-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HFST307O0vpf+s5cFyrZJTW0/dgLk7QzH+uV3VDUkZirTKvxg469RWzu2bkNypYu 9ar0WGYZaXc77p01lNc+Vg== 0000772320-98-000005.txt : 19980518 0000772320-98-000005.hdr.sgml : 19980518 ACCESSION NUMBER: 0000772320-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASMYN CORP CENTRAL INDEX KEY: 0000772320 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] IRS NUMBER: 840987840 STATE OF INCORPORATION: CO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14136 FILM NUMBER: 98626171 BUSINESS ADDRESS: STREET 1: 1335 GREG ST #104 CITY: SPARKS STATE: NV ZIP: 89431 BUSINESS PHONE: 7023315524 MAIL ADDRESS: STREET 1: 1335 GREG STREET STREET 2: SUITE 104 CITY: SPARKS STATE: NV ZIP: 89431 FORMER COMPANY: FORMER CONFORMED NAME: SUMMA METALS CORP DATE OF NAME CHANGE: 19940503 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________ FORM 10-Q [ X ] Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 -------------- OR [ ] Transition report under section 13 or 15 (d) of the Exchange Act COMMISSION FILE NUMBER 0-14136 CASMYN CORP. (Exact name of registrant as specified in Charter) COLORADO (State or other jurisdiction of incorporation) 84-0987840 (IRS Employer Identification No.) 1335 GREG STREET, UNIT #104 SPARKS, NEVADA 89431 (702) 331-5524 (Address and Telephone Number of Principal Executive Offices) Check whether the issuer (1) filed all reports required to be filed by section 13 or 15 (d) of the 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 [ ]. As of May 11, 1998, 141,543,350 shares of the issuer's common stock were outstanding. This report contains 18 pages. CASMYN CORP. FORM 10-Q INDEX Page PART I. Financial Information: No. --- Condensed Consolidated Balance Sheets - March 31, 1998 and September 30, 1997 3 Condensed Consolidated Statements of Operations - Three Months and Six Months ended March 31, 1998 and 1997 4 Condensed Consolidated Statements of Cash Flows - Six Months ended March 31, 1998 and 1997 5 Notes to Condensed Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II. Other Information: Item 6 - Exhibits and Reports on Form 8-K 18 Signatures 18 CASMYN CORP. CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS ------
MARCH 31, 1998 SEPTEMBER 30, 1997 (UNAUDITED) (AUDITED) -------------------------------------- CURRENT ASSETS: Cash and cash equivalents $ 11,441,149 $ 18,185,515 Restricted cash - 5,074,659 Marketable securities 1,935,146 2,096,704 Accounts receivable, net 810,914 511,135 Inventories 705,317 751,299 Prepaid expenses and other assets 20,515 247,560 -------------------------------------- Total current assets 14,913,041 26,866,872 INVESTMENT IN AND ADVANCES TO AFFILIATES 4,574,368 4,574,368 PROPERTY AND EQUIPMENT, NET 18,853,773 16,676,347 OTHER ASSETS 325,955 155,792 -------------------------------------- TOTAL ASSETS $ 38,667,137 $ 48,273,379 ====================================== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 1,336,187 $ 1,108,944 Accrued taxes from acquisition 627,835 792,801 Accrued liabilities 41,134 2,156,704 Line of credit 4,981,463 4,966,160 Current portion of long-term debt - 58,418 -------------------------------------- Total current liabilities 6,986,619 9,083,027 DIVIDEND PAYABLE 4,574,368 4,574,368 -------------------------------------- Total Liabilities 11,560,987 13,657,395 -------------------------------------- MINORITY INTEREST 62,677 144,220 -------------------------------------- STOCKHOLDERS' EQUITY: Preferred stock, $.10 par value; 20,000,000 shares authorized; 1,185,861 and 1,406,962 shares issued and outstanding; liquidation preference $27,919,725 111,680 140,697 Common stock, $.04 par value; 300,000,000 shares authorized; 111,959,619 and 13,376,714 shares issued and outstanding 4,478,385 535,069 Additional paid-in capital 67,865,553 66,486,227 Accumulated deficit (39,067,806) (28,453,840) Foreign currency translation adjustment ( 3,399,747) ( 3,328,954) Treasury stock-at cost, 583,937 and 181,437 shares ( 2,944,592) ( 907,435) ----------------------------------------- Total Stockholders' Equity 27,043,473 34,471,764 ----------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $38,667,137 $48,273,379 ========================================= SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
CASMYN CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 1998 1997 ------------------------------- REVENUES: Precious metals $1,224,376 $874,645 Cost of production 775,724 609,584 ------------------------------ GROSS PROFIT 448,652 265,061 ------------------------------- COSTS AND EXPENSES: General and administrative expenses 630,908 512,352 Compensatory stock option expense - 9,043 Professional services 147,145 111,254 Depreciation, depletion and amortization 150,691 111,290 Mineral exploration expense 16,520 63,760 Mergers and acquisitions 12,638 79,518 ------------------------------- 957,902 887,217 ------------------------------- LOSS FROM OPERATIONS (509,250) (622,156) ------------------------------- OTHER INCOME (EXPENSE): Equity in net loss of affiliate - (208,642) Minority interest in net loss of consolidated subsidiary 41,400 - Interest (expense) income, net 273,884 (40,460) Gain on sale of investment - - Other income (expense), net (4,862,522) 12,843 ------------------------------- Other expense, net (4,547,238) (308,259) ------------------------------- NET LOSS $(5,056,488) $(930,415) =============================== BASIC LOSS PER COMMON SHARE Net loss $(5,056,488) $(930,415) Less: dividends on convertible preferred stock (539,150) - Less: amortization of discount on convertible preferred stock (1,896,660) - ------------------------------- NET LOSS APPLICABLE TO COMMON SHARES $(7,492,298) $(930,415) =============================== NET LOSS PER COMMON SHARE $(.24) $(.07) =============================== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 30,914,485 12,786,279 =============================== SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
CASMYN CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) CONTINUED FOR THE SIX MONTHS ENDED MARCH 31, 1998 1997 ------------------------------- REVENUES: Precious metals $2,201,406 $1,497,151 Cost of production 1,424,910 1,423,430 ------------------------------- GROSS PROFIT 776,496 73,721 ------------------------------- COSTS AND EXPENSES: General and administrative expenses 1,167,247 1,080,323 Compensatory stock option expense - 83,085 Professional services 183,546 173,411 Depreciation, depletion and amortization 307,966 224,863 Mineral exploration expense 99,638 482,735 Mergers and acquisitions 59,185 193,340 ------------------------------- 1,817,582 2,237,757 ------------------------------- LOSS FROM OPERATIONS (1,041,086) (2,164,036) ------------------------------- OTHER INCOME (EXPENSE): Equity in net loss of affiliate - (557,710) Minority interest in net loss of consolidated subsidiary 81,543 - Interest (expense) income, net 575,553 (14,618) Gain on sale of investment - 126,000 Other income (expense), net (4,939,148) 14,257 ------------------------------- Other expense, net (4,282,052) (432,071) ------------------------------- NET LOSS $(5,323,138) $(2,596,107) =============================== BASIC LOSS PER COMMON SHARE Net loss $(5,323,138) $(2,596,107) Less: dividends on convertible preferred stock (1,225,575) - Less: amortization of discount on convertible preferred stock (4,065,253) - -------------------------------- NET LOSS APPLICABLE TO COMMON SHARES $(10,613,966) $(2,596,107) =============================== NET LOSS PER COMMON SHARE $(.48) $(.20) ================================ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 22,138,838 12,701,362 =============================== SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
