based upon current information, that the carrying value
of the Company's cash and cash equivalents, restricted investments, accounts
receivable and accounts payable and accrued liabilities approximates fair
value due to the short maturity of those instruments. The fair value of
amounts due to related parties was not determinable because of the related
party nature of the amounts. The Company estimates the fair value of its line
of credit approximates its carrying value because interest rates on the line
of credit approximate market rates.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), Earnings Per
<PAGE>
Share. The statement is effective for financial statements of the Company for
periods ending after December 15, 1997, including interim periods. SFAS No.
128 establishes standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common stock or potential
common stock. This statement simplifies the standards for computing earnings
per share previously found in APB Opinion No. 15, Earnings Per Share, and
makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the fully diluted EPS computation. The
Company will adopt the new statement for its fiscal year ending September 30,
1998, and anticipates that earnings per share calculations will not be
significantly different from those previously calculated.
The FASB recently issued Statement of Financial Accounting Standards No. 130
("SFAS 130"), Reporting Comprehensive Income, which is effective for fiscal
years beginning after December 15, 1997. SFAS 130 establishes standards for
reporting and displaying comprehensive income and its components in a full set
of general-purpose financial statements. The Company will adopt the new
statement for its fiscal year beginning October 1, 1998, and anticipates that
adoption will not have a significant impact on its consolidated financial
statements.
The FASB recently issued Statement of Financial Accounting Standard No. 131
("SFAS 131"), Disclosure About Segments of an Enterprise and Related
Information, which is effective for fiscal years beginning after December 15,
1997. SFAS 131 establishes standards for segment reporting in the financial
statements. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company will
adopt the new statement for its fiscal year beginning October 1, 1998 and
anticipates that providing required disclosures will not result in
significantly different information than that which is disclosed in Note 4.
3. INVENTORY
Inventories at September 30, were comprised of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Raw materials $ 744,113 $1,081,054
Work in progress 638,310 96,500
Finished goods 61,315 945,087
---------- ----------
Total $1,443,738 $2,122,641
========== ==========
</TABLE>
During the year ended September 30, 1997, the Company provided a reserve for
inventory write-down of certain of its consumer water purification systems in
the amount of $365,734. In addition, $406,674 was charged to expense from
returns of bottled water that had exceeded its shelf life due to a protracted
dispute over distribution rights, which was resolved, subsequent to delivery
of the bottled water.
<PAGE>
4. BUSINESS SEGMENTS
The Company operates in one business segment, the development and sale of
environmental technologies, principally water purification systems. The
Company has operations based in North America, Asia and the Middle East. The
table below presents information as to the Company's operations by geographic
region.
<TABLE>
<CAPTION>
Year ended Year Ended Year Ended
September 30, September 30, September 30,
1997 1996 1995
---------------------------------------
<S> <C> <C> <C>
SALES
North America $368,573 $198,565 $236,533
Asia 933,002 602,942 145,625
Middle East - 215,564 -
---------------------------------------
Total $1,301,575 $1,017,071 $382,158
=======================================
LOSS FROM OPERATIONS
North America $(2,090,675) $(2,897,854) $(3,147,141)
Asia (1,415,979) (1,151,063) (122,284)
Middle East (104,618) (42,800) -
---------------------------------------
Total $(3,611,272) $(4,091,717) $(3,269,425)
=======================================
IDENTIFIABLE ASSETS
North America $921,251 $3,062,382 $5,182,077
Asia 2,527,268 1,783,994 304,382
Middle East 17,000 231,432 -
---------------------------------------
Total $3,465,519 $5,077,808 $5,486,459
=======================================
</TABLE>
5. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment consist of the following at September 30:
1997 1996
<S> <C> <C>
------------------------------
Equipment $ 726,169 $ 701,194
Leasehold improvements 10,812 10,812
------------------------------
Total 736,981 712,006
Accumulated depreciation and amortization (176,398) (134,349)
------------------------------
Total property and equipment, net $ 560,583 $ 577,657
==============================
</TABLE>
6. RELATED PARTY TRANSACTIONS
The Company conducts business with various companies that are related through
the existence of certain common officers, directors and significant
stockholders. In addition, the Company utilizes research, technical and
management services provided by Casmyn to develop commercial applications for
water purification technologies. Casmyn bills the Company for these services
at rates approximating cost recovery. Casmyn billed the Company $242,726,
$285,730 and $223,677 for these services for the years ended September 30,
1997, 1996 and 1995.
<PAGE>
The Company incurred interest expense to Casmyn of $44,008, $39,536 and
$131,629 for the years ended September 30, 1997, 1996 and 1995 respectively.
As a result of these related party transactions, cash advances from and to the
Company and other transactions, the Company had a net amount due to related
parties at September 30, 1997 and 1996 of $0 and $1,772,852, respectively,
including $1,712,421 due to Casmyn at September 30, 1996 which bears interest
at 9% per annum and is due one year from the date of the advance.
Effective September 30, 1997, the Company issued 7,900,004 shares of the
Convertible Preferred Stock to Casmyn as a result of a corporate
restructuring (see note 8).
7. LINE OF CREDIT
In June 1996, the Company entered into a $250,000 revolving credit agreement
with a bank. Under the terms of the agreement, the interest rate on funds
borrowed is determined based upon an index that varies with the bank's prime
lending rate, 8.25% at September 30, 1996. Borrowings under the line of
credit are collateralized by the Company's money market funds (restricted
investments) which are invested with the banking institution. The amounts
borrowed are due upon demand by the financial institution and require monthly
payment of accrued interest.
8. STOCKHOLDERS' EQUITY
The FASB issued SFAS No. 123 ("SFAS 123") "Accounting for Awards of
Stock-Based Compensation to Employees" in October, 1995. This statement,
effective for the Company's fiscal year ending September 30, 1997, establishes
financial accounting and reporting standards for stock-based employee
compensation plans and for transactions where equity securities are issued for
goods and services. This Statement defines a fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic
value based method of accounting prescribed by APB Opinion No. 25, "Accounting
for Stock Issued to Employees". The Company will continue to apply APB
Opinion No. 25 to its stock-based compensation awards to employees and will
disclose the required pro forma effect of SFAS 123 on net income and earnings
per share.
COMMON STOCK
During the year ended September 30, 1995, the Company completed a private
placement for 500,000 shares of common stock for net proceeds of $1,000,000.
On September 29, 1995, the Company completed a private placement of 1,000,000
units for net proceeds of $2,375,000. Each unit consisted of one common share
of the Company plus one warrant; two warrants plus $3.00 will entitle the
holder to purchase one share of the Company's common stock. All warrants
expire on October 1, 1999. At September 30, 1995 the proceeds were included
in stock subscriptions receivable. The subscriptions receivable were
collected prior to December 31, 1995.
During the fourth quarter of 1996, WPUR issued 1,532,700 of its restricted
common shares to Casmyn in exchange for 425,750 shares of Auromar Development
Corporation ("Auromar") common stock. The Company recorded these shares at a
<PAGE>
value of $1,532,700 or $1.00 per share. This value reflects a discount from
the price at which WPUR common shares were trading on the NASD Bulletin Board
on the date of the transaction. This transaction along with the conversion in
1996 by Casmyn of preferred stock into common stock (see below) resulted in
Casmyn increasing its percentage ownership of the Company to approximately
31.2% at September 30, 1996. Effective September 30, 1997, Casmyn exchanged
5,634,756 common shares for Convertible Preferred shares thereby eliminating
its ownership position in the Company (see "Preferred Stock" below).
Additionally, the Company issued to Casmyn warrants to purchase up to
3,300,000 common shares at a price of $.75 per share exercisable for a three
year period.
PREFERRED STOCK
The Company's Series A preferred stock was initially designated such that the
stock could be converted at the option of the holder to common stock on a
one-for-one basis (subject to adjustment pursuant to certain common stock
transactions), had a $.05 per share cumulative dividend rate and each share
was entitled to the equivalent of four common share votes.
