EXHIBIT 99.17
BANRO CORPORATION
Suite 7070, 1 First Canadian Place
100 King Street West
Toronto, Ontario M5X 1E3
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN THAT an annual and special meeting (the "Meeting")
of shareholders of Banro Corporation (the "Corporation") will be held at the
offices of Macleod Dixon LLP, BCE Place, Canada Trust Tower, Suite 3900, 161 Bay
Street, Toronto, Ontario on Friday, the 3rd day of October, 2003 at the hour of
nine o'clock in the forenoon (Toronto time), for the following purposes:
(1) To receive and consider the audited consolidated financial statements
of the Corporation for the financial year ended December 31, 2002,
together with the auditors' report thereon;
(2) To elect directors of the Corporation;
(3) To reappoint BDO Dunwoody LLP, Chartered Accountants, as the auditors
of the Corporation to hold office until the close of the next annual
meeting of shareholders of the Corporation, and to authorize the
directors of the Corporation to fix the auditors' remuneration;
(4) To consider and, if thought advisable, to approve, confirm and ratify
by means of an ordinary resolution, an amendment to the Corporation's
stock option plan (the "Plan") to increase from 1,000,000 to 1,900,000
the maximum number of common shares of the Corporation that may be
issued pursuant to the exercise of stock options granted under the
Plan; and
(5) To transact such other business as properly may be brought before the
Meeting or any adjournment or adjournments thereof.
The specific details of the matters to be put before the Meeting as
identified above are set forth in the management information circular of the
Corporation (the "Circular") accompanying and forming part of this Notice. The
audited consolidated financial statements of the Corporation for the financial
year ended December 31, 2002, together with the auditors' report thereon, are
attached to the Circular as Exhibit 1.
This Notice and the accompanying Circular have been sent to each director
of the Corporation, each shareholder of the Corporation entitled to notice of
the Meeting and the auditors of the Corporation.
Shareholders who are unable to attend the Meeting in person are requested
to sign and return the enclosed form of proxy to the Corporation c/o Equity
Transfer Services Inc., Richmond Adelaide Centre, Suite 420, 120 Adelaide Street
West, Toronto, Ontario, M5H 4C3.
DATED at Toronto, Ontario this 5th day of September, 2003.
BY ORDER OF THE BOARD
(signed)
Arnold T. Kondrat
Executive Vice President
NOTE:The directors have fixed the hour of 4:00 p.m. (Toronto time) on the 2nd
day of October, 2003 before which time the instrument of proxy to be used
at the Meeting must be deposited with the Corporation c/o Equity Transfer
Services Inc., Richmond Adelaide Centre, Suite 420, 120 Adelaide Street
West, Toronto, Ontario, M5H 4C3, provided that a proxy may be delivered to
the Chairman of the Meeting on the day of the Meeting or any adjournment
thereof prior to the time for voting.
BANRO CORPORATION
MANAGEMENT INFORMATION CIRCULAR
SOLICITATION OF PROXIES
This management information circular (the "Circular") is furnished in
connection with the solicitation of proxies by the management of BANRO
CORPORATION (the "Corporation") for use at the annual and special meeting of
shareholders of the Corporation (the "Meeting") to be held at the time and place
and for the purposes set forth in the attached notice of annual and special
meeting of shareholders (the "Notice"). It is expected that the solicitation
will be by mail primarily, but proxies may also be solicited personally by the
management of the Corporation. The cost of such solicitation will be borne by
the Corporation.
APPOINTMENT, REVOCATION AND DEPOSIT OF PROXIES
The persons named in the enclosed form of proxy are officers of the
Corporation.
A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A
SHAREHOLDER) TO ATTEND AND ACT FOR HIM OR HER AND ON HIS OR HER BEHALF AT THE
MEETING OTHER THAN THE PERSONS DESIGNATED IN THE ENCLOSED FORM OF PROXY. SUCH
RIGHT MAY BE EXERCISED BY STRIKING OUT THE NAMES OF THE PERSONS DESIGNATED IN
THE FORM OF PROXY AND BY INSERTING IN THE BLANK SPACE PROVIDED FOR THAT PURPOSE
THE NAME OF THE DESIRED PERSON OR BY COMPLETING ANOTHER PROPER FORM OF PROXY
AND, IN EITHER CASE, DELIVERING THE COMPLETED AND EXECUTED PROXY TO THE
CORPORATION C/O EQUITY TRANSFER SERVICES INC., RICHMOND ADELAIDE CENTRE, SUITE
420, 120 ADELAIDE STREET WEST, TORONTO, ONTARIO, M5H 4C3, AT ANY TIME PRIOR TO
4:00 P.M. (TORONTO TIME) ON THE 2ND DAY OF OCTOBER, 2003.
A shareholder forwarding the enclosed form of proxy may indicate the manner
in which the appointee is to vote with respect to any specific item by checking
the appropriate space. If the shareholder giving the proxy wishes to confer a
discretionary authority with respect to any item of business, then the space
opposite the item is to be left blank. The shares represented by the proxy
submitted by a shareholder will be voted in accordance with the directions, if
any, given in the proxy.
A shareholder who has given a proxy may revoke it at any time in so far as
it has not been exercised. A proxy may be revoked, as to any matter on which a
vote shall not already have been cast pursuant to the authority conferred by
such proxy, by instrument in writing executed by the shareholder or by his or
her attorney authorized in writing or, if the shareholder is a body corporate,
by an officer or attorney thereof duly authorized, and deposited at the
registered office of the Corporation at any time prior to 4:00 p.m. (Toronto
time) on the last business day preceding the day of the Meeting, or any
adjournment thereof, or with the Chairman of the Meeting on the day of the
Meeting or any adjournment thereof, and upon either of such deposits the proxy
is revoked. A proxy may also be revoked in any other manner permitted by law.
