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 September 30, 2001
[ ] 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
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(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 November 10, 2001, the Company had 59,863,678 shares of its
$.0005 par value common stock issued and outstanding.
PART 1 - FINANCIAL INFORMATION
PAGE
----
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet at September 30, 2001 (Unaudited)........3
Condensed Consolidated Statements of Operations for the three months
and nine months period ended September 30, 2001 and 2000 (Unaudited).......4
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 2001 and 2000 (Unaudited)..............................5
Notes to Condensed Consolidated Financial Statements (Unaudited)..............6
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GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)
September 30,
ASSETS 2001
-------------
Current assets:
Cash $ 144,480
Accounts receivable 7,261
Inventory 25,591
-------------
Total current assets 177,332
Deferred foreign tax asset 1,250,647
Mining properties and equipment 3,278,565
-------------
$ 4,706,544
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 669,543
Accrued liabilities 922,137
Note payable 54,323
-------------
Total current liabilities 1,646,003
Long-term debt 3,000,000
-------------
Total liabilities 4,646,003
-------------
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, 59,263,678 shares issued and outstanding 29,632
Additional paid-in capital 15,384,675
Accumulated deficit (12,227,913)
Unamortized stock award (27,340)
Accumulated other comprehensive income:
Foreign currency translation adjustment (3,098,513)
-------------
Total stockholders' equity 60,541
-------------
$ 4,706,544
=============
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 NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000
------------- ------------- ------------- -------------
Diamond Sales $ 25,419 $ 691,806 $ 1,497,066 $ 1,886,769
Production Expenses (431,314) (616,251) (1,354,742) (1,381,253)
Development and exploration expenses -- (261,101) -- (792,464)
Less diamonds recovered -- 153,689 -- 400,649
------------- ------------- ------------- -------------
Net development and exploration expense -- (107,412) -- (391,815)
Royalty (163) (34,591) (18,218) (94,339)
Selling, general and administrative expenses (224,069) (397,453) (908,855) (1,032,479)
------------- ------------- ------------- -------------
Operating loss (630,127) (463,901) (784,749) (1,013,117)
------------- ------------- ------------- -------------
Other
Loss on sale of fixed assets -- -- (16,910) --
Interest expense, net (116,614) (119,279) (353,066) (359,761)
------------- ------------- ------------- -------------
Loss before deferred foreign tax benefit (746,741) (583,180) (1,154,725) (1,372,878)
Deferred foreign tax benefit -- -- 88,804 --
------------- ------------- ------------- -------------
Net loss (746,741) (583,180) (1,065,921) (1,372,878)
Other comprehensive loss -
Foreign currency translation adjustment (400,223) (394,842) (822,104) (913,350)
------------- ------------- ------------- -------------
Comprehensive loss $ (1,146,964) $ (978,022) $ (1,888,025) $ (2,286,228)
============= ============= ============= =============
Basic and diluted income (loss) per share $ (.01) $ (.01) $ (.02) $ (.03)
============= ============= ============= =============
Weighted average number of shares outstanding 54,562,243 48,686,678 53,640,293 47,455,539
============= ============= ============= =============
See accompanying notes to consolidated financial statements.
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GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000
------------ ------------
Cash flows from operating activities:
Net income (loss) $(1,065,921) $(1,372,878)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 370,725 375,643
Amortization of stock award 5,852 --
Value of options issued for services 50,000 --
Loss on sale of assets 16,910 --
Decrease (increase) in trade accounts receivable (4,861) (429)
Decrease (increase) in prepaid expenses 1,508 --
(Increase) decrease in inventory 46,692 (532,483)
(Increase) in deferred foreign tax benefit (88,804) --
Increase (decrease) in accounts payable (60,464) 272,674
Increase (decrease) in accrued liabilities 310,724 182,842
Increase (decrease) in note payable (114,645) --
------------ ------------
Net cash used in operating activities (532,284) (1,074,631)
------------ ------------
Cash flows used in investing activities:
Proceeds from sale of assets 21,812 --
Additions to mining properties and equipment (11,316) (27,692)
------------ ------------
Net cash from (used) in investing activities 10,496 (27,692)
------------ ------------
Cash flows provided by financing activities:
Net proceeds from director's loan -- 57,876
Net proceeds from issuance of common shares 286,400 929,200
------------ ------------
Net cash provided by financing activities 286,400 987,076
------------ ------------
Effects of exchange rates on cash (7,313) (13,342)
------------ ------------
Net decrease in cash and cash equivalents (242,701) (128,589)
Cash and cash equivalents, beginning of period 387,181 182,100
------------ ------------
Cash and cash equivalents, end of period $ 144,480 $ 53,511
============ ============
See accompanying notes to condensed consolidated financial statements
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GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
September 30, 2001
(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
September 30, 2001
------------------
Mining property:
Caerwinning deposit, at cost $ 370,750
Less accumulated amortization (92,052)
------------
278,698
Grasdrif deposit, at cost 828,927
Less accumulated depreciation (111,681)
------------
717,246
Mining equipment, at cost: 3,170,651
Less accumulated depreciation (891,543)
------------
2,279,108
Office equipment, at cost: 49,197
Less accumulated depreciation (45,684)
------------
3,513
------------
$ 3,278,565
============
(3) Inventory consists primarily of diamonds on hand at September 30, 2001.
