EXHIBIT 99.11
Banro Corporation
Consolidated Financial Statements
June 30, 2003
(Expressed in U.S. dollars)
Banro Corporation
Consolidated Financial Statements
June 30, 2003
(Expressed in U.S. dollars)
Contents
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Consolidated Financial Statements
Balance Sheets 1
Statements of Operations and Deficit 2
Statements of Cash Flows 3
Summary of Significant Accounting Policies 4-6
Notes to Financial Statements 7-13
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Banro Corporation
Consolidated Balance Sheets
(Expressed in U.S. dollars)
June 30, 2003 December 31,
(unaudited) 2002
- --------------------------------------------------------------------------------
Assets
Current
Cash $ 1,217,057 $ 1,228,005
Accounts receivable and other assets 40,000 40,571
Amounts due from related parties 675,165 317,108
--------------------------------
1,932,222 1,585,684
Notes receivable 208,000 208,000
Investment 483,457 930,673
Property, plant and equipment 93,677 111,619
--------------------------------
$ 2,717,356 $ 2,835,976
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Liabilities and Shareholders' Equity
Current
Accounts Payable $ 16,151 $ 80,902
Amount due to related party - 4,912
--------------------------------
16,151 85,814
--------------------------------
Shareholders' Equity
Share capital 39,173,793 39,173,793
Stock options 48,393 29,816
Deficit (36,520,981) (36,453,447)
--------------------------------
2,701,205 2,750,162
--------------------------------
$ 2,717,356 $ 2,835,976
================================
1
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Banro Corporation
Consolidated Statements of Operations and Deficit
(Expressed in U.S. dollars)
- ------------------------------------------------------------------------------------------------------
Three Months ended Six Months ended
June 30 June 30
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------
Expenses
Professional fees $ 34,171 $ 49,271 $ 68,256 $ 108,916
Consulting fees 118,788 67,298 177,661 134,334
Office and sundry 35,753 67,241 65,261 67,241
Salary 61,359 39,106 128,014 33,416
Travel and promotion 40,887 89,534 79,478 111,135
Shareholder relations 9,002 19,153 14,354 33,094
Management fees 25,667 1,049 27,666 3,048
Interest and bank charges 1,119 370 1,943 847
Amortization 11,013 13,478 21,804 26,429
Foreign exchange loss (135,998) (44,957) 274,843) (37,460)
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(201,761) (252,394) (309,594) (481,000)
Interest income 7,320 3,837 12,927 3,874
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Loss from operations (194,441) (248,557) (296,667) (477,126)
Equity share of loss of BRC (50,830) (12,995) (69,923) (22,479)
Miscellaneous income earned - - 299,056 -
-------------------------------------------------------
Net earnings (loss) for the period (245,271) (261,552) (67,534) (499,605)
Deficit, beginning of the period (36,275,710) (35,285,782) (36,453,447) (35,047,729)
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Deficit, end of the period $(36,520,981) $(35,547,334) $(36,520,981) $(35,285,782)
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Earnings (loss) per share $ (0.02) $ (0.03) $ (0.01) $ (0.03)
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2
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Banro Corporation
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
- ------------------------------------------------------------------------------------------------------
Three Months ended Six Months ended
June 30 June 30
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net earnings (loss) for the period $ (245,271) $ (261,552) $ (67,534) $ (499,605)
Adjustments to reconcile loss to net cash
Provided by operating activities
Equity loss 50,830 12,995 69,923 22,479
Value of options issued 11,818 - 18,577 -
Amortization 11,013 13,478 21,804 26,429
Changes in non-cash working capital
Accounts receivable (19,780) (2,019) 571 1,715
Accounts payable (13,893) (111,603) (64,751) (345,475)
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(205,283) (348,701) (21,410) (794,457)
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Investing activities
Capital Assets (3,862) (11,326) (3,862) (11,326)
Advances to BRC Development 412,000 - 377,293 -
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408,138 (11,326) 373,431 (11,326)
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Financing activities
Due to/from related parties (261,107) (196,375) (362,969) (205,688)
Common shares and warrants issued for - 2,601,520 - 3,168,101
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(261,107) 2,405,145 (362,969) 2,962,413
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Net increase (decrease) in cash during the
period (58,252) 2,045,118 (10,948) 2,156,630
Cash, beginning of the period 1,275,309 126,049 1,228,005 14,537
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Cash, end of the period $1,217,057 $2,171,167 $1,217,057 $2,171,167
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3
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Banro Corporation
Summary of Significant Accounting Policies
(Expressed in U.S. dollars)
June 30, 2003
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Nature of Business Banro Corporation's (the "Company") business focus is in the
exploration of mineral properties in the Democratic Republic
of the Congo (the "Congo").