The Corporation's registered office is located at Suite 7070, 1 First Canadian
Place, 100 King Street West, Toronto, Ontario, M5X 1E3.
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MANNER OF VOTING AND EXERCISE OF DISCRETION BY PROXIES
The persons named in the enclosed form of proxy will vote or withhold from
voting the common shares in respect of which they are appointed in accordance
with the direction of the shareholders appointing them. In the absence of such
direction, such common shares will be voted FOR each of the matters identified
in the Notice and described in this Circular.
The enclosed form of proxy confers discretionary authority upon the persons
named therein with respect to amendments or variations to matters identified in
the Notice, and with respect to other matters which may properly come before the
Meeting. At the time of the printing of this Circular, management of the
Corporation knows of no such amendments, variations or other matters to come
before the Meeting other than the matters referred to in the Notice.
VOTING BY NON-REGISTERED SHAREHOLDERS
Only registered shareholders or the persons they appoint as their proxies
are permitted to vote at the Meeting. However, in many cases, common shares
owned by a person (a "non-registered holder") are registered either (a) in the
name of an intermediary (an "Intermediary") that the non-registered holder deals
with in respect of the common shares (Intermediaries include, among others,
banks, trust companies, securities dealers or brokers and trustees or
administrators of self-administered registered savings plans, registered
retirement income funds, registered education savings plans and similar plans),
or (b) in the name of a clearing agency (such as The Canadian Depository for
Securities Limited ("CDS")) of which the Intermediary is a participant. In
accordance with the requirements of National Instrument 54-101 of the Canadian
Securities Administrators, the Corporation has distributed copies of this
Circular and the accompanying Notice together with the form of proxy
(collectively, the "Meeting Materials") to the clearing agencies and
Intermediaries for onward distribution to non-registered holders of common
shares.
Intermediaries are required to forward the Meeting Materials to
non-registered holders unless a non-registered holder has waived the right to
receive them. Very often, Intermediaries will use service companies to forward
the Meeting Materials to non-registered holders. Generally, non-registered
holders who have not waived the right to receive Meeting Materials will either:
a) be given a form of proxy which has already been signed by the Intermediary
(typically by a facsimile stamped signature), which is restricted as to the
number and class of securities beneficially owned by the non-registered
holder but which is not otherwise completed. Because the Intermediary has
already signed the form of proxy, this form of proxy is not required to be
signed by the non-registered holder when submitting the proxy. In this
case, the non-registered holder who wishes to vote by proxy should
otherwise properly complete the form of proxy and deliver it as specified;
or
b) be given a form of proxy which is not signed by the Intermediary and which,
when properly completed and signed by the non-registered holder and
returned to the Intermediary or its service company, will constitute voting
instructions (often called a "Voting Instruction Form") which the
Intermediary must follow. Typically, the non-registered holder will also be
given a page of instructions which contains a removable label containing a
bar code and other information. In order for the form of proxy to validly
constitute a Voting Instruction Form, the non-registered holder must remove
the label from the instructions and affix it to the Voting Instruction
Form, properly complete and sign the Voting Instruction Form and submit it
to the Intermediary or its services company in accordance with the
instructions of the Intermediary or its service company.
3
In either case, the purpose of this procedure is to permit non-registered
holders to direct the voting of the common shares they beneficially own. Should
a non-registered holder who receives either form of proxy wish to vote at the
Meeting in person, the non-registered holder should strike out the persons named
in the form of proxy and insert the non-registered holder's name in the blank
space provided. Non-registered holders should carefully follow the instructions
of their Intermediary including those regarding when and where the form of proxy
or Voting Instruction Form is to be delivered.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The authorized share capital of the Corporation consists of an unlimited
number of common shares and an unlimited number of preference shares, issuable
in series. As of the date of this Circular, an aggregate of 9,886,594 common
shares of the Corporation and no preference shares of the Corporation were
issued and outstanding. Each common share entitles the holder thereof to one
vote at all meetings of shareholders of the Corporation, except for meetings at
which only holders of another specified class or series of shares of the
Corporation are entitled to vote separately as a class or series.
All shareholders of record at the close of business on September 2, 2003
will be entitled either to attend and vote at the Meeting in person the shares
held by them or, provided a completed and executed proxy shall have been
delivered to the Corporation as described above, to attend and vote thereat by
proxy the shares held by them. However, if a shareholder has transferred any
shares after September 2, 2003 and the transferee of such shares establishes
ownership thereof and makes a written demand, not later than ten days before the
Meeting, to be included in the list of shareholders entitled to vote at the
Meeting, the transferee will be entitled to vote such shares.
As of the date of this Circular, to the knowledge of the directors and
senior officers of the Corporation, no person or company beneficially owned,
directly or indirectly, or exercised control or direction over more than ten
percent (10%) of the issued and outstanding common shares of the Corporation.
CURRENCY
As the Corporation's financial statements are prepared in United States
dollars, all dollar amounts referred to in this Circular are expressed in United
States dollars unless otherwise indicated.
ELECTION OF DIRECTORS
The number of directors on the board of directors of the Corporation must
consist of not more than twenty (20) directors and not less than three (3)
directors to be elected annually. The number of directors to be elected at the
Meeting is five (5). Unless otherwise specified, the persons named in the
enclosed form of proxy will vote FOR the election of the nominees whose names
are set forth below. Management of the Corporation does not contemplate that any
of the nominees will be unable to serve as a director, but if that should occur
for any reason prior to the Meeting, the persons named in the enclosed form of
proxy reserve the right to vote for another nominee in their discretion. Each
director elected will hold office until the close of the first annual meeting of
shareholders of the Corporation following his election unless his office is
earlier vacated in accordance with the by-laws of the Corporation.