On June 29, 1995, the Company sold a voting controlling interest to Casmyn
Corp. ("Casmyn"), a company related through certain common officers, directors
and significant stockholders, through the issuance of 3,000,000 Series A
preferred shares of the Company, in exchange for $2,378,475 in debts owed by
the Company. On September 29, 1995, the Company sold Casmyn an additional
1,000,000 Series A preferred shares at $2.00 per share for net proceeds of
$2,000,000. At September 30, 1995 the $2,000,000 was included in
subscriptions receivable and was collected subsequent to September 30, 1995.
At September 30, 1995, Casmyn had effective voting control of the Company with
a 56.25% voting interest.
Pursuant to the terms of the preferred stock, effective September 30, 1996,
Casmyn converted 4,000,000 shares of Series A preferred stock into common
stock of the Company. Upon conversion of preferred stock to common stock,
preferred stock dividends in arrears payable to Casmyn were $237,500. The
Company recorded the dividend and increased the amounts payable to Casmyn by
$237,500.
During the year ended September 30, 1997, the Board of Directors redesignated
the preferences and rights of the Company's Series A Convertible Preferred
Stock ("Convertible Preferred Shares") such that each Convertible Preferred
Share has no dividend rights, has a liquidation preference equal to $0.45 per
share, constitutes a senior security of the Company, is entitled to two votes
per share and is convertible into two shares of the Company's.
Effective September 30, 1997, the Company issued 7,900,004 Convertible
Preferred Shares to Casmyn as a result of the following transactions (the
"Restructuring"). The Company restructured its debts and equity interest held
by Casmyn through the following:
(a) Conversion of $4,574,363 of outstanding debt to Casmyn (net of $157,435
which represents the market value of 31,487 common shares of Casmyn which was
offset against the total debt) to 5,082,626 Convertible Preferred Shares.
(b) Exchange of 5,634,756 common shares of the Company owned by Casmyn for
2,817,378 Convertible Preferred Shares.
<PAGE>
(c) The Convertible Preferred Shares may be converted by the holder at any
time after twelve months from the distribution date. Any remaining
Convertible Preferred Shares will be automatically converted into two common
shares on the eighteenth month from the distribution date.
(d) The sale of 150,000 shares of Casmyn Corp. common stock held by the
Company to Casmyn for cash of $5.00 per share. A loss from sale of investment
in affiliate of $791,198 was recorded in the year ended September 30, 1997 in
connection with this and other sales of Casmyn Corp. common stock made by the
Company during the year.
The number of Convertible Preferred Shares to be received upon the conversion
of the outstanding debt was determined based upon the closing market price of
the Company's common stock on September 30, 1997. The Restructuring was based
upon the advise of independent investment banking firms representing the
respective interests of the Company and Casmyn.
STOCK OPTIONS
During 1995, the Company adopted a qualified Incentive Stock Option Plan
(ISOP) which provides that a maximum of 700,000 options to purchase the
Company's common stock may be granted to officers, employees and advisors of
the Company. Options granted under the ISOP are intended to qualify as
incentive stock options under the Economic Recovery Tax Act of 1981 (the
"1981 Act") as amended by the Tax Reform Act of 1986.
In 1995, options to purchase 606,000 shares of common stock were granted under
the ISOP with an exercise price of $1.00 per share which represented the
market price per share on the date of grant. In 1997, options to purchase
10,000 shares of common stock were granted under the ISOP with an exercise
price of $1.00 per share which represented the market price per share on the
date of the grant. All options granted are exercisable for a period of ten
years and vest over a three year period.
The Company also adopted a non-qualified Stock Option Plan (SOP), which
provides for the granting of options to purchase a maximum of 875,000 shares
of the Company's common stock to officers, key employees and advisors of the
Company. Options granted under the SOP are not intended to qualify as
incentive stock options under the 1981 Act.
In 1995, options to purchase 480,000 shares of common stock at a price of $.01
to $3.00 per share were granted under the SOP. In 1996, options to purchase
35,000 shares of common stock at prices ranging from $1.00 to $2.00 per share
were granted under the SOP. In 1997, options to purchase 150,000 shares of
common stock were granted under the SOP at a price of $1.25 per share. The
options vest on varying terms of periods up to three years. Certain of these
options are compensatory in nature and resulted in total compensation expense
of $99,500 during the year ended September 30, 1995. During the year ended
September 30, 1997 and 1996, 140,000 and 267,000 options, respectively, were
canceled.
Prior to September 30, 1994, the Company had granted options to purchase up to
a total of 1,350,000 shares of its common stock. These options were not
intended to qualify as incentive stock options under the 1981 Act. Included
in these options were options to purchase up to 1,000,000 shares at $1.00 per
share granted to the Chief Executive Officer of the Company, under an
employment agreement. This agreement provides that 25% of such options were
vested immediately with the remaining 75% to vest based on the achievement of
defined sales goals.
The fair value of each option grant during the fiscal year ended September 30,
1997 and 1996 was estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: risk-free interest rate
of 5%; no dividends; expected lives ranging from three to ten years; and
expected volatility of 37%. The weighted-average fair value of those option
<PAGE>
grants in 1997 and 1996 is $0.08 and $0.05 respectively. The Company applies
APB Opinion 25 and related Interpretations in accounting for its option plans.
There was no compensation expense recorded related to these options. If
compensation costs for grants had been recorded under the SOP and ISOP
consistent with the method prescribed by SFAS 123, the effect on compensation
expense and loss per share would have been immaterial.
<PAGE>
A summary of stock option activity under Company plans follows:
<TABLE>
<CAPTION>
Weighted
Average
Number Option Price
of Shares Per Share
<S> <C> <C>
----------- -------------
Outstanding at September 30, 1994 1,350,000 $1.00
Granted (vested and non-vested) 1,086,000 $1.17
Canceled 0 0
Exercised 0 0
----------- -------------
Outstanding at September 30, 1995 2,436,000 $1.07
Granted (vested and non-vested) 35,000 $1.14
Canceled ( 267,000) $1.00
Exercised ( 33,500) $1.00
----------- -------------
Balance at September 30, 1996 2,170,500 $1.08
----------- -------------
Granted 150,000 $1.25
Canceled (140,000) $1.00
Exercised ( 99,500) $0.50
----------- -------------
Balance at September 30, 1997 2,081,000 $1.14
=========== =============
Exercisable at September 30, 1997 1,134,000 $1.19
=========== =============
</TABLE>
9. INCOME TAXES
A reconciliation of the income tax benefit (provision) with amounts determined
by applying the statutory U.S. Federal income tax rate to the consolidated
income (loss) before income taxes is as follows for the year ended September
30:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
Tax benefit at U.S. statutory rate $1,514,000 $ 1,390,000 $ 1,180,000
Operating losses with no current
tax benefit ( 1,514,000) ( 1,390,000) ( 1,180,000)
------------ ------------- -------------
Total $ - $ - $ -
============ ============= =============
<FN>
The Company's deferred tax items as of September 30 are as follows:
</TABLE>
<TABLE>
<CAPTION>
1997 1996
------------- --------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards $ 4,880,000 $ 3,051,000
Other 32,000 28,000
------------- --------------
Total deferred tax assets 4,912,000 3,079,000
DEFERRED TAX LIABILITIES - -
VALUATION ALLOWANCE ( 4,912,000) ( 3,079,000)
------------- --------------
NET DEFERRED TAX ASSETS $ - $ -
============= ==============
</TABLE>
As of September 30, 1997 the Company has net domestic operating loss
carryfowards for income tax purposes of approximately $14,000,000 expiring in
<PAGE>
years through 2012. These losses may not qualify for use under the current
Internal Revenue Code due to tax rules concerning ownership changes. Because
the future benefits of these loss carryforwards are not considered to be more
likely than not, such benefits are fully offset by a valuation allowance.
10. OPERATING LEASES
The Company has obligations under operating leases for offices and facilities.