(4) Certain income statement accounts were reclassified in 2001 to reflect
the change in our Grasdrif deposit from exploration to production
effective at the beginning of the year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
BACKGROUND
The Company is engaged in diamond exploration and mining. We have
acquired the rights to two mining properties, the Grasdrif Deposit and the
Caerwinning Deposit located in the Republic of South Africa.
In the June quarterly report management reported that production would
be expected to decline at both properties but more significantly at Caerwinning
as a result of the reclassification of the resources. The decline in production
led to further pressure on the company's already stretched cash resources. On
September 5, 2001 Standard Bank of South Africa applied for and was granted a
final order of liquidation of Global Diamond Resources (SA) (Pty) Ltd. for an
outstanding amount of approximately $150,000. All operations ceased on September
5, 2001. The company is vigorously contesting the order on the grounds that it
was never given an opportunity to respond to the court order. The major
shareholders provided the funds to repay the amount owing to Standard Bank on
September 7, 2001.
Following the September 11, 2001 attack on New York and Washington the
US Treasury Department froze the assets of one of the company's directors and
major shareholders, Mr. Yassin Kadi. It is alleged that Mr. Kadi provided funds
to terrorist organizations. Mr. Kadi denies the allegations and is actively
taking legal action to clear his name and was granted the right to bring his
case to the British High Court before the end of the year. Until the order is
lifted Mr. Kadi's shares in the company will not be transferred to any other
party.
The shareholders, management and employees of the company all strongly
and in the most emphatic way condemn terrorism and fully support the conviction
and punishment of anyone found guilty of any acts of terrorism or the funding
thereof, but believe in the well established legal principle that one is
presumed innocent until proven guilty.
RESULTS OF OPERATIONS
CAERWINNING
Our mining and exploration operations have been conducted on the T2
terrace at the Caerwinning property. The gravel at Caerwinning occurs in three
distinct terraces, of which the oldest is located the furthest from the present
riverbed. The terraces are named T1, T2 and T3 with T1 being the oldest. During
the second quarter of 2001 we completed the mining of the T2 terrace. We have
completed a drilling program covering the entire T1 terrace east of the main
road. The results of this drilling program indicate that the T1 terrace contains
21.5 million tonnes of gravel as opposed to the T2 terrace, which contained 1.2
million tonnes of diamondiferous gravel. Reverse circulation drilling and
selective bulk samples during the third and fourth quarter of 2001 will allow
for the classification of the gravel on the T1 terrace into Measured, Indicated
or Inferred Mineral Resources. This classification would allow for the
development of a mine plan that should yield consistent profitable results.
The following chart details production information for the three months ended
September 30, 2001 and 2000 and for the nine months ended September 30, 2001 and
2000:
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, 2001 September 30, 2000 September 30, 2001 September 30, 2000
------------------ ------------------ ------------------ ------------------
Number of tons treated 44,747 161,639 170,612 421,637
Number of carats yielded 139 1,377 1,325 4,155
Total $ Value of production* $37,955 $508,982 $462,082 $1,699,349
Grade cpht .31 .85 .78 .99
$ Value per Carat $273 $370 $349 $409
Direct mining profit/(loss) ($242,666) $40,964 ($319,332) $411,177
* May not reflect actual sales value due to changing inventory levels,
exchange rates and diamond pricing.
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Tonnage throughput at Caerwinning during the quarter ended September 30, 2001
and the resulting diamond production were down from the first and second quarter
of 2001. This is due to the completion of operations on the T2 terrace.
We expect to commence with the drilling of the two magnetic anomalies which were
found at Caerwinning during the third and fourth quarters of 2001.