The following table and the notes thereto set out the name and municipality
of residence of each person proposed to be nominated for election as a director,
his current position and office with the Corporation, his present principal
4
occupation(s) or employment, the date on which he was first elected or appointed
a director of the Corporation, and the approximate number of common shares of
the Corporation beneficially owned directly or indirectly or over which he
exercises control or direction as at the date of this Circular:
Shares of the
Corporation
Name, Current Beneficially
Position(s) with Owned,
the Corporation and Director Controlled or
Municipality of Residence Present Principal Occupation(s) Since Directed(1)
- ------------------------- ------------------------------- -------- --------------
William R. Wilson President of the Corporation and August 21, Nil
Chief Executive Officer, President of Basin Perlite Company (an 1995
President and a industrial mineral company).
director(2)
Denver, Colorado
Arnold T. Kondrat(3) Executive Vice President of the November 6, 904,299
Executive Vice President Corporation and Chairman of the Board 1989(5)
and a director(4) of Nevada Bob's International Inc. (an
Toronto, Ontario international franchisor).
Bernard R. van Rooyen(3) Director of various public companies June 16, 3,333
Director engaged in mining. 1997
Montgomery Park, South
Africa
Richard J. Lachcik(3) Partner of Macleod Dixon LLP (a law August 23, 3,333
Director firm)(6). 1996
Oakville, Ontario
Geoffrey G. Farr Partner of Macleod Dixon LLP (a law September 5,999
Secretary and a director firm)(6). 27, 2001
Toronto, Ontario
- ----------
(1) The information as to shares beneficially owned, directly or indirectly,
not being within the knowledge of the Corporation, has been furnished by
the respective proposed directors individually.
(2) Mr. Wilson is also President and a director of the Corporation's
subsidiary, Banro American Resources Inc.
(3) Member of the audit committee of the board of directors of the Corporation.
(4) Mr. Kondrat is also Secretary-Treasurer and a director of the Corporation's
subsidiary, Banro American Resources Inc.
(5) The date shown for Mr. Kondrat is the date he was first appointed as a
director of the Corporation's predecessor company, Madison Grant Resources
Inc.
(6) Macleod Dixon LLP acts as counsel to the Corporation.
5
APPOINTMENT OF AUDITORS
BDO Dunwoody LLP, Chartered Accountants, are the current auditors of the
Corporation and were first appointed auditors of the Corporation on November 21,
2002. Shareholders of the Corporation will be asked at the Meeting to reappoint
BDO Dunwoody LLP as the Corporation's auditors to hold office until the close of
the next annual meeting of shareholders of the Corporation, and to authorize the
directors of the Corporation to fix the auditors' remuneration. Unless otherwise
specified, the persons named in the enclosed form of proxy will vote FOR the
said reappointment of BDO Dunwoody LLP as the auditors of the Corporation and
FOR authorizing the directors to fix the remuneration of the auditors.
AMENDMENT TO STOCK OPTION PLAN
The Corporation's stock option plan (the "Plan") was approved by
shareholders of the Corporation at the annual and special meeting of
shareholders held on December 12, 2000. Prior to the amendment described in the
next sentence, the terms of the Plan provided that the maximum number (the
"Maximum Number") of common shares of the Corporation ("Shares") that may be
issued pursuant to the exercise of stock options granted under the Plan is
1,000,000. The board of directors of the Corporation, by resolution dated
effective September 5, 2003, approved, subject to and conditional upon receipt
of shareholder approval and the approval of the TSX Venture Exchange, an
amendment to the Plan to increase the Maximum Number by 900,000 to 1,900,000.
There are currently outstanding under the Plan options to purchase an
aggregate of 744,250 Shares and, to date, options to purchase an aggregate of
38,750 Shares have been exercised under the Plan.
Shareholders of the Corporation will be asked at the Meeting to consider
and, if thought advisable, to approve, confirm and ratify by means of an
ordinary resolution, the said amendment to the Plan. The resolution shareholders
will be asked to approve is as follows:
WHEREAS shareholders of the Corporation wish to approve, confirm and ratify
an amendment to the Corporation's stock option plan (the "Plan") to
increase from 1,000,000 to 1,900,000 the maximum number (the "Maximum
Number") of common shares of the Corporation that may be issued pursuant to
the exercise of stock options granted under the Plan;
NOW THEREFORE BE IT RESOLVED THAT:
1. the amendment to the Plan to increase the Maximum Number from 1,000,000 to
1,900,000 be and is hereby approved, confirmed and ratified; and
2. any one director or officer of the Corporation be and is hereby authorized
and directed to execute and deliver on behalf of the Corporation all such
documents and instruments and to do all such other acts and things as in
his opinion may be necessary or desirable in connection with the foregoing.
To be approved, the above resolution must be passed by a majority of the
votes cast by shareholders at the Meeting in respect of this resolution, other
than votes attaching to Shares beneficially owned by insiders of the Corporation
to whom options may be granted under the Plan ("Insiders") and associates of
such Insiders(1). Unless otherwise specified, the persons named in the enclosed
form of proxy will vote FOR the resolution.
6
- ----------
(1) Based on information furnished to the Corporation by Insiders, the number
of votes attaching to Shares beneficially owned by Insiders and Insiders'
associates is 916,964 in the aggregate.
STATEMENT OF EXECUTIVE COMPENSATION
Ontario securities law requires that a "Statement of Executive
Compensation" in accordance with Form 40 to the Regulation to the Securities Act
(Ontario) ("Form 40") be included in this Circular. Form 40 prescribes the
disclosure requirements in respect of the compensation of the executive officers
and directors of reporting issuers. The following addresses the applicable items
identified in Form 40.
Summary Compensation Table
- --------------------------
The following table (which is presented in accordance with Form 40) sets
forth certain information with respect to the named individuals for the
financial years ended December 31, 2002, December 31, 2001 and December 31,
2000.
