<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED APRIL 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD OF
_________ TO _________.
COMMISSION FILE NUMBER: 0-15859
RICH COAST INC.
---------------
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 91-1835978
------------------------------ -------------------
State or other jurisdiction of (I.R. S. Employer
incorporation or organization Identification No.)
10200 FORD ROAD, DEARBORN, MICHIGAN 48126
-----------------------------------------
(Address of principal executive offices)
Issuer's telephone number: 313-582-8866
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
-----------------------------
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [ ]
Check here if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $1,897,155.
At July 14, 1997 there were 16,559,922 shares of the Registrant's no par value
Common Stock ("Common Stock"), the only outstanding class of voting securities,
outstanding. Based on the closing price of the Common Stock as reported by
Nasdaq on July 14, 1997, the aggregate market value of Common Stock held by
non-affiliates of the Registrant was approximately $4,139,981.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [x]
<PAGE> 2
RICH COAST INC.
FORM 10-KSB
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General Development of Business.
Rich Coast Inc. (the "Company" and/or "Rich Coast") is a non-hazardous waste
treatment facility specializing in recycling of waste oils. The Company is
domiciled in Delaware and operates under the General Corporation Law of the
State of Delaware. Rich Coast's executive office is located at 10200 Ford Road,
Dearborn, MI 48126. All of Rich Coast's operations are located in Dearborn,
Michigan at 10200 Ford Road and at 6011 Wyoming Avenue.
Until 1992, the Company's primary focus was exploration and development of
natural resource properties. The Company was initially incorporated in the
Province of British Columbia and through 1996 operated under the name of Rich
Coast Resources Ltd. Effective February 25, 1997 the Company was reincorporated
in Delaware under the name Rich Coast Inc.
In 1992, the Company began activities in the environmental industry. Pursuant
to an agreement dated August 31, 1992, the Company, through its wholly-owned
subsidiary Rich Coast Resources Inc. ("RCRI"), a Michigan corporation, formed
"Waste Reduction Systems" ("WRS"), a general partnership under the Michigan
Uniform Partnership Act, together with Integrated Waste Systems, Inc. ("IWS")
of Bloomfield Hills, Michigan and The Powers Fagan Group, Inc. ("P & F") of
East Lansing, Michigan.
The purpose of the partnership was to design, develop, construct and operate a
sludge processing system and/or bulk distillation and fractionalization system
for waste processing. On July 9, 1993, Waste Reduction Systems commenced
commercial operation of its Dearborn, Michigan plant. The plant was designed to
treat non-hazardous industrial sludge produced by the many industrial plants
located in Michigan and nearby States.
Pursuant to an Agreement of Merger, the Company acquired WRS's operations by
merger of two of its partners, IWS and P & F, into its third partner, RCRI (the
"Merger"), in a transaction intended to qualify as a tax-free reorganization.
The Merger was effective as of December 26, 1995, the date on which the
Certificate of Merger was accepted by the Michigan Department of Commerce. For
accounting and certain other purposes, the Merger was effective as of October
31, 1995.
In connection with the Merger, three of the six directors resigned from the
Company's Board of Directors effective January 15, 1996. Robert W. Truxell and
James P. Fagan, principals of IWS and P & F respectively, were elected as
directors and officers of the Company. See "Management."
<PAGE> 3
Following the Merger, the Company's principal operations have been conducted
through RCRI and its activities and property interests in the natural resource
industry have been eliminated.
On January 16, 1996, the Company acquired a new plant and processing facility
located in Dearborn, Michigan from Mobil Oil Corporation. This acquisition
increased the Company's oil processing capacity by approximately ten times. As
part of this acquisition the Company acquired more than nine million gallons of
tank capacity which, when combined with the increased processing capacity, will
allow the Company to pursue much larger contracts. The Company also acquired a
17-mile product pipeline from the facility to the Detroit River, which gives
the Company access to the St. Lawrence Seaway and the Great Lakes Waterway
System. This will allow the Company to ship and receive product from waste
generators and customers throughout the world. To fund the acquisition the
Company completed a $2.0 million senior secured debt financing with a private
investor. The five-year financing bears interest at 10% and may be prepaid at
any time without penalty.