Minimum annual lease payments are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $221,249
1999 107,762
2000 85,536
2001 86,237
2002 86,237
Thereafter 63,170
<FN>
Related rental expense was $209,728, $156,857 and $60,685 for the years ended
September 30, 1997, 1996 and 1995, respectively.
</TABLE>
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None of the "reportable events" described in Item 304 (a) (1) (ii) or (iv) of
Regulation S-B occurred with respect to the Company within the last two fiscal
years, or the subsequent interim period to date hereof.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF
THE REGISTRANT
Certain information about the directors and executive officers of the Company
is contained in the following table:
<TABLE>
<CAPTION>
SERVED IN CURRENT
NAME AGE POSITION POSITION SINCE
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Amyn S. Dahya 40 President, Chief Executive Officer 1994
and Chairman of the Board
Sandro Kunzle 42 Director 1994
Mehdi C. Nimjee 48 Director 1994
Al-Karim Haji 30 Chief Financial Officer 1997
Douglas C. Washburn 52 Vice President and Treasurer 1994
Dennis E. Welling 51 Controller and Secretary 1994
</TABLE>
BACKGROUND OF OFFICERS AND DIRECTORS OF THE COMPANY
- ----------------------------------------------------
AMYN S. DAHYA. Mr. Dahya has extensive international experience in project
development, engineering, joint ventures, and finance. Prior to joining the
Company in 1993, he held senior positions with Davy McKee, an international
engineering firm and in 1987 he founded Casmyn Group of Companies specializing
in mineral and environmental engineering, which he has developed for the last
ten years. Mr. Dahya serves on the Board of Directors of several companies,
including Diamond Fontein International and Casmyn Corp. where he also holds
executive management positions.
SANDRO KUNZLE. Mr. Kunzle has over 23 years of international banking and
finance experience. During his career, Mr. Kunzle has held senior positions
with several Swiss banks and financial institutions. He currently holds the
position of Managing Director of Witra Inc., an investment firm based in
Switzerland. His expertise in international finance and venture capital adds
significant experience to the Company's international business development
efforts.
MEHDI C. NIMJEE. Mr. Nimjee brings to the Company twenty-one years of project
management experience in the field of analytical chemistry and its
applications to exploration, mining, agriculture, hazardous materials handling
and the environment. He has also had experience in designing and setting up
project specific laboratories internationally. Mr. Nimjee also brings
extensive technical expertise to the Company.
AL-KARIM HAJI. Mr. Haji is a graduate of the University of British Columbia,
Canada, in Commerce and Business Administration and is a Canadian Chartered
Accountant. He brings nine years of financial management experience to the
<PAGE>
Company. Prior to joining the Company in 1993, he was with KPMG Peat Marwick
in Canada for six years, working for clients such as McDonald Dettweiler
(subsequently acquired by Orbital Sciences Corp.), Jim Pattison Industries and
the Spectra Group. Through his background, Mr. Haji brings to the Company
experience in areas of international business development, strategic planning,
financial planning, finance and taxation. Mr. Haji is fluent in several
languages.
DOUGLAS C. WASHBURN. Mr. Washburn holds a MBA/CPA and brings twenty-six years
of financial management experience to the Company. Prior to joining the
Company in 1993 he was a principal at Washburn Partners, a financial
consulting firm, from 1990 to 1993. Between 1980 and 1990, he was Vice
President and Controller of Armco Financial Corporation, a $1 billion
multinational merchant bank and its successor Glenfed Financial Corporation.
Through his background he brings to the Company expertise in areas of
international finance, planning, taxation, accounting and management
information systems.
DENNIS E. WELLING. Mr. Welling, a CPA, currently serves as Controller and
Secretary. He has twenty-six years internal and external audit and
controlling experience, including positions with Deloitte & Touche, Armco
Steel Corporation and Glenfed Financial Corporation. He has significant
management information systems experience in the mining, manufacturing and
financial services sectors.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the annual remuneration during the fiscal year
ended September 30, 1997, which was paid to or accrued for the account of each
of the most highly compensated Executive Officers or directors of the Company
whose total cash and cash equivalent remuneration exceeded $100,000. No
compensation is currently paid to non-employee directors. The following
includes compensation information relating to the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Securities
Underlying
Options Other
Position Year Salary ($) (#) Comp.
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amyn Dahya 1997 $ 150,000 1,000,000 -0-
President, CEO and 1996 $ 150,000 1,000,000 -0-
Chairman of the Board 1995 $ 150,000 1,000,000 -0-
</TABLE>
All other executive officers of the Company listed above received a combined
annual cash compensation of $102,750 for the fiscal year ended September 30,
1997. In addition, the Company pays a portion of each employee's health
insurance premium.
The Company has entered into a ten year employment contract with Amyn Dahya.
Pursuant to the terms of this agreement, Mr. Dahya earns an annual base salary
of $150,000, which increases by no less than 10% per year if such an increase
is approved by the Board of Directors. Under this contract, Mr. Dahya
receives normal group benefits available to other of the Company's executives.
This contract also provides Mr. Dahya with the grant of 5 year non-qualified
stock options to purchase shares of the Company's common stock at an exercise
price of $1.00 per share pursuant to the following schedule:
<TABLE>
<CAPTION>
No. of Shares Time of Vesting
------------- ---------------
<S> <C> <C>
250,000 Immediately upon execution of the Employment Agreement
250,000 When gross sales of the Company reach $2,500,000
250,000 When gross sales of the Company reach $5,000,000
250,000 When gross sales of the Company reach $7,500,000
</TABLE>
With the exception of Amyn Dahya, there are no employment contracts, proposed
termination of employment or change-in-control arrangements between Company
and any of its directors or executive officers.
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value
Underlying of Unexercised In-
Unexercised options the-Money options
at Sept.30, 1997 at Sept. 30, 1997
Shares Value Exercisable/ Exercisable/Unexercisable
Name Acquired Realized Unexercisable ($000/s)
============= ======== ======== ================ =========================
<S> <C> <C> <C> <C>
Amyn S. Dahya 0 0 250,000/750,000 $0/$0
============= ======== ======== ================ =========================
</TABLE>
During 1995 the Company adopted a qualified Incentive Stock Option Plan (ISOP)
which provides that a maximum of 700,000 options to purchase the Company's
common stock may be granted to officers and employees and advisors of the
Company. Options granted under the ISOP are intended to qualify as incentive
stock options under the Internal Revenue Code of 1986 as amended (the "Code"),
The ISOP is administered by the Board of Directors through a committee
presently consisting of two members of the Board (Committee). The Committee
determines which persons receive options, the number of shares that may be
purchased under each option, vesting provisions, option terms and exercise
price. Options granted under the ISOP are require to have an exercise price
equal to or greater than the market price of the Company's common shares at
the grant date. In the event an optionee voluntarily terminates his
relationship with the Company, he has the right to exercise his accrued
options within 3 months of such termination. However, the Company may redeem
any accrued options held by an optionee by paying the difference between the
option price and the then fair market value. If an optionee's relationship is
involuntarily terminated, other than because of death, he also has the right
to exercise the accrued options within thirty days of such termination. Upon
death, his estate or heirs have one year to exercise his accrued options. .
Options granted under the ISOP are not transferable other than by will or by
the laws of descent and distribution. The ISOP provides that the number of
shares and the option price will be adjusted on a pro-rata basis for stock
splits and stock dividends.
In 1995, options to purchase 606,000 shares of common stock were granted under
the ISOP with an exercise price of $1.00 per share which represents the market
price per share on the date of grant. In 1996, options to purchase 10,000
shares of common stock were granted under the ISOP with an exercise price of
$1.00 per share which represents the market price per share on the date of the
grant. All options granted are exercisable for a period of ten years and vest
over a three year period.
The Company also adopted a non-qualified Stock Option Plan (SOP), which grants
options to purchase a maximum of 875,000 shares of the Company's common stock
to officers, key employees and advisors of the Company. Options granted under
the SOP are not intended to qualify as incentive stock options under the Code.