GRASDRIF
Exploration and trial mining activities continued at the Grasdrif
Deposit during the third quarter of 2001. The following chart details production
information for the three months ended September 30, 2001 and 2000 and for the
nine months ended September 30, 2001 and 2000:
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
------------- ------------- -------------- -------------
2001 2000 2001 2000
---- ---- ---- ----
Number of tons treated 19,316 85,616 144,216 220,170
Number of carats yielded 132 152 628 428
Total $ value of production* $69,701 $183,605 $1,215,101 $418,297
Grade cpht .68 .18 .44 .19
$ Value per Carat $528 $1,211 $1,935 $976
Direct mining profit/(loss) ($163,066) ($107,412) $443,438 ($391,815)
* May not reflect actual sales value due to changing inventory levels,
exchange rates and diamond pricing.
Grasdrif has yielded several diamonds with a mass in excess of 10 carats, the
largest being a diamond of 54.71 carats. These diamonds were recovered at
various locations on the property. Reverse circulation drilling and selective
bulk samples during the third and fourth quarter of 2001 will allow for the
classification of the gravel at Grasdrif into Measured, Indicated or Inferred
Mineral Resources. This classification would allow for the development of a mine
plan that should yield consistent profitable results.
MONTROSE
As a result of the liquidation order regarding Global Diamond
Resources (SA) (Pty) Ltd., and the shortage of cash resources the option over
the Montrose property lapsed.
FINANCIAL RESULTS
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
----------------- ----------------- ------------------ -----------------
Diamond Sales $25,419 $691,806 $1,497,066 $1,886,769
Operating Profit/(Loss) ($630,127) ($463,901) ($784,749) ($1,013,117)
Net Profit/(Loss) ($746,741) ($583,180) ($1,065,921) ($1,372,878)
Earnings/(Loss) per Share ($0.01) ($0.01) ($0.02) ($0.03)
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GENERAL AND ADMINISTRATIVE EXPENSES
Management is continuing its efforts to streamline overhead costs and
general and administrative expenses. The selling, general and administrative
costs incurred during the first nine months of 2001 was $908,855 as compared to
$1,032,479 for the first nine months of 2000. These amounts include certain
non-recurring legal expenses amounting to $158,954 for the nine months ended
September 30, 2001 and $79,900 for the corresponding period in 2000. For the
three months ended September 30, 2001, general and administrative expenses were
$224,069, which included no legal expenses, as compared to $397,453, which
included non-recurring legal expenses of $12,669 for the three months ended
September 30, 2000.
CURRENCY CONSIDERATION
Our mining properties, mining properties under development, and mining
equipment are all situated in the Republic of South Africa, where the currency
is the Rand. Under current accounting pronouncements, the Company is required to
translate the period end assets and liabilities of its South African subsidiary
at the current exchange rate, while maintaining equity accounts at the exchange
rate in place at the time of the original transaction. The resulting changes in
the balance sheet accounts due to exchange rate fluctuation must be accumulated
and accounted for in the equity section as foreign currency translation reserve.
The translation of our property and equipment to reflect the Rand/US$ exchange
rate of 9.0201 at September 30, 2001 caused most of the foreign currency
translation adjustment of $822,104 for the nine months ended September 30, 2001.
The accumulated foreign currency translation adjustment reflected in the equity
section of the balance sheet was $3,098,513 at September 30, 2001.
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.
We believe that in the event of the liquidation order being set aside
we will require additional working capital of approximately $1,500,000 to
satisfy our working capital requirements for the next 12 months. The company's
major shareholders have expressed their support for the company and have already
contributed approximately $250,000 to this end. The increase in working capital
would be required to repay all the outstanding creditors, other than interest
due to IPCM, who as a major shareholder has indicated its support of the company
by delaying demands for the payment of the interest due. Should any of the
following events occur, additional working capital might be needed during the
next 12 months. The events are:
a) the trial mining at the Grasdrif property returns to an operating loss
or negative cash flow.
b) Reclassification of resource costs exceed the operating budget.
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 there from. 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.
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
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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 third quarter of 2001, a private placement took
place of 6,092,000 shares of common stock totaling $286,400. The following is a
list of each transaction of $.0005 par value common stock:
Date Name Number of Shares Total Amount
---- ---- ---------------- ------------
9-10-01 LIWA Diamond Company Ltd. 2,000,000 $100,000
9-10-01 New Diamond Holdings Ltd. 2,000,000 100,000
9-10-01 Buckmore Limited 2,080,000 85,905
9-10-01 Roy Graf 12,000 495
Item 3. Defaults Upon Senior Securities.
-------------------------------
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Inapplicable.
Item 5. Other Information.
-----------------
Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
--------
Inapplicable.
(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: November 14, 2001 By: /s/ JOHANN DE VILLIERS
-----------------------------
Johann de Villiers,
Chief Executive Officer
and Chief Financial Officer
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