Principles of The consolidated financial statements include the accounts
Consolidation of the Company, its wholly-owned subsidiary in the United
States, Banro American Resources Inc., and its 93% owned
subsidiary, societe Aurifere du Kivu et du Maniema S.A.R.L.
(Sakima), in the Congo. The Congolese government holds the
remaining 7% ownership interest of Sakima.
Investments Investments in companies subject to significant influence
are accounted for using the equity method. Other long-term
investments are accounted for using the cost method.
Property, plant Property plant and equipment is recorded at cost.
and equipment Amortization is recorded as follows:
Office furniture and fixtures 20% declining balance basis
Office equipment Straight line over four years
Leasehold improvements Straight line over five years
Foreign Currency These consolidated financial statements are expressed in
Translation United States dollars. For integrated operations, monetary
assets and liabilities are translated at the spot rates of
exchange in effect at the end of the year; non-monetary
items are translated at historical exchange rates in effect
on the dates of the transactions. Revenues and expense
items, except amortization, are translated at average rates
of exchange in effect during the year. Realized exchange
gains and losses and currency translation adjustments are
included in the consolidated statements of operations and
deficit.
For the self-sustaining operation, all assets and
liabilities are translated at spot rates of exchange and
revenue and expense items are translated at historical
exchange rates in effect on the dates of the transactions.
Currency translation adjustments are disclosed as a separate
component of shareholders' equity. There was no cumulative
translation adjustment at year-end. Realized exchange gains
and losses are included in the consolidated statements of
operations.
4
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Banro Corporation
Summary of Significant Accounting Policies
(Expressed in U.S. dollars)
June 30, 2003
- --------------------------------------------------------------------------------
Deferred Exploration costs relating to mineral properties and rights
Exploration are deferred and carried as an asset until the results of
Expenditures the projects are known. As the Company currently has no
operational income, any incidental revenues earned in
connection with these properties or related exploration
activities are applied as a reduction to capitalized
exploration costs. If a property is determined to be
non-commercial, non- productive or its value is impaired;
those costs in excess of estimated recoveries are charged to
operations.
Stock Options The Company has one stock option plan, which is described in
Note 6(d). The Company has elected to follow the intrinsic
method of accounting for stock options granted to directors,
officers and employees whereby no compensation expense is
recorded in the financial statements. Any consideration paid
by directors, officers and employees on exercise of stock
options or purchases of shares is credited to share capital.
However, additional disclosure of the effects of accounting
for stock-based compensation to directors, officers and
employees as compensation expense, using the fair value
method, is disclosed as pro-forma information. Compensation
expense on stock options granted to non- employees is
recorded as an expense in the period the options are vested
using the fair value method.
Financial Unless otherwise noted, it is management's opinion that the
Instruments company is not exposed to significant interest, currency or
credit risks arising from these financial instruments. The
fair values of these financial instruments approximate their
carrying values, unless otherwise noted.
Income Taxes The asset and liability method is used to determine income
taxes. Pursuant to this method, future tax assets and
liabilities are recognized for future tax consequences
attributable to differences between financial statement
carrying values and tax bases of assets and liabilities.