Effective January 1, 1997 James P. Fagan was appointed as President and Chief
Executive Officer replacing Robert W. Truxell as Chief Executive Officer. Mr.
Truxell remains as Corporate Chairman and Chairman of the Board of Directors.
Current employment at Rich Coast's Dearborn location consists of three
executive officers, five administrative and sales personnel plus fourteen
operating employees for total workforce of twenty two people. The operating
personnel are not unionized. Normal operations are conducted ten hours per
weekday and a half shift on Saturdays.
Business of Rich Coast Inc.
Rich Coast Inc. conducts business through its three subsidiaries; Rich Coast
Oil, Inc.; RCRI (d/b/a Waste Reduction Systems, Inc.); and Rich Coast Pipeline,
Inc. Present plans are for Rich Coast Oil, Inc. to receive all oily waste
streams for treatment to separate and purify the oil and to dispose of the
remaining sludge and water. The Rich Coast oil site will also house the
biological treatment operations. Waste Reduction Systems, Inc. will receive all
other non-hazardous wastes for treatment and disposal at its Ford Road site.
Rich Coast Pipeline, Inc. is inactive at present but will be utilized when
volume justifies.
Rich Coast Oil, Inc. Operations are conducted at 6011 Wyoming Ave., Dearborn,
Michigan at the 17 acre site acquired from Mobil Oil Corporation on January 16,
1996. Currently, a relatively small percentage of incoming non-hazardous liquid
waste materials are unloaded, stored and processed at the Wyoming Ave. site.
Installations are underway which will convert a one million gallon tank for
biological treatment of liquid organic wastes prior to discharge to the Detroit
sewerage system.
In addition, plans are underway to modify an existing truck maintenance
building to accommodate four forty thousand gallon tanks which will be used to
separate oil from waste streams and to treat the oil so that, initially, it can
be sold to suppliers of cutting oil and, ultimately, directly to users of
cutting oil. Total funding required for completion of both the biological
treatment system and the oil recycling system is not yet available. A
convertible note is being offered by the Company to
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<PAGE> 4
raise $800,000. This note will pay a 10% interest rate and be converted into
common stock at a 40 percent discount to the market price after eighteen
months. Resultant funds are expected to be sufficient to complete the
biological and oil systems.
Waste Reduction Systems, Inc. Operations are conducted at 10200 Ford Road,
Dearborn, Michigan. The total site area comprises approximately 3.5 acres and
includes a 23,000 square foot steel and brick building in which the treatment
plant is located. The site has ample parking and room for tanker trucks to
maneuver. WRS entered into a 7 year land contract in 1993 for the building at a
rate of $4,754 per month and a renewable 7 year lease which will cause the land
to be titled to WRS for $1.00, either after satisfactory clean-up by others or
after 91 years. Non-hazardous wastes in the form of sludges, oily wastes, drum
and pallet loads, waste waters and leachates are treated at Ford Road for
either disposal to the Detroit sewerage system, the Browning-Ferris Industries
landfill at Arbor Hills, Michigan or as a recycled oil product. Capacity at the
Ford Road site presently is limited due to incoming truck traffic. In the
future, oily wastes will be diverted to the Wyoming Ave. site, as will be much
of the waste waters and leachate. Ford Road will expand its capability to
process wastes that require shredding and for wastes that require a pit or
mixing floor for processing prior to disposal. Longer term the Company expects
to consolidate all Michigan operations at its Wyoming Ave. site.
Rich Coast Pipeline, Inc. The 17 mile long pipeline from Rich Coast's Wyoming
Ave. site to Mobil Oil Corporation's Woodhaven oil terminal was purchased
knowing that some repairs probably would be required.