CASMYN CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) 1998 1997 ------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(5,323,138) $(2,596,107) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation, depletion and amortization 307,966 224,863 Equity in net loss of affiliate - 557,710 Compensatory stock option expense - 83,085 Amortization of debt issue costs - 30,000 Gain on sale of investment - (126,000) Minority interest in net loss of consolidated subsidiary (81,543) - Other non-cash expense - 171,499 Increase in accounts receivable (299,779) (735,877) (Increase) decrease in inventories 45,982 (371,857) Decrease (increase) in prepaid expenses and other assets 56,882 108,947 Increase in accounts payable 227,243 155,339 Decrease in accrued liabilities (2,280,536) (307,892) Increase (decrease) in amounts due from related parties - 156,903 ------------------------------- Net cash used in operating activities (7,346,923) (2,649,387) ------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of assets - 900,000 Decrease in long-term deposits - 60,731 Investment in and advances to affiliates - (1,244,570) Proceeds from sale of marketable securities 161,558 - Purchase of property and equipment (2,485,392) (4,581,349) ------------------------------ Net cash used in investing activities (2,323,834) (4,865,188) ------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Private placement of common stock and units - 1,410,500 Issuance of common stock for exercise of stock options 2,797 201,540 Proceeds from line of credit 15,303 3,976,605 Decrease in restricted cash 5,074,659 - Purchase of treasury stock (2,037,157) - Repayments of long-term debt (58,418) (10,344) ------------------------------ Net cash provided by financing activities 2,997,184 5,578,301 ------------------------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (70,793) (1,054,176) ------------------------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (6,744,366) (2,990,450) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 18,185,515 4,046,194 ------------------------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $11,441,149 $1,055,744 ============================== (CONTINUED) SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
CASMYN CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1997 ---------------------------- 1998 1997 ---------------------------- CASH PAID FOR INTEREST $232,090 $ 83,658 ============================ NON-CASH INVESTING AND FINANCING ACTIVITIES: Issuance of common stock for services $ - $226,561 Issuance of common stock for payment of interest - 58,219 Conversion of preferred stock to common stock 3,906,600 - Issuance of preferred stock dividend 1,225,575 - Amortization of discount on convertible preferred stock 4,065,253 - Reduction of payable to joint venture and investment in joint venture - 623,000 - ----------------------------------------------------------------------------- CASMYN CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES The accompanying condensed consolidated financial statements are unaudited; however, in the opinion of management, such statements include all adjustments (which are of a normal, recurring nature) necessary for a fair statement of the results for the interim periods. The financial statements included herein have been prepared by Casmyn Corp. (the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures included herein are adequate to make the information not misleading. The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the Company's consolidated financial statements filed as part of the Company's September 30, 1997 Form 10-K. The Form 10-K should be read in conjunction with this quarterly report. INCOME (LOSS) PER SHARE The Company adopted the provisions of Statement of Financial Accounting Standards No. 128 ("SFAS 128") in the quarter ended December 31, 1997 and has calculated the basic loss per share information as prescribed by SFAS 128. The calculation of the diluted earnings per share has been omitted as the assumed conversion, exercise or contingent issuance of securities would have an antidilutive effect on earnings per share. RECENTLY ISSUED ACCOUNTING STANDARDS The FASB recently issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting Comprehensive Income, which is effective for fiscal years beginning after December 15, 1997. SFAS 130 establishes standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. The Company will adopt the new statement for its fiscal year beginning October 1, 1998, and does not anticipate that adoption will have a significant impact on its consolidated financial statements. Under the new statement the Company will report the change in the foreign currency translation adjustment as a component of comprehensive income. The FASB recently issued Statement of Financial Accounting Standard No. 131 ("SFAS 131"), Disclosure About Segments of an Enterprise and Related Information, which is also effective for fiscal years beginning after December 15, 1997. SFAS 131 establishes standards for segment reporting in the financial statements. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company will adopt the new statement for its fiscal year beginning October 1, 1998 and does not anticipate that providing required disclosures will result in significantly different information from that which is currently being disclosed. 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. FOREIGN CURRENCY TRANSLATION Prior to September 30, 1997, the functional currency of the Company's Zimbabwe operations had been the Zimbabwean dollar. Accordingly, balance sheet accounts were translated to US dollars using current exchange rates in effect at the balance sheet date while revenue and expense accounts were translated using the weighted average exchange rate during the reported period. The gains or losses resulting from such translation were recorded in the foreign currency translation adjustment account included as part of stockholders' equity. During the quarter ended December 31, 1997, the Zimbabwean currency experienced devaluation in excess of 40%. This level of devaluation is expected to have significant impacts on Zimbabwe's annual rate of inflation such that the country may be classified as highly inflationary. As a result, the US dollar has been adopted as the functional currency for the Company's Zimbabwe operations, effective October 1, 1997. Pre-existing non-monetary assets and liabilities are measured using exchange rates in effect as at October 1, 1997 and any gains or losses from holding monetary assets and liabilities are reflected in the statement of operations for the period. Amortization and charges related to non-monetary items are recorded using exchange rates at the time such items arose. Other Revenue and expense accounts are continued to be translated using the weighted average exchange rate during the reported period. 2. RESTRICTED CASH As at year end September 30, 1997, the Company had $5,074,659 of restricted cash (including accrued interest of $74,659) which was deposited with two financial institutions under the Company's guarantee of short term loans to unrelated third parties. Under agreements with the unrelated third parties, the loans were secured by certain investment accounts, which contained common shares of the Company. During the three months ended March 31, 1998, the significant decline in the Company's share price had created an impairment in the value of the security. As a result, the lenders of the loans proceeded to call the guarantee provided by the Company resulting in a loss of $4,978,424 to the Company. 3. COMMITMENTS AND CONTINGENCIES On February 16, 1998, the Company entered into an agreement with Salomon Brothers Inc. and Smith Barney Inc. ( collectively, "Salomon Smith Barney") to render certain financial advisory and investment banking services to the Company. Included in the services to be provided was advice on strategic alternatives and implementation of the proposed restructuring of the First Convertible Preferred Stock. The Company paid a retainer fee of $150,000 on execution of the agreement and must pay additional monthly fees of $40,000. In addition, the Company may be liable for a success fee of $1,000,000 plus 7.5% of the post restructuring if the Total Enterprise Value of the Company is between $30,000,000 and $75,000,000 and 10% of the Total Enterprise Value in excess of $75,000,000. ; and an additional $1,000,000 if the average closing stock price, before adjusting for stock splits is greater than $1.00 per share plus $100,000 for every $0.25 the per share stock price exceeds $1.00. The Total Enterprise Value of the Company referred to in the previous paragraph is a defined term in the agreement with Salomon Smith Barney which means the market values of all sources of capital used to fund the assets of the Company including, but not limited to, all forms of debt, preferred securities, warrants, stock purchase rights, convertible securities, minority interest, all forms of equity including common equity and dividends or distributions paid after January 31, 1998, less cash. The details of the agreement are included in Exhibit 10.12. 3. SUMMARY OF STOCKHOLDERS' EQUITY TRANSACTIONS (Unaudited) During the six months ended March 31, 1998, the Company has recorded the following activity in its stockholders' equity accounts:
Number of Number of Common Common Preferred Description Shares Stock Shares Balances September 30, 1997 13,376,714 $ 535,069 1,406,962 Exercise of stock options 69,923 2,797 - Preferred stock dividend - - 49,023 Conversion of preferred shares 98,512,982 3,940,519 (339,196) Conversion discount on convertible preferred stock - - - Purchase of treasury stock - - - Foreign currency translation adjustment - - - Net loss - - - -------------------------------------- Balances at March 31, 1998 111,959,619 $ 4,478,385 1,116,789 ====================================== 3. SUMMARY OF STOCKHOLDERS' EQUITY TRANSACTIONS CONTINUED (Unaudited) During the six months ended March 31, 1998, the Company has recorded the following activity in its stockholders' equity accounts:
Additional Preferred Paid-in Accumulated Description Stock Capital Deficit Balances September 30, 1997 $ 140,697 $66,486,227 $(28,453,840) Exercise of stock options - - - Preferred stock dividend 4,902 1,220,673 (1,225,575) Conversion of preferred shares ( 33,919) ( 3,906,600) - Conversion discount on convertible preferred stock - 4,065,253 (4,065,253) Purchase of treasury stock - - - Foreign currency translation adjustment - - - Net loss - - (5,323,138) ----------------------------------------- Balances at March 31, 1998 $ 111,680 $67,865,553 $(39,067,806) =========================================
3. SUMMARY OF STOCKHOLDERS' EQUITY TRANSACTIONS CONTINUED (Unaudited) During the six months ended March 31, 1998, the Company has recorded the following activity in its stockholders' equity accounts:
Foreign Currency Total Translation Treasury Shareholders' Descprition Adjustment Stock Equity Balances September 30, 1997 $(3,328,954) $ (907,435) $ 34,471,764 Exercise of stock options - - 2,797 Preferred stock dividend - - - Conversion of preferred shares - - - Conversion discount on convertible preferred stock - - - Purchase of treasury stock - (2,037,157) (2,037,157) Foreign currency translation adjustment (70,793) - (70,793) Net loss - (5,323,138) ---------------------------------------- Balances at March 31, 1998 $(3,399,747) $(2,944,592) $ 27,043,473 ========================================
4. SUBSEQUENT EVENTS (i) On April 2, 1998, the Company received a notice from Nasdaq that its Common Stock is subject to delisting because the current stock price is below the minimum price of $1.00. The Company has until July 1, 1998, to achieve compliance. The Company intends to hold a special meeting of the Common Shareholders to obtain approval for a reverse split (see (iii) below). (ii) On April 23, 1998, the Company received a notice from Nasdaq that its Common Stock is subject to delisting because it has failed to maintain the minimum number of active market makers for trading of its shares. The Company was provided a thirty-day (30) period to achieve compliance. (iii) On March 11, 1998 and March 20, 1998 the Company disclosed the proposed and subsequently revised amendment to the terms of the preferred instruments as contained in a proxy statement to the preferred shareholders.The majority of the preferred shareholders did not approve the proposed amendment in a special shareholders meeting held on March 31, 1998. ( See Forms 8-K dated March 11, 1998 and March 20, 1998) On May 6, 1998, the Company presented a new proposal to the Company's Convertible Preferred Shareholders seeking approval for a revised restructuring proposal as follows: (1) To establish a fixed conversion price of $0.04 per Common Share for all conversion notices received after the proposal is approved by the Preferred Shareholders; (2) To grant to the Preferred Shareholders voting rights on an as converted basis, subject to approval by the Company's Common Shareholders; and (3) To permit the Company to redeem the Preferred Stock at the following redemption prices plus accrued and unpaid dividends, if redeemed during the twelve months beginning January 1, 1998 - $25; 1999 - $32.50; 2000-$35; 2001-$40; and $40 per share thereafter. If the Preferred Shareholders approve the restructuring proposal, the Company intends to send out a proxy statement to its Common Share- holders seeking their approval of the above voting rights for the Preferred Shareholders and a fifty-to-one reverse split of the Common Stock (subject to adjustment on approval of the Board of Directors). The fixed conversion price will only remain in effect if the Common Shareholders approval is received within 60 days of the Preferred Shareholders approval. Two of the present members of the Board of Directors will resign if the restructuring proposal is approved at the meeting of the Preferred Shareholders. The two remaining members will then elect three persons designated by the Preferred Shareholders as Directors of the Company. Thus, the majority of the Board will be made up of persons designated by the Preferred Shareholders. The three new directors will resign immediately should the Common Shareholders not approve the reverse split of the Common Stock and the authorization for voting rights for the Preferred Shareholders. (iv) As of May 11, 1998, the Company has reached an agreement in principle, subject to documentation, related to the sale of its equity interest in Casmyn International Inc.(CII), a 55% owned subsidiary, to WaterPur International Inc. ("WaterPur"). CII has been involved with the development of business opportunities for the Company in the Commonwealth of Independent States. The Company is related to WaterPur through certain common directors and officers. Under the terms of the sale arrangement, the Company will receive gross proceeds of $55,000, which will be paid by WaterPur issuing cash or an equivalent number of common shares at the time the transaction is concluded. WaterPur's common stock is traded publicly in the over-the-counter market and is listed on the Bulletin Board maintained by Nasdaq under the symbol "WPUR" (v) As of May 11, 1998, the Company had an aggregate 141,543,350 Common shares issued and outstanding compared to 111,959,619 Common shares as at March 31, 1998. The additional 29,583,731 Common Shares issued subsequent to the six months ended March 31, 1998, were due to the conversion of 18,892 shares of Convertible Preferred Stock. (vi) On April 22, 1998, the Company renewed its short term credit facility. The $5,000,000 facility is fully utilized and bears interest at LIBOR plus 2.25%. After twelve months from the date of initial drawdown, the borrowings under the facility are repayable upon demand. The terms of the facility are the same as in the prior year except for the security provided by the Company is a cash sum of 120% of the facility which is held in an account under a pledge agreement and supporting security agreement. The Bank will release the previous security relating to the Company's assets in Zimbabwe. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements and information contained in this Report constitute "forward looking statements" within the meaning of the United States Federal securities laws. Such statements involve risks and uncertainties which may cause actual results, performance, or achievements of the Company to be materially different from results, performance, or achievements implied by such forward looking statements. Factors which could affect the Company's financial results are described below and in the Company's latest Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended September 30, 1997. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof. The Company undertakes no obligation to release the result of any revisions to these forward looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events. OVERVIEW The business activities of the Company center around mineral resource development. The primary focus to date has been the acquisition and exploration of precious mineral resource properties in Zimbabwe, Zambia and South Africa. The Company has acquired certain mineral properties in South Africa, a prospecting license in Zambia and is presently conducting mining operations at the Zimbabwe mining properties. In response to the recent decline in gold prices, the Board of Directors had adopted a policy to curtail non-mining activities until an improvement in gold prices occurs. The overall objective is to preserve the Company's cash resources and capital base while maintaining its gold production at a sustainable profit. The most immediate effects of this policy are significant reduction in such expenses as exploration and mergers & acquisitions (M&A). In addition, the Company has reached an agreement in principle, subject to documentation, related to the sale of its equity interest in Casmyn International Inc., ("CII") a 55% owned subsidiary, to WaterPur International Inc. ("WaterPur"). The primary focus of CII is to pursue projects in mining and water infrastructure development in the Commonwealth of Independent States ("CIS"). RESULTS OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1998 COMPARED TO THE SIX MONTHS ENDED MARCH 31, 1997 Revenues for the six months ended March 31, 1998 were $2,201,406 representing sales of approximately 7,395 ounces of gold produced in Zimbabwe compared to $1,497,151 for the six month period ended March 31, 1997 representing the sale of approximately 4,300 ounces of gold. The increase in gold production during the current period over the same period in 1997 was consistent with the Company's overall plan for production ramp-up. The Company anticipates continued increase in its gold output for the remainder of the fiscal year. The average selling price of gold for the six months ended March 31, 1998, was $298 per ounce compared to an average price of $348 per ounce during the six months ended March 31, 1997. The cost of production incurred for mineral operations amounted to $1,424,910 (or approximately $193 per ounce of gold produced) for the six months ended March 31, 1998 compared to $1,423,430 (or approximately $331 per ounce of gold produced) for the same period ended March 31, 1997. The significantly lower average cost of production during the current period reflects the Company's decision, in response to the recent decline in gold prices, to extract gold from surface ores and tailings that require lower processing costs. The Company believes this strategy will allow it to continue its mining operations with profitability in the foreseeable future. General and administrative (G&A) expenses were $1,167,247 for the six months ended March 31, 1998, compared to $1,080,323 for the six months ended March 31, 1997, an increase of $86,924. The increase is mainly attributable to activities related to Casmyn International Inc., (CII) a 55% owned subsidiary, which was formed during 1997 to explore business opportunities in the Commonwealth of Independent States (CIS). The increase of $179,336 in CII was due primarily to travel and salary expenses incurred for the newly recruited staff in the CIS during the six-month period ended March 31, 1998. These expenses are not expected to recur in future quarters due to the sale of the Company's interest in CII. In addition, investor relations expense increased $46,309 during the six months ended March 31, 1998 compared to the six months ended March 31, 1997 due to more frequent inquiries from current and potential investors during the period. Salaries and wages increased $52,815 during the six months ended March 31, 1998 compared to the same period in 1997 due to adjustments to salary levels. On the other hand, certain expenses have shown significant decreases, partly due to the Company's adopted policy to reduce costs. Travel expenses decreased $116,616 during the six months ended March 31, 1998 compared to the same period ended March 31, 1997. Travel expenses during the six months ended March 31, 1997, included a tour of the Zimbabwe mining operations for a group of twelve mining analysts, as part of the due diligence process for the preparation of independent research reports. Insurance expense decreased $35,448 during the current period due to consolidation of the Company's world-wide insurance coverage. The Company continues in its efforts to reduce G & A costs in the future. There was no compensatory stock option expense for the six months ended March 31, 1998, compared to $83,085 for the six months ended March 31, 1997. Compensatory stock options, which are granted to senior staff, are vested over a predetermined multi-years period. There had been no options granted or vested during the current period. Professional services expenses, consisting of accounting, audit and tax and legal expenses increased $10,135 in the six months ended March 31, 1998, compared to the six months ended March 31, 1997, mainly due to increased legal fees. Mineral exploration expenses decreased $383,097 during the six months ended March 31, 1998, compared to the same period ended March 31, 1997. In addition, expenses related to mergers and acquisitions decreased $134,155 during the six months ended March 31, 1998 compared to the same period ended March 31, 1997. These significant decreases reflect the Board's decision to curtail non-mining activities until an improvement in gold prices occurs. With respect to non-operating activities, the Company no longer accrued a loss from WaterPur as a result of divesting its debt and equity holdings in WaterPur at September 30, 1997. The Company consolidates the financial results of Casmyn International Inc., a 55% owned subsidiary, which incurred a loss of $181,207 for the six months ended March 31, 1998. Accordingly, minority interest's share of the Subsidiary's loss amounted to $81,543 (or 45%). During the six months ended March 31, 1998, the Company earned investment income of $575,553 from its cash and marketable securities balances compared to an interest expense of $14,618 during the same period in 1997. Included in the Other Income (Expense) account was a restricted cash drawdown for a loan guarantee loss of $4,978,424. The loss related to a guarantee provided by the Company for certain unrelated third parties' short term loans. The loans were advanced to the third parties in May 1997 by two independent financial institutions and were secured by certain investment accounts, which contained common shares of the Company. During the three months ended March 31, 1998, the significant decline in the Company's share price had created an impairment in the value of the security. As a result, the lenders of the loans proceeded to call the guarantee provided by the Company resulting in a loss to the Company. THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1997 Revenues for the three months ended March 31, 1998 were $1,224,376 representing the sale of approximately 4,038 ounces of gold produced in Zimbabwe compared to $874,645 for the three month period ended March 31, 1997 representing the sale of approximately 2,500 ounces of gold produced. As discussed above, the increase in gold output was the result of the Company's production ramp-up program. The average selling price of gold for the three months ended March 31, 1998 was $303 per ounce compared to an average selling price of $350 per ounce in the three months ended March 31, 1997. Costs associated with mineral operations amounted to $775,724 (or approximately $192 per ounce of gold) for the three months ended March 31, 1998 compared to $609,584 (or approximately $244 per ounce of gold) for the same period in 1997. In addition, on a three month basis, the cost of mineral operations increased $166,140 (or 27%) while gold sales increased $349,731 (or 40%). The comparison highlights the result of the Company's decision to focus on extracting gold from surface ores and tailings that require lower processing costs. General and administrative expenses (G&A) were $630,908 for the three months ended March 31, 1998, compared to $512,352 for the three months ended March 31, 1997, an increase of $118,556. The increase is partially due to G&A expenses of $92,000 incurred during the three month period ended March 31, 1998, in Casmyn International Inc., (CII) a 55% owned subsidiary. The increase related to travel and salary expenses for the new staff at the Subsidiary. These expenses are not expected to recur in future quarters due to the sale of the Company's interest in CII. Other items contributed to the overall increase in G&A expenses for the current period include: salaries and wages which increased $125,758 due to adjustments to salary levels; and investor relations expenses, which increased $18,750 due to the increased number of queries from current and potential investors. On the other hand, certain G&A items decreased during the three months ended March 31, 1998, compared to the same period ended March 31, 1997. Travel expenses decreased $81,723 during the current period compared to the same period in 1997 due to a reduction in business development activities. In addition, insurance expense decreased $28,723 as a result of savings generated from coverage consolidation. Professional services expenses, consisting of accounting, audit and tax and legal expenses increased $35,891 in the three months ended March 31, 1998 compared to the three months ended March 31, 1997 mostly due to higher legal advisory expenses. Costs associated with mineral exploration and mergers & acquisitions decreased $47,240 and $66,880, respectively, during the three months ended March 31, 1998, compared to the same period in 1997. As discussed previously, the decreases were due to the adopted policy of curtailing costs in non-mining activities until an improvement in gold prices occurs. With respect to non-operating activities for the three months ended March 31, 1998, minority interest share of Casmyn International Inc.'s loss amounted to $41,400, representing a 45% share of the total loss of $92,000 incurred by the Subsidiary. The Company earned investment income of $273,884 from its cash and marketable securities balances compared to an interest expense of $40,460 during the same period in 1997. Included in the Other Income (Expense) account was a restricted cash drawdown for a loan guarantee loss of $4,978,424 (as described in the previous section). CAPITAL RESOURCES AND LIQUIDITY At March 31, 1998, the Company had a net working capital balance of $7,926,422. Management anticipates the net use of cash will diminish in the Zimbabwean operating activities as the gold operations approaches profitability. As at March 31, 1998, the Company spent approximately $2.5 million on the current phase of expansion and anticipates spending approximately $1.5 million during the remainder of the fiscal year ended September 30, 1998, on capital expenditures related to refurbishment and construction of the mining and mineral processing facilities, as well as on projects related to power supply, water supply and housing. The Company will use current cash and cash equivalents to fund other on-going projects in the short term and anticipates that it will be able to secure additional debt and/or equity financing to fund longer term projects although there can be no assurance that any such financing will be secured or the amounts thereof. As discussed previously, the Company has adopted a policy to curtail non-mining activities until improvements in gold prices occur. As a result, future cash requirements for such activities as exploration, mergers & acquisitions and travel expenses are expected to be lower than in prior periods. With respect to non-recurring use of cash, the Company used $2,037,157 to purchase 405,500 shares of its common stock and used $4,978,424 in connection with a restricted cash drawdown for a loan guarantee loss during the six months ended March 31, 1998. Net Cash Used in Operating Activities. Net cash used in operating activities was $7,346,923 for the six months ended March 31, 1998. The amount included a restricted cash drawdown for a loan guarantee loss of $4,978,424 and was net of a charge of $226,423 related to such non-cash items as depreciation, depletion & amortization. Use of cash as a result of changes in working capital accounts during the current period included: $299,779, due to an increase in the accounts receivable balance in Zimbabwe; and $2,280,536, primarily due to settlements of certain marketable securities purchased at last year end. Other working capital accounts provided a total cash source of $330,107, majority of which was due to increase in accounts payable balance in Zimbabwe during the period. Net Cash Used in Investing Activities. Net cash used in investing activities was $2,323,834 for the six months ended March 31, 1998 due to the purchase of property and equipment of $2,485,392 primarily at the Zimbabwe mining properties. In addition, the Company received proceeds of $161,558 from sale of marketable securities as part of its on-going portfolio investment activities. Net Cash Provided by Financing Activities. Net cash provided by financing activities was $2,997,184 for the six months ended March 31, 1998. The Company received $5,074,659 from the release of the restricted cash account, which was set up as collateral for its guarantee in connection with certain unrelated third parties' loans. As discussed previously, the Company recorded a corresponding restricted cash drawdown for a loan guarantee loss of $4,978,424 during the current period. In addition, the Company used $2,037,157 to buy back its common shares during the first three months in 1998. OTHER On February 16, 1998 the Company entered into an agreement with Salomon Brothers Inc. and Smith Barney Inc. ( collectively, "Salomon Smith Barney") to render certain financial advisory and investment banking services to the Company. Included in the services to be provided was advice on strategic alternatives and implementation of the proposed restructuring of the First Convertible Preferred Stock. The Company paid a retainer fee of $150,000 on execution of the agreement and must pay additional monthly fees of $40,000. In addition, the Company may be liable for a success fee of $1,000,000 plus 7.5% of the post restructuring if the Total Enterprise Value of the Company is between $30,000,000 and $75,000,000 and 10% of the Total Enterprise Value in excess of $75,000,000. An additional $1,000,000 if the average closing stock price, before adjusting for stock splits is greater than $1.00 per share plus $100,000 for every $0.25 the per share stock price exceeds $1.00. The Total Enterprise Value of the Company referred to in the previous paragraph is a defined term in the agreement with Salomon Smith Barney which means the market values of all sources of capital used to fund the assets of the Company including, but not limited to, all forms of debt, preferred securities, warrants, stock