Future tax assets and liabilities are measured using enacted
tax rates expected to be recovered or settled. The effect on
future tax assets and liabilities of a change in tax rate is
recognized in income in the period that includes the
enactment date. Net future income tax losses are offset by
valuation allowances to the extent that they are not more
likely not to be realized.
5
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Banro Corporation
Summary of Significant Accounting Policies
(Expressed in U.S. dollars)
June 30, 2003
- --------------------------------------------------------------------------------
Use of Estimates The preparation of consolidated financial statements in
conformity with Canadian generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and
liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ
from those estimates.
6
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Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
June 30, 2003
- --------------------------------------------------------------------------------
1. Interest in Sakima
- -- ------------------
On July 31, 1998 the Company discovered that the government of the Congo,
without prior warning or consultation, had issued Presidential decrees to,
among other things, (a) dissolve Sakima and (b) terminate the Company's
mining convention relating to the Company's mineral properties. The Company
has disputed the validity of the Congolese government actions and has
vigourously pursued resolution of the disputes through legal procedures.
On April 19, 2002 the government of the Congo formally signed a settlement
agreement with the Company. The agreement calls for, among other things,
the Company to hold 100% interest in the Twangiza, Kamituga, Lugushwa and
Namoya gold deposits under a revived 30-year mining convention. The
government of the Congo retains 100% of the tin assets. Subsequent to the
signing of the settlement agreement the Company filed with the Federal
Court in Washington, DC, a notice of dismissal with respect to its legal
action against the Congolese government.
On May 30, 2003 the government of the Congo issued Presidential decrees to
rescind the July 31, 1998 decrees and to amend the Company's mining
convention in accordance with the settlement agreement signed on April 19,
2002.
The Company operates primarily in one operating segment and its assets
located in the Congo, including its interests in gold and other mining
properties, may be subject to sovereign risks, including political and
economic instability, government regulations relating to mining, military
repression, civil disorder, currency fluctuations and inflation, all or any
of which may impede the Company's activities in this country or may result
in the impairment or loss of part or all of the Company's interest in the
properties.
The major components relating to Sakima included in the consolidated
balance sheet are as follows:
06/30/2003 12/31/2002
-------------------------------
Current assets $ 4,190 $ 34,031
-------------------------------
Net assets $ 4,190 $ 34,031
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2. Note Receivable
- -- ---------------
The note, receivable from a shareholder of the Company, is secured by a
pledge of marketable securities with a market value at June 30, 2003 of
$112,389 and bears interest at 4% per annum. The principal and interest
accrued thereon is due on November 30, 2004.
7
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Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
June 30, 2003
- --------------------------------------------------------------------------------
3. Investment
- -- ----------
The Company owns 3,500,000 common shares, representing 41.54% equity
interest, in BRC Development Corporation (BRC) with a quoted market value
of approximately $511,910 at June 30, 2003 (December 31, 2002 - $333,000).
On November 29, 2002 the Company acquired, by way of private placement
1,500,000 common shares of BRC at a price of Cdn. $0.20 per share.
BRC is a corporation formed under the laws of the Province of Ontario whose
principal business is the acquisition and exploration of mineral properties
in Canada.
The Company's investment in BRC is summarized as follows:
06/30/2003 12/31/2002
Equity investment, beginning of period $ 502,968 $ 367,024
Acquisitions - 192,765
----------------------------
502,968 559,789
Share of equity loss (69,923) (56,821)
----------------------------
Equity investment, end of period 433,045 502,968
Amount due from BRC 50,412 427,705
----------------------------
$ 483,457 $ 930,673
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The amount due from BRC is unsecured, non-interest bearing and is due on
demand.