Long Term
Annual Compensation Compensation
------------------- ------------
Other Annual Shares under All other
Name Year Salary Bonus Compensation Options Granted Compensation
- ------------------ ---- ------ ----- ------------ --------------- ------------
William R. Wilson 2002 Nil Nil $10,286(2) Nil Nil
2001(1) Nil Nil $12,028(2) 50,000 Nil
Arnold T. Kondrat(3) 2002 $30,526 $107,016 Nil 123,000 Nil
2001 $30,998 Nil Nil 250,000 Nil
2000 $60,633 Nil $242,532(4) Nil Nil
Bernard R. van Rooyen 2001(5) Nil Nil Nil 50,000 Nil
2000 $120,000 Nil Nil Nil Nil
- ----------
(1) Mr. Wilson is Chief Executive Officer and President of the Corporation and
has held these positions since January 16, 2001.
(2) Represents management fees paid by the Corporation to Mr. Wilson.
(3) Mr. Kondrat is Executive Vice President of the Corporation.
(4) Represents management fees paid by the Corporation to Mr. Kondrat.
(5) Mr. van Rooyen was Chairman of the Board, Chief Executive Officer and
President of the Corporation until January 16, 2001.
Long-Term Incentive Plan Awards
- -------------------------------
The Corporation did not have a long-term incentive plan within the meaning
of Form 40 (the definition of "long-term incentive plan" contained in Form 40
expressly excludes a stock option plan) during the financial year ended December
31, 2002.
7
Stock Options
- -------------
The following table (which is presented in accordance with Form 40) sets
forth certain information with respect to stock options of the Corporation
granted to Mr. Kondrat during the financial year ended December 31, 2002. No
stock options of the Corporation were granted to Mr. Wilson during the financial
year ended December 31, 2002.
Market Value
% of Total of Shares
Options Underlying
Shares Under Granted Exercise Price Options on the Expiration
Name Options Granted in 2002 (per share) Date of Grant(1) Date
- ---- --------------- ------- ----------- ---------------- ----
Arnold T. Kondrat 123,000 21.85% Cdn$0.80 Cdn$0.73 Jan. 8, 2007
- ----------
(1) The market value figure identified in this column of the table is the
closing sale price per share of the common shares of the Corporation on
January 7, 2002 (the stock options were granted on January 8, 2002), as
reported by the TSX Venture Exchange.
No stock options of the Corporation were exercised by either Mr. Wilson or
Mr. Kondrat during the financial year ended December 31, 2002. The following
table (which is presented in accordance with Form 40) sets forth the value of
all outstanding stock options of the Corporation held by such individuals as at
December 31, 2002.
Number of Value of Unexercised
Unexercised Options in-the-Money
Name at Dec. 31, 2002 Options at Dec. 31, 2002
- ---- ---------------- ------------------------
William R. Wilson Exercisable - 50,000 Cdn$145,000
Unexercisable - Nil
Arnold T. Kondrat Exercisable - 311,500 Cdn$891,050 (exercisable)
Unexercisable - 61,500 Cdn$166,050 (unexercisable)
Stock Option Repricings
- -----------------------
The Corporation did not during the financial year ended December 31, 2002
reprice downward any stock options.
Defined Benefit or Actuarial Plan Disclosure
- --------------------------------------------
The Corporation does not have a defined benefit or actuarial plan.
Employment Contracts
- --------------------
Other than as set out in the next paragraph, there is no (a) employment
contract between the Corporation or any of its subsidiaries and either Mr.
Wilson or Mr. Kondrat (such individuals shall be referred to in this section as
the "Named Executive Officers"), or (b) compensatory plan or arrangement with
respect to a Named Executive Officer which results or will result from the
resignation, retirement or any other termination of a Named Executive Officer's
employment with the Corporation and its subsidiaries or from a change of control
8
of the Corporation or any subsidiary of the Corporation or a change in a Named
Executive Officer's responsibilities following a change of control.
The Corporation and Mr. Kondrat have entered into an employment contract
(the "Agreement") which sets out the terms upon which Mr. Kondrat performs the
services of Executive Vice President of the Corporation. Under the Agreement,
for fiscal 2003 Mr. Kondrat is paid a salary of Cdn$18,000 per month. The
Corporation may terminate the Agreement at any time (a) for "just cause" (as
defined in the Agreement) without notice and without any payment in lieu of
notice, or (b) without cause or notice provided the Corporation pays Mr. Kondrat
an amount equal to six months salary in lieu of notice.
Composition of the Compensation Committee
- -----------------------------------------
The board of directors of the Corporation (the "Board") does not have a
compensation committee such that the Board itself performs the functions of a
compensation committee. The members of the Board during the financial year ended
December 31, 2002 were Mr. Wilson (who is also currently Chief Executive Officer
and President of the Corporation), Mr. Kondrat (who is also currently Executive
Vice President of the Corporation), Bernard R. van Rooyen (who was formerly
Chairman of the Board, Chief Executive Officer and President of the
Corporation), Richard J. Lachcik and Geoffrey G. Farr (who is also currently
Secretary of the Corporation). See "Election of Directors", "Indebtedness of
Directors and Officers" and "Interest of Insiders in Material Transactions" with
respect to additional information relating to the said directors.
Report on Executive Compensation
- --------------------------------
Annual Compensation. As set out under "Statement of Executive Compensation
- - Summary Compensation Table", the Corporation paid to the Corporation's two
executive officers, Mr. Wilson and Mr. Kondrat, during the financial year ended
December 31, 2002 compensation of, respectively, $10,286 (paid as management
fees) and $137,542. Mr. Kondrat's said compensation was comprised of an annual
salary of $30,526 and a bonus of $107,016 (Cdn$168,000). The Board, in
determining to pay the bonus, wished to reward Mr. Kondrat for the significant
role he played in the return to the Corporation of its expropriated gold
properties and for his work in securing a significant amount of financing for
the Corporation. The Board believed that the amount of the bonus was an
appropriate amount in order to provide such reward.