purchase rights, convertible securities, minority interest, all forms of equity including common equity and dividends or distributions paid after January 31, 1998, less cash. The details of the agreement are included in Exhibit 10.12. As of May 11, 1998, the Company had an aggregate 141,543,350 Common shares issued and outstanding compared to 111,959,619 Common shares as at March 31, 1998. The additional 29,583,731 Common Shares issued subsequent to the six months ended March 31, 1998, were due to the conversion of 18,892 shares of Convertible Preferred Stock. On April 2, 1998, the Company received a notice from Nasdaq that its Common Stock is subject to delisting because the current stock price is below the minimum price of $1.00. The Company has until July 1, 1998, to achieve compliance. The Company intends to hold a special meeting of the Common Shareholders to obtain approval for a reverse split (see Restructuring Proposal below). On April 23, 1998, the Company received a notice from Nasdaq that its Common Stock is subject to delisting because it has failed to maintain the minimum number of active market makers for trading of its shares. The Company was provided a thirty-day (30) period to achieve compliance. Restructuring Proposal On March 11, 1998 and March 20, 1998 the Company disclosed the proposed and subsequently revised amendment to the terms of the preferred instruments as contained in a proxy statement to the preferred shareholders.The majority of the preferred shareholders did not approve the proposed amendment in a special shareholders meeting held on March 31, 1998. ( See Forms 8-K dated March 11, 1998 and March 20, 1998) On May 6, 1998, the Company presented a new proposal to the Company's Convertible Preferred Shareholders seeking approval for a revised restructuring proposal as follows: (1) To establish a fixed conversion price of $0.04 per Common Share for all conversion notices received after the proposal is approved by the Preferred Shareholders; (2) To grant to the Preferred Shareholders voting rights on an as converted basis, subject to approval by the Company's Common Shareholders; and (3) To permit the Company to redeem the Preferred Stock at the following redemption prices plus accrued and unpaid dividends, if redeemed during the twelve months beginning January 1, 1998 - $25; 1999 - $32.50; 2000-$35; 2001-$40; and $40 per share thereafter. If the Preferred Shareholders approve the restructuring proposal, the Company intends to send out a proxy statement to its Common Shareholders seeking their approval of the above voting rights for the Preferred Shareholders and a fifty-to-one reverse split of the Common Stock (subject to adjustment on approval of the Board of Directors). The fixed conversion price will only remain in effect if the Common Shareholders approval is received within 60 days of the Preferred Shareholders approval. Two of the present members of the Board of Directors will resign if the restructuring proposal is approved at the meeting of the Preferred Shareholders. The two remaining members will then elect three persons designated by the Preferred Shareholders as Directors of the Company. Thus, the majority of the Board will be made up of persons designated by the Preferred Shareholders. The three new directors will resign immediately should the Common Shareholders not approve the reverse split of the Common Stock and the authorization for voting rights for the Preferred Shareholders. Sale of Subsidiary As of May 11, 1998, the Company has reached an agreement in principle, subject to documentation related to the sale of its equity interest in Casmyn International Inc., a 55% owned subsidiary, to WaterPur International Inc. ("WaterPur"). CII has been involved with the development of business opportunities for the Company in the Commonwealth of Independent States. The Company is related to WaterPur through certain common directors and officers. Under the terms of the sale arrangement, the Company will receive gross proceeds of $55,000, which will be paid by WaterPur issuing cash or an equivalent number of common shares at the time the transaction is concluded. WaterPur's common stock is traded publicly in the over-the-counter market and is listed on the Bulletin Board maintained by Nasdaq under the symbol "WPUR". Renewal of Credit Facility On April 22, 1998, the Company renewed its short term credit facility. The $5,000,000 facility is fully utilized and bears interest at LIBOR plus 2.25%. After twelve months from the date of initial drawdown, the borrowings under the facility are repayable upon demand. The terms of the facility are the same as in the prior year except for the security provided by the Company is a cash sum of 120% of the facility which is held in an account under a pledge agreement and supporting security agreement. The Bank will release the previous security relating to the Company's assets in Zimbabwe. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits Exhibit 10.12 Agreement with Salomon Brothers Inc. and Smith Barney Inc. and Casmyn Corp. Exhibit 27 -- FINANCIAL DATA SCHEDULE (EDGAR only) B. Forms 8-K 1. The Company filed Form 8-K on March 11, 1998 disclosing details of the proposed amendment to the terms of the preferred instruments as contained in a proxy statement to the preferred shareholders. The proposal established, among other things, a fixed range of conversion prices for conversion of the remaining preferred shares. The proxy statement was revised (see below) prior to the scheduled special shareholders meeting. 2. The Company filed Form 8-K on March 20, 1998 revising the details of the proposed amendment to the terms of the preferred instruments as contained in a proxy statement to the preferred shareholders. The proposal established, among other things, a fixed conversion price for conversion of the remaining preferred shares. A majority of the preferred shareholders did not approve the proposed amendment in a special shareholders meeting held on March 30, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Casmyn Corp. /s/ Debbie Barfurth-Wood May 11, 1998 By _____________________________ Debbie Barfurth-Wood, Controller (Duly authorized and Principal Accounting Officer) EX-10.12 2 SALOMON SMITH BARNEY February 16, 1998 Casmyn Corp. Suite 1800, 1500 West Georgia Street Vancouver, B.C. Canada V6G 2Z6 Attention: Ladies and Gentlemen: The purpose of this letter is to confirm the engagement of Salomon Brothers Inc. and Smith Barney Inc. (collectively, "Salomon Smith Barney") by Casmyn Corp. (the "Company") on an exclusive basis to render certain financial advisory and investment banking services to the Company. Section 1. Services to be Rendered. Salomon Smith Barney will perform such of the following financial advisory and investment banking services as the Company may reasonably request: (a) Salomon Smith Barney will familiarize itself to the extent it deems appropriate and feasible with the business, operations, properties, financial condition and prospects of the Company, it being understood that Salomon Smith Barney shall in the course of such familiarization, rely entirely upon publicly available information and such other information as may be supplied by the Company, without independent investigation; (b) Salomon Smith Barney will advise and assist the Company in identifying and/or evaluating various strategic or financial alternatives (each, an "Alternative Transaction") that may be available to the Company to enhance shareholder values, including, without limitation, an acquisition of all or a significant portion of the assets or equity securities of another corporation or other business entity, a sale (whether or not the proposal therefor is solicited or unsolicited) of the Company or a significant portion of its equity securities, assets or businesses to one or more third parties, a recapitalization (including a negotiated transaction with all or a majority of the preferred security