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4. Property, Plant and Equipment
- -- -----------------------------
June 30, 2003
Accumulated
Cost Amortization Net Book Value
Office furniture and fixtures $ 18,254 $ 11,504 $ 6,750
Office equipment 106,880 67,539 39,341
Leasehold improvement 105,746 58,160 47,586
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$230,880 $ 137,203 $ 93,677
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8
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Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
June 30, 2003
- --------------------------------------------------------------------------------
4. Property, Plant and Equipment - (continued)
- -- -------------------------------------------
December 31, 2002
Accumulated
Cost Amortization Net Book Value
Office furniture and fixtures $ 18,254 $ 10,775 $ 7,479
Office equipment 103,019 57,039 45,980
Leasehold improvement 105,746 47,586 58,160
-----------------------------------------
$ 227,019 $ 115,400 $ 111,619
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5. Deferred Exploration Expenditures and Mineral Rights
- -- ----------------------------------------------------
Cumulative
from inception
in April 1994
Deferred Exploration
Exploration cost $ 16,158,080
Amortization 30,851
--------------
Net expenditure 16,188,931
Effect of exchange rate change 2,511
--------------
16,191,442
Write-off (16,191,442)
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Balance - end of period $ -
==============
Mineral rights
Mineral rights $ 9,681,194
Write-off (9,681,194)
--------------
Balance - end of period $ -
==============
Because of the events referred to in Note 1, the mineral rights and
deferred exploration expenditures were written off in 2000. For the periods
ended June 30, 2003 and December 31, 2002 the Company has not capitalized
any costs related to the Congo mineral properties.
9
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Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
June 30, 2003
- --------------------------------------------------------------------------------
6. Share Capital
- -- -------------
(a) Authorized Share Capital
Unlimited number of common shares
Unlimited number of preference shares, issuable in series
(b) Issued Share Capital- Common Shares
June 30, 2003 December 31, 2002
----------------------------------------------------
Number of Number of
shares Amount Shares Amount
Balance -
Beginning of period 9,886,594 $ 39,173,793 7,472,844 $ 35,996,713
Exercise of stock options - - 38,750 22,710
Exercise of warrants - - 425,000 125,502
Issued during the year - - 1,950,000 3,028,868
----------------------------------------------------
Balance - End of period 9,886,594 $ 39,173,793 9,886,594 $ 39,173,793
====================================================
(i). On January 24, 2002, the Company issued by way of private placement
350,000 units of the Company at a price of Cdn. $0.70 per unit for
cash proceeds of Cdn. $245,000 (US $152,886). Each unit consists of
one common share of the Company and one nontransferable warrant. Each
such warrant entitles the holder thereof to purchase one common share
of the Company at a price of Cdn. $0.80 for a period of two years.
(ii).On March 25, 2002, the Company completed a non-brokered arm's length
private placement of 500,000 common shares of the Company at a price
of Cdn. $1.30 per share for cash proceeds of Cdn. $650,000 (US
$408,703).
(iii). On April 22, 2002, the Company completed a non-brokered arm's length
private placement of 100,000 units of the Company at a price of Cdn.
$1.50 per unit for cash proceeds of Cdn. $150,000 (US $94,067). Each
unit consists of one common share of the Company and one
non-transferable warrant. Each such warrant entitles the holder
thereof to purchase one common share of the Company at a price of Cdn.
$1.80 for a period of two years.
(iv).On May 21, 2002, the Company completed a non-brokered arm's length
private placement of 1,000,000 common shares of the Company at a price
of Cdn. $3.65 per share for cash proceeds of Cdn. $3,650,000 (US
$2,373,212).
10
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Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
June 30, 2003
- --------------------------------------------------------------------------------
6. Share Capital - (continued)
- -- ---------------------------
c) Warrants
The following table summarizes information about warrants outstanding
and exercisable at June 30, 2003 and December 31, 2002
Exercise
Number Price
Date of grant outstanding Cdn $ Expiry Date
12/13/01 400,000 $0.70 12/13/03
01/24/02 350,000 $0.80 01/24/04
04/22/02 100,000 $1.80 04/22/04
--------------------------
850,000
==========================
d) Stock Options
In 2001, the Company established an incentive Stock Option Plan under
which nontransferable options to purchase common shares of the Company
may be granted to directors, officers, employees or service providers
of the Company.