The SOP is administered by the Board of Directors through a committee
presently consisting of all three members of the Board which determines which
<PAGE>
persons receive options under the SOP, the number of shares that may be
purchased under each option and the vesting period. The term of all options is
five 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 stock dividends.
In 1995, options to purchase 480,000 shares of WPUR's common stock at a price
of $.01 to $3.00 per share were granted under the SOP. In 1996, options to
purchase 35,000 shares of common stock at prices ranging from $1.00 to $2.00
per share were granted under the SOP. In 1997, options to purchase 150,000
shares of common stock were granted under the SOP at a price of $1.25 per
share. These options vest on varying terms of periods up to three years.
Certain of these options are compensatory in nature and resulted in total
compensation expense of $0, $0 and $99,500 during the years ended September
30, 1997, 1996 and 1995 respectively. During the years ended September 30,
1997 and 1996, 140,00 and 267,000 options, respectively were canceled.
Prior to September 30, 1994, the Company had granted options to purchase a
total of up to 1,350,000 shares of its common stock. These options are not
intended to qualify as incentive stock options under the Code. Included in
these options are options to purchase up to 1,000,000 shares at $1.00 granted
to the Chief Executive Officer of the Company, under an employment agreement
discussed above. This agreement provides that 25% of such options were vested
immediately with the remaining 75% to vest based on the achievement of defined
sales goals.
The only other benefit plan offered at the present or during 1997 involves a
major medical plan which is made available to all employees on a
non-discriminatory basis, the Company currently maintains no other stock
option plans, no plan which would be termed a "Long-Term Incentive Plan" as
explained in Item 402 (a)(6)(iii) of the U.S. Securities and Exchange Act, nor
any benefit plan which would give rise to "Long Term Compensation" as defined
in Item 402(b)(iv) of the U.S. Securities and Exchange Act, except as
described above.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely on a review of Forms 3 and 4 and amendments thereto furnished to
the Company during its most recent fiscal year and certain written
presentations, no person who was a director, officer, or beneficial owner of
more than 10% of the Company's common stock failed to file on a timely basis
reports required by Section 16(a) of the Securities Exchange Act of 1934
during the most recent fiscal year.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information table sets forth certain information regarding the
Company's common stock owned on January 7, 1998 by (1) any person (including
any "group") who is known by the Company to own beneficially more than 5% of
its outstanding common stock, (2) each director and officer, and (3) all
officers and directors as a group.
<TABLE>
<CAPTION>
Name and Address of Beneficial Shares of Common Percent of Common
Owner Stock Owned Stock Outstanding**
- -----------------------------------------------------------------------------
<S> <C> <C>
Dahya Holdings
1335 Greg St. #104 2,798,698 (1) 22.0%
Sparks, NV. 89431
- -----------------------------------------------------------------------------
Sandro Kunzle
Tenuta Aia Vecchia 25,000 (2) nil
58029 Sassofortino (GR)
Italy
- -----------------------------------------------------------------------------
Mehdi C. Nimjee
1800-1500 West Georgia St. 50,000 (2) nil
Vancouver, British Columbia
Canada V6G 2Z6
- -----------------------------------------------------------------------------
Casmyn Corp.
1335 Greg St. #104 3,000,000 (3) 20.9%
Sparks, NV. 89431
- -----------------------------------------------------------------------------
All Officers and Directors
of the Company as a Group
(6 persons) 2,974,548 23.3%
- -----------------------------------------------------------------------------
</TABLE>
** Based upon 12,500,710 common shares outstanding at January 7, 1998.
(1) At January 7, 1998, Dahya Holdings, Inc., a foreign corporation, of
which Mr. Amyn Dahya is an officer and director, held 2,548,698 common shares
of the Company. Mr. Mansoor Dahya, an uncle to Mr. Amyn Dahya, is the
majority shareholder of Dahya Holdings, Inc. and holds 91% of the outstanding
voting stock of Dahya Holdings, Inc. In view of Amyn Dahya's position as
an officer and director of Dahya Holdings Inc. Amyn Dahya may have shared
voting and investment power in and to these shares. Also at January 7,
1998, Mr. Dahya had a total of 250,000 exercisable options to purchase
common stock of the Company at $1.00 per share.
(2) Represents exercisable options to purchase common stock of the
Company at $1.00 per share.
(3) Represents exercisable warrants to purchase common stock of the
Company at $0.75 per share.
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Casmyn Corp. and Subsidiaries
- ------------------------------
The Company utilizes certain facilities and employees and officers of Casmyn
in conducting its business activities. Casmyn employs several qualified
scientists and technologists experienced in the fields of environmental
protection, water purification, treatment of effluents from mineral processing
operations, and pollution control of water. The Company is utilizing Casmyn's
infrastructure in order to develop commercial applications for water
purification technologies developed by Casmyn. Casmyn provides research and
development services to the Company as required. In addition, Casmyn provides
technical staff to the Company as required. Casmyn bills the Company for the
services of its technical staff at a rate which approximates cost recovery.
As of September 30, 1997, the Company restructured its debt to Casmyn Corp.
and issued convertible preferred stock to Casmyn in exchange for the Company's
common stock held by Casmyn Corp. (see Note 8 in the Notes to the Consolidated
Financial Statements).
<PAGE>
PART IV
ITEM 13.
(a) 3. Exhibits
------------
3.1 Company's amended and restated articles of incorporation*
3.2 Company's By-Laws*
4. Instruments defining the rights of holders
---------------------------------------------
4.1 Certificate of Designation of Preferences and Rights of Series A
Convertible Preferred Stock ++
10. Material Contracts
-----------------------
10.1 Stock Subscription Offer for Vector Environmental Technologies,
Inc.**
10.2 Preferences and rights of Series A Preferred Stock - VETI**
10.3 Vector Environmental Technologies, Inc. 1995 Incentive Stock
option Plan**
10.4 Societe Generale $2.5 million Subscription Agreement VETI**
10.5 Employment Agreement with Amyn Dahya***
10.6 Distribution Agreement with Bristol Worldsource Inc.+
10.7 Restructure Agreement ++
11. Statement re: computation of per share earnings (computation can be
determined from the material contained in this report)
21. Subsidiaries of the Company (see Item 1 - Description of Business)
27. Financial Data Schedule
____________________________________________________________________________
* Previously filed with the Commission on Form 10-K for fiscal year ended
September 30, 1994
** Previously filed with the Commission on Form 10-KSB for the fiscal year
ended September 30, 1995
*** Previously filed with the Commission on Form 10
+ Previously filed with the Commission on Form 10-KSB for the fiscal year
ended September 30, 1996
++ Filed herein
(b) Reports on Form 8-K
-------------------
September 30, 1997 The Company reported the issuance of approximately
7,750,000 shares of its Convertible Preferred Stock to Casmyn Corp. from the
conversion of outstanding debt and the exchange of common stock held by Casmyn
Corp. for Convertible Preferred shares. In addition, the Company granted
Casmyn Corp. warrants to purchase up to 3,300,000 shares of the Company's
common stock at a price of $0.75 per share (see Note 8 in the Notes to the
Consolidated Financial Statements).
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf of
the undersigned, thereunto duly authorized.
WATERPUR INTERNATIONAL INC.