holders) or restructuring of the Company (including divestitures, spinoffs, split-offs and -2 similar transactions), a public or private sale of additional equity or debt securities of the Company, repurchases by the Company of its common stock or other securities, a liquidation of the Company, or such other form of transaction that Salomon Smith Barney, after completing the familiarization process provided for in Section 1(a) hereof, believes may be of possible interest to the Company; (c) If the Company determines to consider or undertake one or more Alternative Transactions, Salomon Smith Barney will advise and assist the Company in considering the desirability of undertaking such Alternative Transaction(s) and, if the Company believes such Alternative Transaction(s) to be desirable, in effecting such Alternative Transaction(s); and (d) Salomon Smith Barney will render such other financial advisory and investment banking services as may from time to time be agreed upon in writing by Salomon Smith Barney and the Company. Section 2. Fees The Company shall pay to Salomon Smith Barney for its services hereunder the following cash fees (refer also to the Illustrative Fee Schedule on page 7): Retainer Fees (a) $150,000, payable promptly following the Company's execution of this letter agreement; plus (b) additional monthly fees of $40,000, payable on each monthly anniversary of this letter agreement of Salomon Smith Barney's engagement hereunder; plus Additional Fees (c) additional fees, customary under the circumstances, as the Company and Salomon Smith Barney may from time to time agree upon in writing, with respect to any actual or proposed Alternative Transaction; plus Success Fees (a) if the majority of the Board of Directors of the Company agree to any Alternative Transaction other than a standstill agreement of 12 months or less, a success fee equal to: (i) $1,000,000 plus 75% of the post restructuring Total Enterprise Value (the equity portion of which shall be based upon the 10 business day average closing price of the stock commencing 10 business days after the closing of -3- the restructuring or if there is no market for the stock, fair value as agreed by both parties) of the company between $30,000,000 and $75,000,000 and 10% of the post restructuring Total Enterprise Value in excess of $75,000,000; and (ii) $1,000,000 if the average closing stock price, before adjusting for any stock splits effected after today, post restructuring for the period commencing 10 business days after the closing of the restructuring and ending 10 business days thereafter and after adding any distributions or dividends paid subsequent to January 31, 1998, is greater than $1.00 per share plus $100,000 for every $0.25 the per share stock price exceeds $1.00. Fee Credits (e) Up to the full amount of the Retainer Fees will be credited against all other fees payable subject to the total fees payable being not less than $3,000,000. Form of Payments (f) The first $2,500,000 of fees payable to Salomon Smith Barney will be payable in cash. The balance of fees payable, if any, will be paid in cash, or to the extent permissible, at the Company's option, in the same kind and amount of consideration as the consideration received by accepting preferred shareholders. For purposes hereof, the term Total Enterprise Value shall mean the market values of all sources of capital used to fund the assets of the company including, but not limited to, all forms of debt, preferred securities, warrants, stock purchase rights, convertible securities, minority interest, all forms of equity including common equity, and dividends or distributions paid after January 31, 1998, less cash. In the event that there is no market in a given security the value of such security shall be determined by Salomon Smith Barney and the Company in good faith. Section 3. Expenses. In addition to any fees that may be payable to Salomon Smith Barney hereunder and regardless of whether any Alternative Transaction is proposed or consummated, the Company hereby agrees, from time to time upon request, to reimburse Salomon Smith Barney for all reasonable fees and disbursements of Salomon Smith Barney's counsel, mining consultants and all of Salomon Smith Barney's reasonable travel and other out-of-pocket expenses incurred in connection with any actual or proposed transaction or otherwise arising out of Salomon Smith Barney's engagement hereunder. -4- Section 4. Indemnity. Salomon Smith Barney and the Company have entered into a separate letter agreement, dated the date hereof, providing for the indemnification of Salomon Smith Barney by the Company in connection with Salomon Smith Barney's engagement hereunder. Section 5 Termination of Engagement; Etc. Salomon Smith Barney's engagement hereunder may be terminated by either the Company or Salomon Smith Barney at any time, with or without cause, upon written advice to that effect to the other party; provided, however, that Salomon Smith Barney will be entitled to its full fees under Section 2 hereof in the event that at any time prior to the expiration of two years after such termination an Alternative Transaction is consummated; and provided, further, that the provisions of this Section 5 and Sections 3, 4 and 6 hereof shall survive any such termination. Section 6. Miscellaneous. (a) THIS LETTER AGREEMENT AND THE RELATED INDEMNIFICATION AGREEMENT REFERRED TO ABOVE SHALL BE DEEMED MADE IN NEW YORK. SUCH AGREEMENTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO SUCH STATE'S RULES CONCERNING CONFLICTS OF LAWS. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR PROCEEDING RELATED TO OR ARISING OUT OF THIS ENGAGEMENT, OR ANY TRANSACTION OR CONDUCT IN CONNECTION HEREWITH, IS WAIVED. (b) The Company expressly acknowledges that all opinions and advice (written or oral) given by Salomon Smith Barney to the Company in connection with Salomon Smith Barney's engagement are intended solely for the benefit and use of the Company (including its management, directors and attorneys) in considering the transaction to which they relate and the Company agrees that no such opinion or advice shall be used for any other purpose or reproduced, disseminated, quoted or referred to at any time, in any manner or for any purpose, nor shall any public references to Salomon Smith Barney be made by the Company (or such persons), without the prior written consent of Salomon Smith Barney, which consent shall not be unreasonably withheld. (c) The Company expressly acknowledges that Salomon Smith Barney has been retained solely as an advisor to the Company, and not as an advisor to or agent of any other person, and that the Company's engagement of Salomon Smith Barney is not intended to confer rights upon any persons not a party hereto (including shareholders, -5- employees or creditors of the Company) as against Salomon Smith Barney, Salomon Smith Barney's affiliates or their respective directors, officers, agents and employees. -6 Please confirm that the foregoing is in accordance with your understandings and agreements with Salomon Smith Barney by signing and returning to Salomon Smith Barney the duplicate of this letter enclosed herewith. Very truly yours, SALOMON BROTHERS INC. SMITH BARNEY INC. By: SMITH BARNEY INC. By _____/s/ Rene J. Robichaud____ Rene J. Robichaud Managing Director ACCEPTED AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN: CASMYN CORP. By ___/s/ Al-Karim Haji_______________ Al-Karim Haji Director of Finance -7- ILLUSTRATIVE FEE SCHEDULE
Total Retainer Fees -------------- Share Enterprise Price Value (8) Up Front Monthly (1) - ------------------- ------------ -------------- ---------- U5$0.250 *30,000,000 $ 150,000 $ 240,000 0.375 32,500,000 150,000 240,000 0.500 35,000,000 150,000 240,000 0.625 37,500,000 150,000 240,000 0.750 40,000,000 150,000 240,000 0.875 42,500,000 150,000 240,000 1.000 45,000,000 150,000 240,000 1.125 47,500,000 150,000 240,000 1.250 50,000,000 150,000 240,000 1.750 60,000,000 150,000 240,000 2.250 70,000,000 150,000 240,000 2.750 80,000,000 150,000 240,000 3.250 90,000,000 150,000 240,000 3.750 100,000,000 150,000 240,000