The price of the pipeline sale to Rich Coast was reduced as consideration for
repairs to be paid for by Rich Coast Inc. Before the pipeline is repaired, Rich
Coast must be assured that a viable terminalling agreement can be negotiated
with Mobil Oil Corp. An agreement exists at present between Mobil and Rich
Coast Resources, Inc. which was and still is a corporation domiciled in
Michigan and controlled by Rich Coast Inc.; however, the existing terminalling
agreement contains terms that are unacceptable to Rich Coast and would make
utilization of the pipeline uneconomical. When and if an acceptable
terminalling agreement can be reached the Company still will require a long
term contract with several large volume users to justify barge shipments
throughout the Great Lakes Region and the St. Lawrence Seaway. When the Wyoming
Ave. facility is fully on stream it is anticipated that pipeline repairs and
the terminalling agreement will be pursued.
Facility Value, Potential and Objectives. When the Mobil Oil terminal came on
the market, Rich Coast was faced with an unprecedented opportunity but without
adequate funding to acquire and facilitate the Mobil Oil property. Realizing
that to replicate the Mobil Oil terminal at a later date would be prohibitively
expensive and time consuming, Rich Coast borrowed $2,000,000 and acquired
Mobil's 17 acres in the heart of the automobile industry. This acreage included
12 storage tanks with over nine million gallons of capacity, an administration
building, a truck maintenance building, six tanker truck loading and unloading
racks which connect to all tanks, a one million gallon per day sewer permit, a
supportive community which allows industrial zoning and expansion permits plus
the pipeline to the Detroit River which gives Rich Coast the opportunity to
service the entire east coast of the United States.
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<PAGE> 5
Rich Coast's 17 acre Wyoming Ave. site has had 58 borings analyzed by the State
of Michigan and has received a "covenant not to be sued" by the State of
Michigan. This environmental status is extremely attractive to all major
automotive industry suppliers in the area and, of course, to Ford, General
Motors and Chrysler, inasmuch as they avoid liability for any pollution that
existed at the time borings were made. Rich Coast has successfully passed
customer audits conducted recently that allow the Company to compete for the
oily wastes coming out of the auto industry. The volume of potential business
makes an increase in processing capability necessary and attainment of this
capacity is a top priority and objective for Rich Coast. It is anticipated that
additional funds required for the expanded processing capability will come from
subscriptions to the convertible note described earlier. The biological
treatment system now nearing completion is an excellent complementary system to
the waste oil treatment in that the oily water separated during the treatment
process can go directly to the bio system and then to the sewer with assurances
that even the more stringent discharge regulations now being considered by the
EPA can be met. Rich Coast envisions a worldwide demand for its combined
systems for oily wastes.
When Rich Coast completes its conversion of the gasoline terminal to a
non-hazardous waste disposal and oil recycling facility, it will become a
uniquely competitive and high quality oil recycling facility. With its
proprietary processes and a facility that would be extremely expensive and time
consuming to replicate, Rich Coast fully expects to dominate its market area
when this conversion is complete.
ITEM 2. DESCRIPTION OF PROPERTY
See discussion above Under "Business of Rich Coast Inc."
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding and none of its
property is the subject of any legal proceeding. The litigation previously
pending, involving Daniel A. Gillett and DM Capital v Rich Coast Resources,
Ltd. and Robert Truxell was settled by an Agreement reached in December, 1996
wherein Daniel A. Gillett was paid $20,000 in cash and 40,000 shares of common
stock of Rich Coast Resources, Ltd. at date of signing with 200,000 additional
shares issued upon the Company receiving approval by the British Columbia
Securities Commission of its re-domicile request. A future and final payment of
$100,000 in cash will be paid to Mr. Gillett upon the Company's receipt of a
minimum of $1,000,000 of additional gross investment capital. The settlement
with Mr. Gillett is payment for his services in securing the $2.0 million debt
financing for purchase of the Mobil Oil Corporation terminal in Dearborn,
Michigan.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the shareholders, through the
solicitation of proxies or otherwise, during the fourth quarter of fiscal 1997.