/s/ Amyn S. Dahya
By: 1/12/98
- ----------------------------- -------------------
Amyn S. Dahya, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------ ----------------------------------- -------
<S> <C> <C>
/s/ Amyn S. Dahya President, Chief Executive Officer 1/12/98
- ------------------------ -------
Amyn S. Dahya and Chairman of the Board
(Principal Executive Officer)
/s/ Sandro Kunzle Director 1/12/98
- ------------------------ -------
Sandro Kunzle
/s/ Mehdi C. Nimjee Director 1/12/98
-------
Mehdi C. Nimjee
/s/ Al-Karim Haji Chief Financial Officer 1/12/98
- ------------------------ -------
Al-Karim Haji (Principal Financial Officer)
/s/ Douglas C. Washburn Vice President - Treasurer 1/12/98
- ------------------------ -------
Douglas C. Washburn
/s/ Dennis E. Welling Controller, Secretary 1/12/98
- ------------------------ -------
Dennis E. Welling (Principal Accounting Officer)
</TABLE>
EXHIBIT 4.1
CERTIFICATE OF DESIGNATION OF PREFERENCES AND
RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK
OF
WATERPUR INTERNATIONAL INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned, being the duly elected Chief Executive Officer and
Secretary of WaterPur International Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware in accordance with
the provisions of Section 103 thereof (the "Corporation"), DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the Corporation, as amended, the Board
of Directors has duly adopted the following recitals and resolutions:
"WHEREAS, the Certificate of Incorporation of this corporation, as
amended, provides for a class of shares known as Preferred Stock, issuable
from time to time in one or more series;
WHEREAS, the Board of Directors of this corporation is authorized to
determine or alter the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series of Preferred Stock, to
fix the number of shares constituting any such series, and to determine the
designation thereof, or any of them; and
WHEREAS, the Board of Directors of this corporation desires, pursuant to
its authority, to determine and fix the rights, preferences, privileges and
restrictions relating to the initial series of Preferred Stock and the number
of shares constituting and the designation of such initial series;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby fixes
and determines the designation of, the number of shares constituting, and the
rights, preferences, privileges and restrictions relating to, the initial
series of Preferred Stock as follows:
<PAGE>
a. Designation. The initial series of Preferred Stock shall be
designated "Series A Preferred Stock".
b. Number. The number of shares constituting the Series A
Preferred Stock shall be 8,500,000. None of the Series A Preferred Stock
have been issued.
c. No Dividend Rights. The holders of the Series A Preferred
Stock shall at no time during the existence of the corporation be
entitled to receive any dividends from the corporation.
d. Liquidation Preference.
(i) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the
Series A Preferred Stock shall each be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock or any class or series of
shares except any class or series of shares which is entitled to priority over
the Series A Preferred Stock, by reason of their ownership thereof, a
liquida-tion preference (the "Liquidation Preference") in the amount of $.45
per share (as adjusted for any stock dividends, combinations or splits with
respect to such shares). If upon the occurrence of such event, the assets and
funds thus distributed among the holders of the Series A Preferred Stock shall
be insufficient to permit the payment to such holders of the full Liquidation
Preference, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of
the Series A Preferred Stock in proportion to the shares of Series A Preferred
Stock then held by them.
(ii) For purposes of this Section(d), (A)any acquisition of
the Corporation by means of merger or other form of corporate reorganization
in which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring
corporation or its subsidiary (other than a mere reincorporation transaction)
or (B)a sale of all or substantially all of the assets of the Corporation,
shall be treated as a liquidation, dissolution or winding up of the
Corporation and shall entitle the holders of Series A Preferred Stock and
Common Stock to receive at the closing in cash, securities or other property
(valued as provided in Section(d)(iii) below) amounts as specified in
Section(d)(i) above.
(iii) Whenever the distribution provided for in this
Section(d) shall be payable in securities or property other than cash, the
value of such distribution shall be the fair market value of such securities
or other property as determined in good faith by the Board of Directors.
e. Voting Rights; Directors.
(i) In addition to any other rights provided for herein or by
law, each holder of shares of Series A Preferred Stock shall be entitled to
the number of votes equal to the number of shares of Common Stock into which
such shares of Series A Preferred Stock could be converted and shall have
voting rights and powers equal to the voting rights and powers of the Common
Stock (except as otherwise expressly provided herein or as required by law,
voting together with the Common Stock as a single class) and shall be entitled
to notice of any stockholders' meeting in accordance with the Bylaws of the
Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating
all shares into which shares of Series A Preferred Stock held by each holder
could be converted) shall be rounded to the nearest whole number (with
one-half being rounded upward).
<PAGE>
(ii) In the event that the holders of the Series A Preferred
Stock are required to vote as a class, the affirmative vote of holders of not
less than two-thirds of the outstanding shares of Series A Preferred Stock
shall be required to approve each such matter to be voted upon and if any
matter is approved by such requisite percentage of holders of Series A
Preferred Stock, such matter shall bind all holders of Series A Preferred
Stock.
(iii) So long as any shares of the Series A Preferred Stock
remain outstanding, the consent of two-thirds of the holders of the then
outstanding Series A Preferred Stock, voting as one class, either expressed in
writing or at a meeting called for that purpose, shall be necessary to repeal,
amend or otherwise change this Certificate of Designation of Preferences and
Rights or the Certificate of Incorporation of the Corporation, as amended, in
a manner which would alter or change the powers, preferences, rights
privileges, restrictions and conditions of the Series A Preferred Stock so as
to adversely affect the Series A Preferred Stock.
(iv) Each share of the Series A Preferred Stock shall entitle
the holder thereof to one vote on all matters to be voted on by the holders of
the Series A Preferred Stock, as set forth above.
f. Conversion. The holders of the Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(i) Right to Convert. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after
twelve (12) months from the date on which the initial mailing of the Series A
Preferred Stock to the shareholders of Casmyn Corp., a Colorado corporation,
shall occur (the "Distribution Date"), at the office of the Corporation or any
transfer agent for such stock, into two (2) fully paid and nonassessable
shares of Common Stock on and subject to the terms and conditions hereinafter
set forth. The conversion rate in effect at any time herein is hereinafter
referred to as the "Conversion Rate".
(ii) Automatic Conversion. Each share of Series A Preferred
Stock shall automatically be converted into shares of Common Stock at the
then-effective Conversion Rate on the date eighteen (18) months from the
Distribution Date.
(iii) Mechanics of Conversion. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for such
stock, and shall give written notice to the Corporation at such office that he
elects to convert the same and shall state therein the name or names in which
he wishes the certificate or certificates for shares of Common Stock to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series A Preferred Stock, a
certificate or certificates for the number of shares of Common Stock to which
he shall be entitled as aforesaid. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of surrender
of the shares of Series A Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on such date.
<PAGE>
(iv) Adjustments to Conversion Rate for Combinations or
Subdivisions of Common Stock. In the event that this Corporation at any time
or from time to time after the original issue date of the Series A Pre-ferred
Stock shall effect a subdivision of the outstanding shares of Common Stock
into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Series A
Conversion Rate in effect immediately prior to such event shall, concurrently
with the effectiveness of such event, be proportionately decreased or
increased, as appropriate.
(v) Adjustment for Reclassification and Reorganization. If
the Common Stock issuable upon conversion of the Series A Preferred Stock
shall be changed into the same or a different number of shares of any other
class or classes of stock, whether by capital reorganization, reclassification
or otherwise (other than a subdivision or combination of shares provided for
in Section(f)(iv) above or a merger or other reorganization referred to in
Section(d)(ii) above), the Series A Conversion Rate then in effect shall,
concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted so that the Series A Pre-ferred
Stock shall be convertible into, in lieu of the number of shares of Common
Stock which the holders would otherwise have been entitled to receive, a
number of shares of such other class or classes of stock equivalent to the
number of shares of Common Stock that would have been subject to receipt by
the holders upon conversion of the Series A Preferred Stock immediately before
that change.
(vi) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in the carrying out of the
provisions of this Section (f) and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock against impairment.
(vii) Certificates as to Adjustments. Upon the occurrence of
each adjustment or readjustment of any Conversion Rate pursuant to this
Section(f), the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A Preferred Stock a certificate executed by
the Corporation's President or Chief Financial Officer setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (A) such
adjustments and readjustments, (B) the Conversion Rate for such series of
Preferred Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of the Series A Preferred Stock.
<PAGE>
(viii) Notices of Record Date. In the event that the
Corporation shall propose at any time (A) to effect any reclassification or
recapitalization of its Common Stock outstanding involving a change in the
Common Stock, or (B) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all of its assets,
or to liquidate, dissolve or wind up; then, in connection with each such
event, the Corporation shall send to the holders of Series A Preferred Stock:
(x) at least twenty (20) days' prior
written notice of the date on which a record shall be taken for determining
rights to vote, if any, in respect of the matters referred to in (A) and (B)
above;
(y) in the case of the matters referred
to in (A) and (B) above, at least twenty (20) days' prior written notice of
the date when the same shall take place (and specifying the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the occurrence of such event).
