U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-21635
Global Diamond Resources, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 33-0213535
- ---------------------------------------- -----------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
836 Prospect Street, Suite 2B, La Jolla, California 92037
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(Address of principal executive offices)
(858) 459-1928
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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 July 31, 2000, the Company had 48,686,678 shares of its $.0005
par value common stock issued and outstanding.
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
PAGE
----
Condensed Consolidated Balance Sheet at June 30, 2000 (unaudited).............2
Condensed Consolidated Statements of Operations for the three month
and six month periods ended June 30, 2000 and 1999 (unaudited)..............3
Condensed Consolidated Statements of Cash Flows for the six month
periods ended June 30, 2000 and 1999 (unaudited)............................4
Notes to Condensed Consolidated Financial Statements (unaudited)..............5
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GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)
ASSETS JUNE 30, 2000
-------------
Current assets:
Cash and cash equivalents $ 322,185
Trade accounts receivable 3,600
Inventory 295,214
-------------
Total current assets 620,999
Deferred foreign tax asset 798,877
Mining properties and equipment 5,475,432
-------------
$ 6,895,308
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 399,759
Note payable to director 205,096
-------------
Total current liabilities 604,855
Long-term debt 3,000,000
-------------
Total liabilities 3,604,855
-------------
Commitments and contingencies --
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000
shares authorized, no shares issued and
outstanding --
Common stock, $0.0005 par value, 100,000,000
shares authorized, 48,686,678 shares issued
and outstanding 24,343
Additional paid-in capital 14,385,556
Accumulated deficit (9,415,154)
Accumulated other comprehensive income:
Foreign currency translation adjustment (1,704,292)
-------------
Total stockholders' equity 3,290,453
-------------
$ 6,895,308
=============
See accompanying notes to consolidated financial statements.
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GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 1999
------------- ------------- ------------- -------------
Diamond Sales $ 781,789 $ -- $ 1,194,963 $ --
Production Expenses (374,428) (167,396) (765,002) (293,788)
Royalty (36,705) -- (59,748) --
------------- ------------- ------------- -------------
Mine Operating Income 370,656 (167,396) 370,213 (293,788)
Development and exploration expenses (291,014) (92,559) (531,363) (185,395)
Less diamonds recovered 151,040 -- 246,960 --
------------- ------------- ------------- -------------
Net development and exploration expenses (139,974) (92,559) (284,403) (185,395)
General and administrative expenses (363,151) (424,819) (634,636) (867,758)
------------- ------------- ------------- -------------
Operating loss (132,469) (684,774) (548,826) (1,346,941)
------------- ------------- ------------- -------------
Other
Interest income 2,749 28,235 3,647 68,538
Interest expense (122,197) (114,018) (244,129) (226,518)
------------- ------------- ------------- -------------
Net interest expense (119,448) (85,783) (240,482) (157,980)
------------- ------------- ------------- -------------
Loss before net tax benefit/expense (251,917) (770,557) (789,308) (1,504,921)
Income tax expense (390) (273) (390) (1,073)
------------- ------------- ------------- -------------
Net Loss (252,307) (770,830) (789,698) (1,505,994)
Other comprehensive loss -
Foreign currency translation adjustment (236,832) 43,901 (518,508) (200,207)
------------- ------------- ------------- -------------
Comprehensive loss $ (489,139) $ (726,929) $ (1,308,206) $ (1,706,201)
============= ============= ============= =============
Basic and diluted loss per share $ (.01) $ (.02) $ (.02) $ (.03)
============= ============= ============= =============
Weighted average number of shares outstanding 47,723,986 45,600,678 46,555,623 45,600,678
============= ============= ============= =============
See accompanying notes to consolidated financial statements.
-3-
GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999
------------- -------------
Cash flows from operating activities:
Net loss $ (789,698) $ (1,505,994)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 194,376 189,882
Decrease (increase) in trade accounts receivable 6,018 (30,198)
(Increase) in inventory (248,564) (118,619)
(Decrease) in accounts payable and accrued liabilities (18,841) (746,509)
------------- -------------
Net cash used in operating activities (856,709) (2,211,438)
------------- -------------
Cash flows used in investing activities:
Additions to mining properties and equipment (4,991) (751,651)
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Net cash used in investing activities (4,991) (751,651)
------------- -------------
Cash flows provided by financing activities:
Net proceeds from issuance of common shares 929,200 --
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Net cash provided by financing activities 929,200 --
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Effects of exchange rates on cash 72,585 (193,621)
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Net increase (decrease) in cash and cash equivalents 140,085 (3,156,710)
Cash and cash equivalents, beginning of period 182,100 5,461,235
------------- -------------
Cash and cash equivalents, end of period $ 322,185 $ 2,304,525
============= =============
See accompanying notes to condensed consolidated financial statements
-4-
GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
June 30, 2000
(1) These condensed consolidated financial statements of Global Diamond
Resources, Inc. (the "Company") do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements and should be read in conjunction with
the financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB. In the opinion of management, the
financial information set forth in the accompanying condensed
consolidated financial statements reflect all adjustments necessary for
a fair statement of the periods reported, and all such adjustments were
of a normal and recurring nature. Interim results are not necessarily
indicative of results for a full year.