Under this Stock Option Plan, options vest 25% immediately at grant
date and 25% on each of the three consecutive six-month periods
subsequent to the issuance. As at June 30, 2003 the Company had
744,250 stock options outstanding to acquire common shares at a
weighted-average price of Cdn. $0.82 per share, expiring at various
dates between January 2004 and January 2007.
The following table summarizes information about stock options
outstanding and exercisable at June 30, 2003:
Options outstanding and exercisable
-----------------------------------------------------------------------------
Options
Options Exercised,
Number granted Expired Number Options Exercise
Date outstanding during the or outstanding Exercisable price Expiry
of grant at 12/31/02 period Forfeited at 06/30/03 at 06/30/03 Cdn $ date
01/31/01 396,250 - - 396,250 396,250 $ 0.60 01/31/04
01/31/01 30,000 - - 30,000 30,000 1.00 01/31/04
10/12/01 40,000 - - 40,000 40,000 0.60 10/12/04
01/08/02 223,000 - - 223,000 167,250 0.80 01/08/07
04/03/02 25,000 - - 25,000 18,750 1.70 04/03/04
04/26/02 30,000 - - 30,000 22,500 3.30 04/26/04
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744,250 - - 744,250 674,750
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11
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Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
June 30, 2003
- --------------------------------------------------------------------------------
6. Share Capital - (continued)
- -- ---------------------------
(d) Stock Options - (continued)
2002
The weighted average grant-date fair value of 178,000 stock options
granted to employees, directors and officers during 2002 was $58,822.
No compensation cost was recognized in the income statement for these
stock options. Had the fair value of these options been expensed, the
loss for the year would be $1,464,540 and the loss per share would be
$0.16.
During 2002, the Company issued a total of 110,000 stock options to
consultants and other service providers, of which 10,000 were
exercised on January 26, 2002 and 45,000 were exercisable as at
December 31, 2002. The weighted average grant-date fair value of these
vested stock options was $33, 705. This amount was recognized in the
income statement as an expense and was credited accordingly to
contributed surplus in the balance sheet.
2003
As at June 30, 2003, the weighted average grant-date fair value of
53,250 vested stock options previously granted to employees, directors
and officers was $21,679. No compensation cost was recognized in the
income statement for these stock options. Had the fair value of these
options been expensed, net loss for the period would be $89,213 and
loss per share would be $0.01.
As at June 30, 2003, a total of 32,500 stock options previously issued
to consultants and other service providers vested. The weighted
average grant-date fair value of these vested stock options was
$18,577. This amount was recognized in the income statement as an
expense and was credited accordingly to contributed surplus in the
balance sheet.
The Black-Scholes option-pricing model was used to estimate values of
all stock options granted during the year based on the following
weighted average information:
(i) risk-free interest rate: 2.54%
(ii) expected volatility: 124%
(iii) expected life: 4.38 years
(iv) expected dividends: $Nil
(e) Earnings (loss) per Share
Earnings (loss) per share was calculated on the basis of the weighted
average number of common shares outstanding for the period ended June
30, 2003, amounting to 9,886,594 (2002 - 7,886,844) common shares.
Fully diluted earnings (loss) per share has not been presented since
the exercise of the options and warrants would be anti-dilutive.
12
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Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
June 30, 2003
- --------------------------------------------------------------------------------
7. Related party transactions
- -- --------------------------
Due from related parties
The amounts primarily represent advances of $558,193 (2002 - $215,725) due
from affiliated companies and advances of $116,972 to employees of the
Corporation.
All these amounts due from related parties are unsecured,
non-interest-bearing and repayable upon demand.
Other transactions
During the quarter ended June 30, 2003, a corporation wholly-owned by a
director of the Company incurred office and general expenses on behalf of
the Company and two other affiliated corporations. The Company's share of
these expenses amounted to $47,003.
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8. Comparative amounts
- -- -------------------
Certain of prior year's amounts have been reclassified to conform to
current period's presentation.
13