(ix) Issue Taxes. The Corporation shall pay any and all issue
and other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Series A Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be obligated to pay
any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
(x) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series A Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series A Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including, without limitation,
engaging in best efforts to obtain the requisite stockholder approval of any
necessary amendment to this Certificate.
(xi) Fractional Shares. No fractional share shall be issued
upon the conversion of any share or shares of Series A Preferred Stock. All
shares of Common Stock (including fractions thereof) issuable upon conversion
of more than one share of Series A Preferred Stock by a holder thereof shall
be aggregated for purposes of determining whether the conversion would result
in the issuance of any fractional share. If, after the aforementioned
aggregation, the conversion would result in the issuance of a fraction of a
share of Common Stock, the Corporation shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such fraction a sum in
cash equal to the fair market value of such fraction on the date of conversion
(as determined in good faith by the Board of Directors).
<PAGE>
(xii) Notices. Any notice required by the provisions of this
Section (f) to be given to the holders of shares of Series A Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at such holder's address appearing in
the records of the Corporation.
RESOLVED FURTHER, that the Chief Executive Officer or any Vice President,
and the Secretary or the Chief Financial Officer of this corporation be, and
each of them hereby is, authorized, empowered and directed, for and on behalf
of this corporation, to execute, verify and file a certificate of
determination of preferences with respect to the Series A Preferred Stock in
accordance with Delaware law; and
RESOLVED FURTHER, that any officer of this corporation, acting alone, be,
and hereby is, authorized, empowered and directed, for and on behalf of this
corporation, to execute any and all further documents or instruments and to
take any further actions as may be necessary, proper or advisable in order to
effectuate the intent and purposes of the foregoing resolutions."
The undersigned further declare under penalty of perjury under the
laws of the State of Delaware that the matters set forth in this Certificate
of Designation of Preferences and Rights are true and correct of our own
knowledge.
DATED: September 30, 1997
____________________________________
Amyn S. Dahya, Chief Executive Officer
____________________________________
Dennis E. Welling, Secretary
EXHIBIT 10.7
RESTRUCTURE AGREEMENT
THIS RESTRUCTURE AGREEMENT ("Agreement") is made and entered into as
of September 30, 1997 (the "Effective Date"), by and among, Casmyn Corp., a
Colorado corporation ("Casmyn"), and WaterPur International Inc., a Delaware
corporation ("WaterPur"), with reference to the following:
A. ON SEPTEMBER 30, 1997, THE BOARDS OF DIRECTORS OF CASMYN AND WATERPUR
APPROVED THE RESTRUCTURING OF CASMYN'S INTEREST IN WATERPUR AND WATERPUR'S
INTEREST IN CASMYN (THE "RESTRUCTURING").
B. WATERPUR SHALL FILE A CERTIFICATE OF DESIGNATION OF PREFERENCES AND
RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK (THE "CERTIFICATE OF
DESIGNATION") WITH THE SECRETARY OF STATE OF THE STATE OF DELAWARE
ESTABLISHING THE PREFERENCES AND RIGHTS OF THE SERIES B PREFERRED STOCK OF
WATERPUR (THE "WATERPUR PREFERRED STOCK") TO BE ISSUED PURSUANT TO THE
RESTRUCTURING.
C. CASMYN AND WATERPUR NOW DESIRE TO MEMORIALIZE THE TERMS OF THE
RESTRUCTURING, AS MORE FULLY SET FORTH IN THIS AGREEMENT.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Conversion of Debt. Upon the filing of the Certificate of
Designation, the outstanding debt of $4,514,304 owed to Casmyn by WaterPur
shall be converted into 5,015,894 shares of WaterPur Preferred Stock.
2. Conversion of WaterPur Common Stock. The 5,634,756 shares of
WaterPur common stock owned by Casmyn shall be converted into 2,817,378 shares
of WaterPur Preferred Stock.
3. Issuance of Warrants. WaterPur shall issue to Casmyn warrants to
purchase up to 3,300,000 shares of WaterPur common stock at $0.75 per share,
exercisable for a three-year period, pursuant to that certain Warrant to
Purchase Common Stock in the form of that attached hereto as Exhibit A.
4. Purchase of Casmyn Common Stock. Effective as of the Effective
Date, Casmyn shall purchase from WaterPur 150,000 shares of Casmyn common
stock owned by WaterPur, which shares Casmyn shall retire to treasury.
<PAGE>
5. Spin-Off. Upon the satisfaction of all regulatory requirements,
the WaterPur Preferred Stock owned by Casmyn pursuant to Sections 1 and 2
hereof shall be distributed on a pro rata basis to the holders of Casmyn
common stock and preferred stock as of a record date of October 15, 1997,
without any consideration being paid by such holders (the "Distribution").
The transfer of such WaterPur Preferred Stock will be restricted for a period
of one year from the date of the Distribution. The Distribution will be made
on the basis of approximately .78 shares of WaterPur Preferred Stock for every
share of Casmyn common stock outstanding or issuable upon conversion of
Casmyn's convertible preferred stock.
6. Miscellaneous..
a. Further Assurances. Each of the parties shall execute such
documents, instruments and other papers and perform such further acts as may
be reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby.
b. Effective Date. Notwithstanding anything to the contrary herein,
the effective date of the transactions described in Sections 1 through 4
hereof shall be deemed to have occurred on the Effective Date.
c. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado applicable to contracts
made and to be performed wholly within such State, and without regard to
the conflicts of laws principles thereof.
The parties hereto have duly executed this Agreement as of the day
and year first above written.
"CASMYN":
CASMYN CORP., a Colorado corporation
By:
__________________________________________
Amyn S. Dahya, Chief Executive Officer
"WATERPUR":
WATERPUR INTERNATIONAL INC.,
a Delaware corporation
By:
___________________________________________
Douglas C. Washburn, Vice President
<PAGE>
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK OF THE
COMPANY ISSUABLE UPON EXERCISE OF SUCH WARRANTS HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), NOR UNDER ANY STATE
SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
TO THE COMPANY OR AN OPINION REASONABLY SATISFACTORY TO THE COMPANY OF COUNSEL
TO THE HOLDER THAT SAID SECURITIES MAY BE PLEDGED, SOLD, ASSIGNED OR
TRANSFERRED, AS THE CASE MAY BE, WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW. BY ITS ACCEPTANCE
HEREOF, THE HOLDER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE REPRESENTS
THAT IT IS AN "ACCREDITED INVESTOR," AS DEFINED IN REGULATION D PROMULGATED
UNDER THE ACT, AND THAT IT IS ACQUIRING SUCH WARRANTS FOR INVESTMENT PURPOSES
ONLY, AND NOT WITH A VIEW TOWARDS DISTRIBUTION.
3,300,000 WARRANTS
WATERPUR INTERNATIONAL, INC.
Warrant Certificate
to purchase Common Stock
Expiring September 30, 2000
This Warrant Certificate ("Warrant Certificate") certifies that
Casmyn Corp. or its registered assigns, is the registered holder of 3,300,000
Warrants expiring September 30, 2000 (the "Warrants") to purchase common
stock, $.005 par value per share (the "Common Stock"), of WaterPur
International, Inc., a Delaware corporation (the "Company"). Each Warrant
entitles the holder upon exercise to receive from the Company on or before
5:00 p.m., Los Angeles time, on September 30, 2000, one fully paid and
non-assessable share of Common Stock (each, a "Warrant Share" and
collectively, the "Warrant Shares") at the purchase price per share (the
"Exercise Price") of $.75 per share, payable in cash, by certified or bank
check, upon surrender of this Warrant Certificate and payment of the
applicable Exercise Price at the office or agency of the Company, subject to
the conditions set forth herein. The foregoing Exercise Price and the number
of Warrant Shares issuable upon exercise of the Warrants are subject to
adjustment upon the occurrence of certain events set forth herein.