(2) Mining Properties and Equipment
June 30,
2000
------------
Mining property:
Caerwinning deposit, at cost $ 469,560
Less accumulated amortization (74,663)
------------
394,897
------------
Mining properties under development:
Grasdrif deposit 987,594
------------
Mining equipment, at cost: 4,933,830
Less accumulated depreciation (852,720)
------------
4,081,110
------------
Office equipment, at cost: 53,740
Less accumulated depreciation (41,909)
------------
11,831
------------
$ 5,475,432
============
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
BACKGROUND
The Company is engaged in diamond exploration and mining. The Company
has acquired the rights to two mining properties, the Grasdrif Deposit and the
Caerwinning Deposit, and owns an option to purchase a third mining property, the
Montrose kimberlite pipe, all of which are located in the Republic of South
Africa.
To date, the companies' activities have included the investigation and
acquisition of mining property interests, exploratory work, site establishment
and the purchase and operation of mining plant and equipment in the process of
development as well as full-scale mining operations at its properties.
RESULTS OF OPERATIONS
CAERWINNING
The Company's principal mining activities are conducted at its
Caerwinning property. The following chart details production information for the
three months ending June 30, 2000 and 1999 and for the six months ending June
30, 2000 and 1999:
Three Months Three Months Six Months Six Months
Ending Ending Ending Ending
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
Number of tons treated 127,574 36,017 259,998 53,083
Number of carats yielded 1,764 133 2,778 236
Total $ Value of production $ 782,551 Not available $ 1,129,653 Not available
$ Value per Carat $ 444 Not available $ 407 Not available
The Caerwinning Deposit had an operating profit amounting to $370,656 for the
three months ending June 30, 2000 and $370,213 for the six months ending June
30, 2000. (For the three months ending June 30, 1999 and six months ending June
30, 1999, the deposit had an operating loss of $167,396 and $293,788,
respectively).
GRASDRIF
Development activities continued at the Grasdrif Deposit during the
second quarter of 2000. On the Lower Terrace, 32,912 tons of diamondiferous
gravel was treated during the three months ending June 30, 2000 and 49,875 tons
were treated for the six months ending June 30, 2000. (Three months ending June
30, 1999, 26,119 tons and six months ending June 30, 1999, 61,068 tons). The
treatment of these tons yielded 44.34 carats for the three months ending June
30, 2000 and 101 carats for the six months ending June 30, 2000. (Three months
ending June 30, 1999, 64 carats and six months ending June 30, 1999, 91 carats).
Although the recovery from this gravel is significantly lower than expected, the
average size and value of the recovered diamonds far exceed expectations. The
average size of diamonds produced on the Lower Terrace during the second quarter
of 2000 amounted to 1.64 carats per stone, valued at $774 per carat and for the
first quarter of 2000 amounted to 2.58 carats per stone, valued at $792 per
carat. (First and second quarter 1999 valuation not available).
Trial mining on the Upper Terrace treated 46,666 tons of diamondiferous
gravel for the three months ending June 30, 2000 and 84,679 tons for the six
months ending June 30, 2000. (First and second quarter 1999, Nil). For the three
months ending June 30, 2000, this treatment yielded 34 stones with a mass of
79.98 carats with an average size of 2.35 carats per stone, valued at $1,151 per
carat. For the six months ending June 30, 2000, this treatment yielded 70 stones
with a mass of 175.74 carats with an average size of 2.51 carats per stone,
valued at $1,140. The grade is lower than expected. The treatment of a total of
343,144 tons of diamondiferous gravel since commencement of operations in 1998
through the second quarter of 2000 at the Grasdrif Deposit amounted to 0.43% of
the entire reserve.
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MONTROSE
During 1999 the Company completed its interpretation of the results of
its large diameter-drilling program conducted during 1998. The conclusion was
that diamonds, mainly gemstones, were found across the pipe at various levels.