Stock Options. The Corporation has a stock option plan (the "Plan"). The
principal purposes of the Plan are (a) to retain and attract qualified
directors, officers, employees and service providers which the Corporation and
its subsidiaries require, (b) to promote a proprietary interest in the
Corporation and its subsidiaries, and (c) to provide an incentive element in
compensation. Stock options are awarded from time to time under the Plan by the
Board. In determining the number of stock options to be granted to an executive
officer, the Board takes into account the respective responsibilities and
contributions to the Corporation of the executive, the executive's ability and
experience, the number of common shares of the Corporation available for stock
options, the number of stock options already held by the executive (if any) and
the benefits of providing management with a personal interest in maximizing
shareholder value. During the financial year ended December 31, 2002, 123,000
stock options were granted under the Plan by the Board to Mr. Kondrat and no
stock options were granted to Mr. Wilson (see "Statement of Executive
Compensation - Stock Options").
9
Report submitted by the Board:
William R. Wilson
Arnold T. Kondrat
Bernard R. van Rooyen
Richard J. Lachcik
Geoffrey G. Farr
Performance Graph
- -----------------
The following graph compares the five year cumulative shareholder return
for Cdn$100 invested in common shares of the Corporation on December 31, 1997
with the cumulative total return of the S&P/TSX Composite Index (formerly the
TSE 300 Composite Index) and the TSX Gold and Precious Minerals Index (both of
which assume dividend reinvestment).
[GRAPHIC OMITTED]
[Cumulative Value of Cdn$100 Invested on December 31, 1997]
Compensation of Directors
- -------------------------
No directors of the Corporation were compensated by the Corporation during
the financial year ended December 31, 2002 for their services in their capacity
as directors or for services as consultants or experts. During the financial
year ended December 31, 2002, the Corporation incurred legal expenses of $98,442
to Macleod Dixon LLP, which acts as counsel to the Corporation. Richard J.
Lachcik and Geoffrey G. Farr, directors of the Corporation, are partners of
Macleod Dixon LLP.
10
INDEBTEDNESS OF DIRECTORS AND OFFICERS
Other than as set out in the table below, no director or officer of the
Corporation or associate of any such director or officer is, or at any time
since the beginning of the Corporation's financial year ended December 31, 2002
has been, indebted to the Corporation or any of its subsidiaries. As of the date
of this Circular, the outstanding aggregate indebtedness to the Corporation and
all of its subsidiaries of all current and former officers, directors and
employees of the Corporation and its subsidiaries was $113,431.
Largest Amount
Name and Position Outstanding During Amount
with the Corporation and Involvement of Financial Year Outstanding as at
Municipality of Residence the Corporation(1) Ended Dec. 31, 2002 Sept. 5, 2003
------------------------- ------------------ ------------------- -------------
Arnold T. Kondrat Lender $19,599 Nil
Executive Vice President
and a director
Toronto, Ontario
BRC Development Lender $427,705 $50,412(3)
Corporation(2)
Toronto, Ontario
Nevada Bob's Lender $119,021(4) $228,581(4)
International Inc.(4)
Toronto, Ontario
Donat K. Madilo Lender $23,044 $23,044
Treasurer
Mississauga, Ontario
William R. Wilson Lender $4,187 Nil
C.E.O., President and a
director
Denver, Colorado
- ----------
(1) The indebtedness set out in the above table is (or was in the case of
indebtedness that has now been repaid) unsecured, non-interest bearing and
repayable upon demand.
(2) BRC Development Corporation ("BRC") is an associate of Mr. Kondrat given
that he beneficially owns more than 10% of the outstanding common shares of
BRC.
(3) This amount represents BRC's accumulated share of common general office
expenses incurred by the Corporation.
(4) Nevada Bob's International Inc. ("NBOB") is an associate of Mr. Kondrat
given that he beneficially owns more than 10% of the outstanding common
shares of NBOB. NBOB's indebtedness represents NBOB's accumulated share of
common general office expenses incurred by the Corporation.
11
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
Other than as described below, no insider of the Corporation, as defined in
the Securities Act (Ontario),(1) or associate or affiliate of such insider has
any material interest in any transaction completed since the commencement of the
Corporation's financial year ended December 31, 2002 or in any proposed
transaction which has materially affected or will materially affect the
Corporation or any of its subsidiaries.
On January 24, 2002, the Corporation completed a private placement which
involved the issue and sale of 350,000 units of the Corporation at a price of
Cdn$0.70 per unit for aggregate proceeds to the Corporation of Cdn$245,000. Mr.
Arnold T. Kondrat, the Executive Vice President and a director of the
Corporation (see "Election of Directors"), purchased 250,000 of the said units.
Each such unit consisted of one common share of the Corporation and one
non-transferable warrant of the Corporation, each such warrant entitling the
holder to purchase one common share of the Corporation at a price of Cdn$0.80
until January 24, 2004.
- ----------
(1) The definition of "insider" contained in the Securities Act (Ontario)
includes every director or senior officer of the Corporation, every
director or senior officer of a company that is itself an insider or
subsidiary of the Corporation and any person or company who beneficially
owns, directly or indirectly, or who exercises control or direction over,
more than 10% of the outstanding common shares of the Corporation.
FINANCIAL STATEMENTS
The audited consolidated financial statements of the Corporation for the
financial year ended December 31, 2002, together with the auditors' report
thereon, are attached to this Circular as Exhibit 1. The directors will lay
before the Meeting the said financial statements and auditors' report.
DIRECTORS' APPROVAL
The contents and the sending of this Circular to the shareholders of the
Corporation have been approved by the board of directors of the Corporation.