<PAGE>
NO WARRANT MAY BE EXERCISED AFTER 5:00 P.M., LOS ANGELES TIME, ON
SEPTEMBER 30, 2000, AND TO THE EXTENT NOT EXERCISED BY SUCH TIME, SUCH
WARRANTS SHALL BECOME VOID.
The Warrants are subject to the following additional terms:
1. Registration of Transfers and Exchanges. Subject to the
restrictions set forth in this Warrant Certificate, the holder of this Warrant
Certificate shall have the right to transfer all or a portion of this Warrant
Certificate. The Company shall from time to time register the transfer of
this Warrant Certificate upon the records to be maintained by it for that
purpose, upon surrender thereof accompanied (if so required by it) by a
written instrument or instruments of transfer in form satisfactory to the
Company, duly executed by the registered holder hereof or by the duly
appointed legal representative thereof or by a duly authorized attorney. Upon
any such registration or trans-fer, a new Warrant Certificate shall be issued
to the transferee(s) and the surrendered Warrant Certificate shall be
cancelled by the Company.
The holder of this Warrant Certificate agrees that prior to any
proposed transfer of the Warrants or of the Warrant Shares, if such transfer
is not made pursuant to an effective Registration Statement under the
Securities Act of 1933, as amended (the "Act"), such holder shall deliver to
the Company an opinion of counsel, reasonably satisfactory in form and
substance to the Company, and from counsel reasonably satisfactory to the
Company, that the Warrants or Warrant Shares may be so sold without
registration under the Act.
The Warrant holder understands and agrees that each certificate
representing Warrant Shares will bear the following legend:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), QUALIFIED OR REGISTERED UNDER
ANY STATE SECURITIES LAW, AND ARE RESTRICTED SECURITIES. THESE SHARES MAY
NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED IN ANY
MANNER ABSENT EITHER REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES LAW, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ITS
COUNSEL THAT REGISTRATION UNDER SUCH LAWS IS NOT REQUIRED."
<PAGE>
The Company may deem and treat the registered holder hereof as the
absolute owner of the Warrants (notwithstanding any notation of ownership or
other writing hereon made by anyone), for the purpose of any exercise hereof,
of any distribution to the holder hereof, and for all other purposes, and the
Company shall not be affected by any notices to the contrary. The Warrants do
not entitle the holder hereof to any rights of a stockholder of the Company.
2. Terms of Warrants; Exercise of Warrants. Subject to the terms
contained herein, the holder of this Warrant Certificate shall have the right,
which may be exercised at any time and from time to time until 5:00 p.m., Los
Angeles time, on September 30, 2000, to purchase and receive from the Company
the number of validly issued, fully paid and non-assessable Warrant Shares
which the holder may at the time be entitled to receive on exercise of the
Warrants represented by this Warrant Certificate and payment of the applicable
Exercise Price then in effect for such Warrant Shares. Each Warrant not
exercised prior to 5:00 p.m., Los Angeles time, on September 30, 2000 shall
become void, and all rights hereunder and all rights in respect thereof
hereunder shall cease as of such time.
A Warrant may be exercised upon surrender to the Company at its
principal office of this Warrant Certificate with the form of election to
purchase attached hereto duly completed and signed, and upon payment to the
Company for the account of the Company of the applicable Exercise Price, as
adjusted as herein provided, for the number of Warrant Shares in respect of
which such Warrants are then exercised. Payment of the aggregate Exercise
Price shall be made in cash, by certified or official bank check payable to
the order of the Company.
Upon such surrender of this Warrant Certificate and payment of the
applicable Exercise Price, the Company shall issue and cause to be delivered
with all reasonable dispatch to the holder of this Warrant Certificate a
certificate or certificates for the number of full Warrant Shares issuable
upon the exercise of such Warrants, together with cash as provided in Section
6. Such certificate or certificates for the Warrant Shares shall be deemed to
have been issued and, subject to applicable federal and state securities laws
and regulations, any person so designated to be named therein shall be deemed
to have become a holder of record of such Warrant Shares as of the date of the
surrender of this Warrant Certificate and payment of the applicable Exercise
Price. Such certificate or certificates for the Warrant Shares may, if
required, bear the legend set forth in Section 1.
The Warrants shall be exercisable, at the election of the holder of
this Warrant Certificate, either in full or from time to time in part and, in
the event that a certificate evidencing Warrants is exercised in respect of
fewer than all of the Warrant Shares issuable on such exercise at any time
prior to the date of expiration of the Warrants, a new certificate evidencing
the remaining Warrant or Warrants will be issued.
<PAGE>
3. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares upon the exercise
of the holder's Warrants.
4. Reservation of Warrant Shares. The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its autho-rized but unissued Common Stock, sufficient Common Stock to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants. The
Company covenants that all Warrant Shares which may be issued upon exercise of
Warrants will, upon issue, be validly issued, fully paid, nonassessable, free
of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof, other than those created by the
holder of such Warrants.
5. Adjustment of Exercise Prices and Number of Warrant Shares
Issuable. The Exercise Price and the number of Warrant Shares issuable upon
the exercise of each Warrant are subject to adjustment from time to time upon
the occurrence of the events enumerated in this Section 5. The Exercise Price
shall be adjusted simultaneously upon occurrence of such events. For purposes
of this Section 5, "Common Stock" means shares now or hereafter authorized of
any class of common stock of the Company and any other stock of the Company,
however designated, that has the right (subject to any prior rights of any
class or series of preferred stock) to participate in any distribution of the
assets or earnings of the Company without limit as to per share amount.
a. In case the Company shall at any time after the date of original
issuance hereof do any of the following: (i) pay a dividend or make a
distribu-tion on its capital stock in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock, (iii) combine its outstanding shares
of Common Stock into a smaller number of shares, or (iv) issue by
reclassification of its Common Stock any shares of capital stock of the
Company; then immediately after the distribution date of such stock dividend
or the effective date of such subdivision, split-up, combination or
reclassification, as the case may be, the number of shares of Common Stock
which the registered holder of this Warrant Certificate is entitled to
purchase hereunder and the Exercise Price of such shares of Common Stock shall
be appropriately adjusted so that the registered holder hereof shall be
entitled to purchase the number of shares of Common Stock that such holder
would have held after such stock dividend, subdivision, split-up, combination
or reclassification, as the case may be, at the aggregate Exercise Price such
holder would have paid for such shares of Common Stock, if such holder had
exercised the Warrants represented by this Warrant Certificate prior to such
event.
<PAGE>
b. In case of any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
con-tinuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as
an entirety, or in case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), lawful and adequate provisions shall be
made whereby the registered holder of this Warrant Certificate shall
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions specified in this Warrant Certificate and in lieu of the
shares of Common Stock immediately theretofore purchasable hereunder and
receivable upon the exercise of the Warrants, such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for a
number of outstanding shares of Common Stock equal to the number of
outstanding shares of Common Stock immediately theretofore purchasable and
receivable upon the exercise of the Warrants represented by this Warrant
Certificate, and in any such case appropriate provision shall be made with
respect to the rights and interests of the registered holder of this Warrant
Certificate to the end that the provisions hereof (including without
limitation, to the extent provided herein, provisions for adjustments of the
Exercise Price and of the number of shares of Common Stock purchasable and
receivable upon the exercise of the Warrants represented by this Warrant
Certificate) shall thereafter be applicable, as nearly as may be, in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof. The Company will not effect any such consolidation, merger
or sale, unless prior to the consummation thereof the successor entity (if
other than the Company) resulting from such consolidation or merger or the
entity purchasing such assets shall assume by written instrument executed and
delivered to the registered holder of this Warrant Certificate, the obligation
to deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provision, such registered holder of this
Warrant Certificate may be entitled to purchase. Notice of any such
consolidation, merger, statutory exchange, sale or conveyance, and of the
provisions so proposed to be made, shall be mailed to the registered holder of
this Warrant Certificate not less than thirty (30) days prior to such event or
promptly upon the Company's receiving notice thereof. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
c. In case at any time or from time to time, conditions arise by
reason of action taken by the Company, which in the opinion of its Board of
Directors or the holder of this Warrant Certificate, are not adequately
covered by the provisions of this Warrant Certificate, and might adversely
affect the exercise rights of the holder of this Warrant Certificate, then the
Board of Directors of the Company shall appoint a firm of independent
certified public accountants of recognized national standing (which may be the
firm regularly retained by the Company), who shall give their opinion upon the
adjustment, if any, on a basis consistent with the standards established in
the other provisions of this Warrant Certificate, necessary with respect to
the Exercise Price or the number of Warrant Shares issuable upon exercise of
the Warrants, so as to preserve, without dilution, the exercise rights of the
<PAGE>
holder of this Warrant Certificate and the number of Warrant Shares issuable
upon exercise of the Warrants by the holder hereof to the extent contemplated
by this Section 5. Upon receipt of such opinion, which shall be conclusive
and binding on the Company and the holder, the Board of Directors of the
Company shall forthwith make the adjustments provided therein.