ILLUSTRATIVE FEE SCHEDULE CONTINUED Success Fees Retainer ------------ Transaction Share Price Fees Fees Fees (2) Bonus (3) Total Credited (4) Payable - ----------------------------------------------------------------- 1,000,000 $ 0 $1,390,000 $ 0 $1,390,000 1,187,500 0 1,577,500 0 1,577,500 1,375,000 0 1,765,000 0 1,765,000 1,562,500 0 1,952,500 0 1,952,500 1,750,000 0 2,140,000 0 2,140,000 1,937,500 0 2,327,500 0 2,327,500 2,125,000 1,000,000 3,515,000 390,000 3,125,000 2,312,500 1,000,000 3,702,500 390,000 3.312,500 2,500,000 1,100,000 3,990,000 390,000 3,600,000 3,250,000 1,300,000 4,940,000 390,000 4,550,000 4,000,000 1,500,000 5,890,000 390,000 5,500,000 4,875,000 1,700,000 6,965,000 390,000 6,575,000 5,875,000 1,900,000 8,165,000 390,000 7,775,000 6,875,000 2,100,000 9,365,000 390,000 8,975,000
(1) Illustrative monthly fees of $40,000 for 6 months. (2) $1,000,000 plus 7.5% of the post restructuring Total Enterprise Value (5) of the Company between $30,000,000 and $75,000,000 and 10.0% of the Total Enterprise Value (5) in excess of $75,000,000. (3) $1,000,000 if the Average Stock Price (6) is greater than $1.00 per share plus $100,000 for every $0.25 the per share stock price exceeds $1.00. (4) Up to the full amount of the Retainer Fees will be credited against all other fees payable subject to the total fees payable being not less than $3,000,000. (5) Total Enterprise Value shall mean the market value of all sources of capital used to fund the assets of the Company including, but not limited to, all forms of debt, preferred securities, warrants, stock purchase rights, convertible securities, minority interest, all forms of equity including common equity, less cash; the common equity portion of which is based on the Average Stock Price(6). In the event that there is no market in a given security the value of such security shall be determined by Salomon Smith Barney and the Company in good faith. (6) Average Stock Price shall mean the average closing of the restructuring and ending 10 business days thereafter and after adding any distributions or dividends paid subsequent to January 31, 1998. SALOMON SMITH BARNEY SALOMON SMITH BARNEY SEVEN WORLD TRADE CENTER February 16,1998 NEW YORK NEW YORK 10048 Gentlemen: In connection with the engagement of Salomon Brothers Inc. and Smith Barney Inc. (collectively, "Salomon Smith Barney") to assist us in identifying and/or evaluating various strategic or financial alternatives that may be available to Casmyn Corp. to enhance shareholder values, including modifications or future additions to such engagement and related activities prior to this date, we agree that we will indemnify and hold harmless you and your affiliates, any director, officer, agent or employee of you or any of your affiliates and each other person, if any, controlling you or any of your affiliates (hereinafter collectively referred to as "you" and "your"), to the full extent lawful, from and against, and that you shall have no liability to us or our owners, parents, creditors or security holders for, any losses, expenses, claims or proceedings including actions brought by us or on our behalf (hereinafter collectively referred to as "losses"), (i) related to or arising out of (A) oral or written information provided by us, our employees or our other agents, with either we or you provide to any actual or potential buyers, sellers, investors or offerees, or (B) other action or failure to act by us, our employees or our other agents or by you at our request or with our consent, or (ii) otherwise related to or arising out of such engagement or any transaction or conduct in connection therewith except that this clause (ii) shall not apply with respect to any losses that are finally judicially determined to have resulted primarily from your bad faith or gross negligence. In the event that the foregoing indemnity is unavailable to you for any reason, we agree to contribute to any losses related to or arising out of such engagement or any transaction or conduct in connection therewith. For such losses referred to in clause (i) of the preceding paragraph, each of us shall contribute in such proportion as is appropriate to reflect the relative benefits received (or anticipated to be received) by you and by us from the actual or proposed transaction giving rise to such engagement; provided, however, that you shall not be responsible for any amounts in excess of the amount of the benefits received (or anticipated to be received) by you. For any other losses, or for losses referred to in clause (ii) if the allocation provided by the immediately preceding sentence is unavailable for any reason, each of us shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of each of us in connection with the statements, omissions or other conduct which resulted In such losses, as well as any other relevant equitable considerations. Benefits received (or anticipated to be received) by us shall be deemed to be equal to the aggregate cash consideration and value of securities or any other property payable, exchangeable or transferable in such transaction or proposed transaction, and benefits received by you shall be deemed to be equal to the compensation payable by us to you in connection with such engagement. Relative fault shall - 2 - be determined by reference to, among other things, whether any alleged untrue statement or omission or any other alleged conduct relates to information provided by us or other conduct by us (or our employees or other agents) on the one hand or by you on the other hand. You and we agree that it would not be just and equitable if contribution were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above. We agree that we will not, without the prior written consent of Salomon Smith Barney, settle any pending or threatened claim or proceeding related to or arising out of such engagement or transactions or conduct in connection therewith (whether or not you are a party to such claim or proceeding) unless such settlement includes a provision unconditionally releasing you from and holding you harmless against all liability in respect of claims by any releasing party related to or arising out of such engagement or any transaction or conduct in connection therewith. We will also promptly reimburse you for all expenses (including counsel fees) as they are incurred by you in connection with investigating, preparing or defending, or providing evidence in, any pending or threatened claim or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not you are a party to such claim or proceeding) or in enforcing this agreement. The foregoing agreement shall be in addition to any rights that you may have at common law or otherwise. Solely for purposes of enforcing this agreement we hereby consent to personal jurisdiction, service and venue in any court in which any claim or proceeding which is subject to this agreement is brought against you. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR PROCEEDING RELATED TO OR ARISING OUT OF SUCH ENGAGEMENT, ANY TRANSACTION OR CONDUCT IN CONNECTION THEREWITH OR THIS AGREEMENT IS WAIVED. This agreement shall remain in full force and effect following the completion or termination of such engagement. Agreed: Very truly yours, CASMYN CORP. SALOMON BROTHERS INC. SMITH BARNEY INC. BY: SMITH BARNEY INC. By: _____/s/ Rene J. Robichaud_____ By: ____/s/ Al-Karim Haji - ----------------------------------- --------------------------- Rene J. Robichaud Al-Karim Haji Managing Director Director of Finance EX-27 3
5 0000772320 CASMYN CORP. 1000 6-MOS SEP-30-1997 OCT-01-1997 MAR-31-1998 11441 1935 811 0 705 14913 19859 1005 38667 6987 0 0 112 4478 22453 38667 2201 2201 1425 1818 4939 0 (576) (5323) 0 (5323) 0 0 0 (5323) (.48) (.48)
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