Unless otherwise indicated, information contained in this Circular is given as
of September 5, 2003.
DATED at Toronto, Ontario this 5th day of September, 2003.
BY ORDER OF THE BOARD
(signed)
Arnold T. Kondrat
Executive Vice President
12
EXHIBIT 1
Banro Corporation
Consolidated Financial Statements
For the years ended December 31, 2002 and 2001
(Expressed in U.S. dollars)
Banro Corporation
Consolidated Financial Statements
For the years ended December 31, 2002 and 2001
(Expressed in U.S. dollars)
Contents
- --------------------------------------------------------------------------------
Auditors' Report 2
Consolidated Financial Statements
Balance Sheets 3
Statements of Operations and Deficit 4
Statements of Cash Flows 5
Summary of Significant Accounting Policies 6-8
Notes to Financial Statements 9-18
================================================================================
Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders of
Banro Corporation
We have audited the consolidated balance sheet of Banro Corporation as at
December 31, 2002 and the consolidated statements of operations and retained
earnings and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2002
and the results of its operations and cash flows for the year then ended in
accordance with generally accepted accounting principles.
The financial statements for the year ended December 31, 2001 were audited by
other auditors who expressed an opinion without reservation on these statements
in their report dated March 8, 2002.
(Signed )BDO Dunwoody LLP
Chartered Accountants
Toronto, Ontario
February 20, 2003 (Except for Note 10, which is as at May 8, 2003)
2
================================================================================
Banro Corporation
Consolidated Balance Sheets
(Expressed in U.S. dollars)
December 31 2002 2001
- --------------------------------------------------------------------------------
Assets
Current
Cash $ 1,228,005 $ 14,537
Accounts receivable and other assets 40,571 3,734
Amounts due from related parties (Note 7) 317,108 189,856
---------------------------
1,585,684 208,127
Accounts receivable - 313,099
Note receivable (Note 2) 208,000 200,000
Investment (Note 3) 930,673 437,638
Property, plant and equipment (Note 4) 111,619 171,850
$ 2,835,976 $ 1,330,714
---------------------------
$ 2,835,976 $ 1,330,714
================================================================================
Liabilities and Shareholders' Equity
Current
Accounts payable $ 80,902 $ 381,730
Amount due to related party (Note 7) 4,912 -
---------------------------
85,814 381,730
---------------------------
Shareholders' equity
Share capital (Note 6) 39,173,793 35,996,713
Stock options 29,816 -
Deficit (36,453,447) (35,047,729)
---------------------------
2,750,162 948,984
---------------------------
$ 2,835,976 $ 1,330,714
================================================================================
On behalf of the Board:
(Signed) Arnold T. Kondrat Director
- --------------------------
(Signed) Richard J. Lachcik Director
- ---------------------------
The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.
3
================================================================================
Banro Corporation
Consolidated Statements of Operations and Deficit
(Expressed in U.S. dollars)
For the years ended December 31 2002 2001
- --------------------------------------------------------------------------------
Expenses
Professional fees $ 234,588 $ 354,201
Consulting fees 356,458 141,874
Office and sundry 127,515 116,782
Salaries 185,175 67,319
Travel and promotion 262,340 55,491
Shareholder relations 83,115 42,822
Management fees 10,286 12,028
Interest and bank charges 2,532 1,811
Accounting and secretarial fees 818 1,244
Amortization 49,857 64,741
Foreign exchange loss 55,028 3,935
---------------------------
(1,367,712) (862,248)
Interest and miscellaneous income earned 29,461 4,876
---------------------------
Loss from operations (1,338,251) (857,372)
Equity share of loss of BRC Development Corporation (56,821) (63,266)
Loss on disposition of assets (10,646) -
---------------------------
Loss for the year (1,405,718) (920,638)
Deficit, beginning of year (35,047,729) (34,127,091)
---------------------------
Deficit, end of year $(36,453,447) $(35,047,729)
================================================================================
Loss per share (Note 6(e)) $ (0.15) $ (0.15)
================================================================================
The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.
4
================================================================================
Banro Corporation
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
For the years ended December 31 2002 2001
- --------------------------------------------------------------------------------
Cash was provided by (used in)
Operating Activities
Loss for the year $ (1,405,718) $ (920,638)
Adjustments to reconcile loss to net cash
provided by operating activities
Equity loss 56,821 63,266
Value of options issued (Note 6(d)) 33,705 -
Loss on disposition of assets 10,646 -
Amortization 49,857 64,741
Interest capitalized (8,000) -
Changes in non-cash working capital balances
Accounts receivable 276,262 (142,003)
Accounts payable (300,828) 291,016
---------------------------
(1,287,255) (643,618)
Investing activities
Acquisition of property, plant and equipment (22,232) (10,348)
Disposition of property, plant and equipment 21,960 -
Investment in BRC Development (549,856) -
---------------------------
(550,128) (10,348)
Financing activities
Due to/from related parties (122,340) (242,186)
Common shares and warrants issued for cash 3,173,191 718,701
---------------------------
3,050,851 476,515
---------------------------
Net increase (decrease) in cash during the year 1,213,468 (177,451)
Cash, beginning of year 14,537 191,988
---------------------------
Cash, end of year $ 1,228,005 $ 14,537
================================================================================
The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.
5
================================================================================
Banro Corporation
Summary of Significant Accounting Policies
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
Nature of Business Banro Corporation's (the "Company") business focus is in the
exploration and development 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
Aircraft 25% declining balance basis
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.
6
================================================================================
Banro Corporation
Summary of Significant Accounting Policies
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
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.
7
================================================================================
Banro Corporation
Summary of Significant Accounting Policies
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
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.
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.
8
================================================================================
Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
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
disputes the validity of the Congolese government actions and is
vigourously pursuing 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 30year 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.