6. Fractional Interests. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section
6, be issuable upon exercise of any Warrants (or specified portion thereof),
the Company shall pay an amount in cash equal to the applicable Exercise Price
on the day immediately preceding the date the Warrant is presented for
exercise, multiplied by such fraction.
7. Notices to the Warrant Holder. Upon any adjustment of the
Exercise Price and/or the number of Warrant Shares issuable upon exercise of
the Warrants pursuant to Section 5, the Company shall promptly thereafter
cause to be given to the Warrant holder, as provided in Section 9, a
certificate setting forth the Exercise Price and/or the number of Warrant
Shares issuable upon exercise of the Warrants after such adjustment and
setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based. Where appropriate, such notice to the
Warrant holder may be given in advance and included as a part of the notice
required to be mailed under the other provisions of this Section 7.
In case:
a. the Company shall authorize the issuance to holders of shares of
Common Stock of rights, options or warrants to subscribe for or purchase
shares of Common Stock or of any other subscription rights or warrants; or
b. the Company shall authorize the distribution to holders of shares
of Common Stock of evidences of its indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings); or
c. of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of Common
Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value,
<PAGE>
or as a result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock; or
d. of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
e. the Company proposes to take any action which would require an
adjustment of the Exercise Price or the number of Warrant Shares issuable upon
exercise of the Warrants pursuant to Section 5;
then the Company shall promptly give to the registered holders of the Warrant
Certificates at their respective addresses appearing on the Warrant register
by first-class mail, postage prepaid, a written notice describing the specific
details of such contemplated action, including, without limitation (i) the
date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to
be determined, or (ii) the initial expiration date set forth in any tender
offer or exchange offer for shares of Common Stock, or (iii) the date on which
any such consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective or consummated, and the date as
of which it is expected that holders of record of shares of Common Stock shall
be entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up.
8. Holder Not Deemed a Stockholder. With respect to the Warrant
Shares purchasable under this Warrant Certificate, no holder hereof shall be
entitled to vote or receive dividends in respect to, or be deemed the holder
of, nor shall anything contained herein be construed to confer upon any holder
of this Warrant Certificate, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issue of
stock, reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger, conveyance, or otherwise) or to receive
notice of meetings, or to receive dividends, until this Warrant Certificate
shall have been exercised and the Warrant Shares receivable upon the exercise
hereof shall have become deliverable as provided in Section 3 above, and then
only with respect to the Warrant Shares purchased.
9. Notices. Any notice, request, instruction or other document to be
given hereunder shall be in writing, shall be deemed to have been duly given
or delivered when delivered personally or telecopied (receipt confirmed, with
a copy sent by certified or registered mail as set forth herein) or sent by
<PAGE>
certified or registered mail, postage prepaid, return receipt requested, or by
FedEx or other reputable overnight delivery service, to the address of the
party set forth below or to such address as the party to whom notice is to be
given may provide in a written notice to the Company, a copy of which written
notice shall be on file with the Company:
<TABLE>
<CAPTION>
If to the Company:
<S> <C>
WaterPur International, Inc.
1500 West Georgia St., Suite 1800
Vancouver, B.C.
Canada V6G 2Z6
Attention: President
If to Casmyn Corp.:
Casmyn Corp.
1500 West Georgia St., Suite 1800
Vancouver, B.C.
Canada V6G 2Z6
Attention: President
</TABLE>
10. Rights Subject to Warrant Certificate. The holder of this
Warrant Certificate, by its acceptance hereof, agrees to be bound by, and
agrees that he holds this Warrant Certificate subject to, the terms and
conditions of this Warrant Certificate.
11. Successors. This Warrant Certificate shall be binding upon and
inure to the benefit of the Company and the registered holder hereof and their
respective heirs, executors, personal representatives, successors and assigns
and shall be binding upon any person, firm, corporation or other entity to
whom this Warrant Certificate and any Warrant Shares issuable upon exercise
hereof are transferred (even if in violation of the provisions of this Warrant
Certificate) and the heirs, executors, personal representatives, successors
and assigns of such person, firm, corporation or other entity.
<PAGE>
12. Miscellaneous. This Warrant Certificate and any provision hereof
may be amended, waived, discharged or terminated only by an instrument in
writing signed by the party (or any predecessor in interest thereof) against
which enforcement of the same is sought. The headings in this Warrant
Certificate are for purposes of reference only and shall not affect the
meaning or construction of any of the provisions hereof. This Warrant
Certificate shall be governed by and construed under the laws of the State of
Delaware, without reference to choice or conflict of laws principles.
IN WITNESS WHEREOF, the Company has caused this
Warrant Certificate to be duly executed and delivered.
Dated: September 30, 1997 WATERPUR INTERNATIONAL, INC., a Delaware corporation
By:_________________________________
Its:_________________________________
<PAGE>
WATERPUR INTERNATIONAL, INC.
PURCHASE FORM
----------------------------
Number of Warrants exercised _______________
The undersigned hereby irrevocably elects to exercise the right
represented by this Warrant Certificate to purchase _______________ shares of
Common Stock of WaterPur International, Inc. and herewith tenders in payment
for such shares $____________ in cash in accordance with the terms hereof.
The undersigned requests that a certificate representing such shares be
registered and delivered as follows:
Name: _________________________________________________
Address: _________________________________________________
_________________________________________________
Delivery Address:
(if different) _________________________________________________
If the number of shares of Common Stock to be received is less than the
aggregate number of shares of Common Stock purchasable hereunder, the
undersigned requests that a new Warrant Certificate representing the balance
of such shares be registered and delivered as follows:
Name: ________________________________________________
Address: ________________________________________________
________________________________________________
Delivery Address: ________________________________________________
(if different)
________________________________________________
Name of registered holder of Warrant Certificate:
________________________________________________
(Please Print)
Address: ________________________________________________
________________________________________________
_________________
(Insert social Signature: _________________________
security or other
identifying number
of holder)
Note: The above signature must correspond with the name
as written upon the face of this Warrant Certificate.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000918997
<NAME> VECTOR ENVIRONMENTAL TECHNOLOGIES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 865
<SECURITIES> 0
<RECEIVABLES> 476
<ALLOWANCES> 39
<INVENTORY> 1444
<CURRENT-ASSETS> 3213
<PP&E> 737
<DEPRECIATION> 176
<TOTAL-ASSETS> 3466
<CURRENT-LIABILITIES> 700
<BONDS> 0
0
0
<COMMON> 63
<OTHER-SE> 2703
<TOTAL-LIABILITY-AND-EQUITY> 3466
<SALES> 1301
<TOTAL-REVENUES> 1301
<CGS> 1024
<TOTAL-COSTS> 1390
<OTHER-EXPENSES> 3523
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4325)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4325)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4325)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