It was therefore decided to begin preparations for a 5,000-ton bulk sample of
the pipe with the purpose of determining the actual grade of the deposit and the
value per carat of the diamonds. This information is required to complete a
feasibility study on the production potential of the Montrose Pipe. The Company
is in the process of completing its Environmental Management Program Report
(EMPR) for the bulk sample. During 2000 it is expected that the authorities will
approve the EMPR for the bulk sample and a permit will be received to conduct
the bulk sample. It is also expected that the option to acquire the property
will have to be extended to allow for the completion of the bulk sample during
2001.
GENERAL AND ADMINISTRATIVE EXPENSES
In line with management's continuing efforts to streamline overhead
costs, general and administrative expenses were reduced in the current quarter
by 15% and for the six months ending June 30, 2000 by 24%.
CURRENCY CONSIDERATION
The Company's mining properties, mining properties under development,
and mining equipment are all situated in the Republic of South Africa, where the
currency is the Rand. The re-evaluation of the Company's property and equipment
to reflect the average Rand/US$ exchange rate of ZAR6.6025 caused most of the
foreign currency translation adjustment of $518,508 for the six months ending
June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its activities to date through revenue derived
from diamond sales, the sale of its equity and securities as well as short-term
loan facilities.
During the first six months of 2000, the Company completed a private
placement of securities, raising $929,200 through the issuance of 3,086,000
shares of common stock and warrants to purchase an additional 3,086,000 shares
of common stock at prices ranging from $.20 to $.50 per share.
The Company believes that at the current levels of production with
budgeted targets being met in the future no additional working capital will be
required during the next 12 months.
Should any of the following events occur, additional working capital
might be needed during the next 12 months. The events are:
a) that the Caerwinning Deposit has negative cash flow from operations;
b) the trial mining on the Upper Terrace at the Grasdrif property continues in
an operating loss or negative cash flow.
The Company's belief concerning its working capital requirements are
based on certain assumptions concerning, among other things, the estimated grade
of its processed ore, average price per carat, scale of mining operations,
Rand-U.S. dollar exchange rate, and cost of production. If any of these
assumptions prove incorrect, the Company may require further additional capital.
Any such additional financing may require an additional pledge or mortgage of
the Company's properties and/or any production therefrom. There is, of course,
no assurance that satisfactory financing could be obtained. In addition to
financing individual and available projects, the Company may also borrow funds
from time to time for working capital and other general corporate purposes.
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FORWARD-LOOKING STATEMENTS
This report contains various forward-looking statements that are based
on the Company's belief as well as assumptions made by and information currently
available to the Company. When used in this report, the words `believe',
`expect', `anticipate', `estimate', and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks, uncertainties and assumptions, including, without limitation, that the
Company only recently commenced mining operations at the Caerwinning Property,
has not engaged in commercial mining operations at the Grasdrif Property, mining
risks in general, political risks associated with the Company's operations in
the Republic of South Africa, general economic conditions, currency
fluctuations, and estimates of costs of production. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated
or projected. The Company cautions potential investors not to place undue
reliance on any such forward-looking statements, all of which speak only as of
the date made.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
Inapplicable.
Item 2. Changes in Securities.
---------------------
During the first six months of 2000, a private placement took
place of 3,086,000 shares of common stock totaling $929,200. The following is a
list of each transaction of $.0005 par value common stock:
Date Name Number of Shares Total Amount
---- ---- ---------------- ------------
3-9-00 Rosemary Investments 875,000 $175,000
3-9-00 Nathan Plafsky 75,000 15,000
3-9-00 Cohen Family Limited Partnership 75,000 15,000
3-14-00 Stephen Radez 100,000 20,000
3-17-00 William Cohen 75,000 15,000
3-17-00 Betty Cohen 75,000 15,000
3-17-00 Nathan Plafsky 75,000 15,000
3-17-00 Donald G. Wood 184,000 36,800
3-20-00 Stephen Blau 50,000 10,000
3-20-00 John Sylvester 25,000 5,000
3-23-00 Jarrow Limited 75,000 15,000
3-23-00 Donald Wood 27,000 5,400
4-7-00 Donald Wood 60,000 12,000
4-13-00 Dandy Ltd. 275,000 55,000
6-13-00 Pierre De Villiers 20,000 10,000
6-16-00 Morton Siegler 20,000 10,000
6-19-00 Nacoma/Titan 1,000,000 500,000
Item 3. Defaults Upon Senior Securities.
-------------------------------
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Inapplicable.
-8-
Item 5. Other Information.
-----------------
Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
--------
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
Inapplicable.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Global Diamond Resources, Inc.
(Registrant)
Dated: July 31, 2000 By: /S/ JOHANN DE VILLIERS
--------------------------------
Johann de Villiers,
Chief Executive Officer
and Chief Financial Officer
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