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:
2002 2001
------------------------
Current assets $ 34,031 $ 315,838
Current liabilities - (30,970)
------------------------
Net assets $ 34,031 $ 284,868
========================
As at December 31, 2002, the minority interest's share of loss exceeded its
share of net assets by approximately $319,000 (December 31, 2001 -
$316,000).
- --------------------------------------------------------------------------------
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 December 31, 2002 of
$85,492 and bears interest at 4% per annum. The principal and interest
accrued thereon is due on November 30, 2004.
9
================================================================================
Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
3. Investment
- -- ----------
The Company owns 3,500,000 common shares, representing 43.75% equity
interest, in BRC Development Corporation (BRC) with a quoted market value
of approximately $333,000 (2001 -2,000,000 common shares representing a 31%
equity interest with a quoted market value of $314,000). 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: 2002 2001
2002 2001
------------------------
Equity investment, beginning of year $ 367,024 $ 430,290
Acquisition of 1,500,000 common shares 192,765 -
Equity share of loss (56,821) (63,266)
------------------------
Equity investment, end of year 502,968 367,024
Amount due from BRC (see Note 10) 427,705 70,614
------------------------
$ 930,673 $ 437,638
========================
The amount due from BRC is unsecured, non-interest bearing and is due on
demand.
BRC's summarized audited balance sheet and income statement for the year
ended December 31, 2002 and 2001, converted to US$ at the year end rate of
exchange, is as follows: 2002 2001
2002 2001
-------------------------
Assets
Current assets $ 596,069 $ 91,386
Investment 791,905 784,285
Mineral properties 240,455 260,750
Property, plant and equipment 76,109 103,643
-------------------------
1,704,538 1,240,064
-------------------------
Liabilities 577,582 138,065
-------------------------
Net equity $1,126,956 $1,101,999
=========================
Income Statement
Revenue $ 10 $ 91
Expenses (150,667) (199,974)
Write-off of mineral claims (25,263) -
-------------------------
Net loss $ (175,920) $ (199,883)
=========================
10
================================================================================
Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
4. Property, Plant and Equipment
- -- -----------------------------
Accumulated Net Book
2002 Cost Amortization Value
Office furniture and fixtures $ 18,254 $ 10,775 $ 7,479
Office equipment 103,019 57,039 45,980
Leasehold improvements 105,746 47,586 58,160
-------------------------------------
$ 227,019 $ 115,400 $ 111,619
=====================================
Accumulated Net Book
2001 Cost Amortization Value
Office furniture and fixtures $ 33,721 $ 25,913 $ 7,808
Office equipment 119,969 72,334 47,635
Leasehold improvements 105,746 26,437 79,309
Aircraft 120,000 82,902 37,098
-------------------------------------
$ 379,436 $ 207,586 $ 171,850
=====================================
- --------------------------------------------------------------------------------
5. Deferred Exploration Expenditures and Mineral Rights
- -- ----------------------------------------------------
Cumulative
from
Inception in
April 1994
Deferred Exploration
Exploration cost $ 16,158,080
Amortization 30,581
-------------
Net expenditure 16,188,931
Effect of exchange rate changes 2,511
-------------
Write-off 16,191,442
(16,191,442)
-------------
Balance, end of year $ -
=============
Mineral Rights
Mineral rights $ 9,681,194
Write-off (9,681,194)
-------------
Balance, end of year $ -
=============
Because of the events referred to in Note 1, the mineral rights and deferred
exploration expenditures were written off in 2000. For the years ended December
31, 2002 and 2001, the Company has not capitalized any costs related to the
Congo mineral properties.
11
================================================================================
Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
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
2002 2001
------------------------- -------------------------
Number of Number of
Shares Amount Shares Amount
Balance,
beginning of year 7,472,844 $ 35,996,713 15,671,181 $ 35,278,012
Share consolidation - - (10,448,337) -
Exercise of stock options 38,750 22,710 - -
Exercise of warrants 425,000 125,502 (33,721) -
Issued during the year 1,950,000 3,028,868 2,250,000 718,701
------------------------- -------------------------
Balance, end of year 9,886,594 $ 39,173,793 7,439,123 $ 35,996,713
========================= =========================
(i) In January 2001 the Company consolidated its shares on a one for three
basis.
(ii) In March 2001 the Company completed a private placement of 1,200,000
common shares at a price of Cdn. $0.50 per share for cash proceeds of
Cdn. $600,000 (US $390,092) of which 600,000 common shares were
purchased by a director of the Company.
(iii)On October 15, 2001, the Company completed an arm's-length private
placement of 300,000 units of the Company at a price of Cdn. $0.35 per
unit for cash proceeds of Cdn. $105,000 (US $66,964). Each unit
consists of one common share of the Company and one non-transferable
warrant. Each warrant entitles the holder thereof to purchase one
common share of the Company at a price of Cdn. $0.40 until October 15,
2003.
12
================================================================================
Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
6. Share Capital - (Continued)
- -- ---------------------------
(iv) On November 20, 2001, the Company completed a non-brokered arm's
length private placement of 350,000 common shares of the Company at a
price of Cdn. $0.50 per share for cash proceeds of Cdn. $175,000 (US
$109,718).
(v) On December 13, 2001, the Company completed an arm's length private
placement of 400,000 units of the Company at a price of Cdn. $0.60 per
unit for cash proceeds of Cdn. $240,000 (US $151,927). 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. $0.70 until December
13, 2003. All 400,000 units were purchased by a director of the
Company.
(vi) 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 non-transferable 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.
(vii)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).
(viii) 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.
(ix) 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).
13
================================================================================
Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
6. Share Capital - (Continued)
- -- ---------------------------
(c) Warrants
The following is a summary of the continuity of warrants for the years
ended December 31, 2002 and 2001.
Number of
warrants
Balance, January 1, 2001 125,000
Issued during 2001 700,000
-----------
Balance, December 31, 2001 825,000
Exercised during 2002 (425,000)
Issued during 2002 (Note 6(b)(vi)(viii)) 450,000
-----------
Balance, December 31, 2002 850,000
===========
The following table summarizes information about warrants outstanding
at December 31, 2002:
Warrants Outstanding and Exercisable
------------------------------------------
Exercise
Number Price Expiry
Date of Grant Outstanding Cdn. $ 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 $ 0.87
==========================
(d) Stock Options
In January 2001, the Company's 1995 and 1996 Stock Option Plans were
terminated and a new 2001 Stock Option Plan was established. Under the
2001 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 December 31, 2002 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.
14
================================================================================
Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
6. Share Capital - (Continued)
- -- ---------------------------
(d) Stock Options - (Continued)
The following table summarizes information about stock options
outstanding and exercisable at December 31, 2001:
Options Outstanding and Exercisable
---------------------------------------------------
Number Options Options Number Options
Outstand- Granted Exercised Outstand- Exercis- Exercise
Date of ing at During Expired or ing at able at Price Expiry
Grant 1/1/02 the Year Forfeited 12/32/02 12/31/02 Cdn. $ Date
01/31/01 465,000 - 68,750 396,250 396,250 $ 0.60 01/31/04
01/31/01 40,000 - 10,000 30,000 30,000 1.00 01/31/04
10/12/01 40,000 - - 40,000 30,000 0.60 10/12/04
01/08/02 - 233,000 10,000 223,000 106,500 0.80 01/08/07
04/03/02 - 25,000 - 25,000 12,500 1.70 04/03/04
04/26/02 - 30,000 - 30,000 15,000 3.30 04/26/04
--------------------------------------------------------
545,000 288,000 88,750 744,250 590,250
========================================================
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.
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) Loss per Share
Loss per share was calculated on the basis of the weighted average
number of common shares outstanding for the year ended December 31,
2002, amounting to 9,183,681 (2001 - 6,327,091) common shares.
Fully diluted earnings per share has not been presented since the
exercise of the options and warrants would be anti-dilutive.
15
================================================================================
Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
7. Related Party Transactions
- -- --------------------------
Amounts due from Related Parties
The amounts primarily represent advances of $215,725 (2001 -$26,983) due
from a company whose director and shareholder is a director of the Company
and from BRC and it's investee company and advances of $101,393 (2001
-$139,281) to employees of the Company. All amounts due from related
parties are unsecured, non-interest bearing and repayable upon demand.
Amounts due to Related Parties
At December 31, 2002 an amount of $4,912 was due to a director and officer
of the Company. This amount is unsecured, non-interest bearing and payable
upon demand.
Management, Directors, General and Accounting Fees
Management fees of $10,286 (2001 - $12,000) were paid to an officer of the
Company.
The Company's share of general expenses amounting to $53,986 ( 2001
-$54,912) were paid or payable to a corporation that is wholly owned by a
director of the Company.
Accounting fees of $814 (2001 - $1,244) were paid to an officer of the
Company.
Legal fees of $98,442 (2001 -$56,679) were paid to a law firm whose two
partners are also directors of the Company.
These transactions are in the normal course of operations and are measured
at the exchange value.
16
================================================================================
Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
8. Income Taxes
- -- ------------
The Company's income tax provision (recovery) for the year ended December
31, 2002 has been calculated as follows:
2002 2001
----------------------------
Net loss for the year $ (1,405,718) $ (920,638)
----------------------------
Combined federal and provincial tax rates 38.62% 41.74%
Income tax recovery at Canadian federal
and provincial statutory rates (542,888) (384,292)
Effect of income tax rates of other
jurisdictions compared to Canadian rates - (3,741)
Losses of subsidiaries not taken for tax 10,295 -
Non-deductible amounts expensed 43,487 75,165
Losses expired 123,438 -
Change in tax rate 307,381 -
Change in valuation allowance 58,287 312,868
----------------------------
Net future income tax asset recorded $ - $ -
============================
The Company's future income tax assets and liabilities at December 31, 2002
are summarized as follows:
Property plant and equipment $ 20,169 $ 14,461
Non-capital losses carried forward 2,314,795 2,262,216
----------------------------
Net future tax asset before valuation allowance 2,334,964 2,276,677
Valuation allowance (2,334,964) (2,276,677)
----------------------------
Net future tax asset $ - $ -
============================
As at December 31, 2002, the Company has available tax losses for Canadian
income tax purposes that may be carried forward to reduce taxable income
derived in future years. A summary of these losses is provided below. These
losses will expire as follows:
2003 $ 1,039,268
2004 456,133
2005 1,071,946
2006 536,939
2007 1,307,224
2008 696,048
2009 1,213,566
-----------
$ 6,321,124
===========
17
================================================================================
Banro Corporation
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
December 31, 2002
- --------------------------------------------------------------------------------
8. Income Taxes - (Continued)
- -- --------------------------
A valuation allowance has been recorded to offset the potential benefits of
these carry-forward non-capital losses and deductible temporary differences
in these consolidated financial statements as the realization thereof is
not considered more likely than not. In addition the Company had capital
losses of $23,387,988 (2001 -$23,274,168) which could be used to offset
capital gains in future tax periods.
- --------------------------------------------------------------------------------
9. Lease Commitments
- -- -----------------
The Company's future minimum lease commitments for office premises as at
December 31, 2002 for the following three years are as follows:
2003 $ 108,328
2004 108,328
2005 72,219
This cost is shared equally with two related companies.
- --------------------------------------------------------------------------------
10. Subsequent Events
- --- -----------------
On May 8, 2003 BRC Development Corporation repaid the amount due to the
Company in full.
- --------------------------------------------------------------------------------
11. Comparative Figures
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Certain of the prior year's amounts have been reclassified to conform to
the current year's presentation.
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