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<PAGE> 6
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Market Information. The Common Stock of the Company is listed on the NASDAQ
Small Cap Market under the trading symbol "KRHC". The following table sets
forth the high and low market prices of the Company's Common Stock as reported
by NASDAQ during the periods indicated. The following prices represent
inter-dealer quotations without retail markups, markdowns, or commission and do
not necessarily represent actual transactions.
NASDAQ Small Cap Market.
<TABLE>
<CAPTION>
High Bid $ Low Bid $
---------- ---------
Calendar
--------
<C> <C> <C>
1997 Second Quarter (4/1 - 6/30) .34 .25
First Quarter (1/1 - 3/31) .44 .20
1996 Fourth Quarter (10/1 - 12/31) .72 .31
Third Quarter (7/1 - 9/30) .75 .59
Second Quarter (4/1 - 6/30) 1.00 .6875
First Quarter (1/1 - 3/31) .96875 .625
1995 Fourth Quarter (10/1 - 12/31) 1.0312 .50
Third Quarter (7/1 - 9/30) 1.25 .50
</TABLE>
The closing price of the Common Stock on NASDAQ on July 14, 1997 was $0.25.
Holders. As of July 14, 1997, there were approximately 3,700 holders of the
Company's Common Stock, and the number of shares issued and outstanding was
16,559,922.
Dividends. During the two most recent fiscal years, the Company has not
declared or paid cash or other dividends on its Common Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company entered into a new development stage when Rich Coast Resources,
Ltd., Integrated Waste Systems, and the Powers Fagan Group merged with an
effective financial start date of October 31, 1995. At that time the main
business focus became treatment of non-hazardous wastes. All remaining mining,
gas and oil related businesses were disposed of in fiscal year 1997 without any
gain or loss to the Company.
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<PAGE> 7
As a result of acquiring the Mobil Oil Corporation terminal in Dearborn, MI and
redomiciling of the Company from British Columbia, Canada to Delaware, U.S.A.,
the Company reorganized into the parent company, Rich Coast Inc. and four
subsidiary C Corporations identified as:
Rich Coast Resources, Inc.
RichCoast Oil, Inc.
Waste Reduction Systems, Inc.
Rich Coast Pipeline, Inc.
FISCAL YEARS ENDED APRIL 30, 1997 AND 1996
Revenues and Results of Operations
Revenues have increased by 83% since 1995 and increased from $1,741,352 in 1996
to $1,897,155 in 1997 even though operations were partially shut down on
occasions as they were transferred from the Company's Ford Rd. location to its
new terminal location on Wyoming Ave. in Dearborn, MI.
The Company's loss increased substantially from $1,420,919 in 1996 to
$1,928,329 in 1997. Costs associated with the merger, restructuring and
redomiciling along with added overhead from the Mobil terminal acquisition
account for a large portion of the losses in 1997. Those losses also include
facilities and services acquired through an exchange of common shares. The
losses were incurred to transform the Company into an effective organization
and to provide for essential services and new facilities. Management expects to
attain a positive monthly net income before the end of fiscal 1998, however,
the Company's business continues to be speculative.
The Company will continue to pursue equity financing to complete its oil
recycling processes and to increase its capacity. Prospects for raising the
required funds are promising; however, without additional funding there could
be doubt as to the Company's ability to continue to operate in the normal
course of business.
Salaries and Wages/Consulting Services
Salaries and wages increased by $147,935 from 1996 but remain $121,694 under
1995 costs. Consolidation of operations at Dearborn has resulted in a long term
savings but non-recurring high costs in consulting and legal services of over
one million dollars have overshadowed the current advantages of consolidation.
Audit, Accounting and Legal
The unusually high 1997 cost of $213,911 reflects the one time cost of merger,
acquisition of the Mobil property, and redomiciling to Delaware, U.S.A. Costs
of $58,462 experienced in 1995 are close to what the Company expects to be
normal costs.
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<PAGE> 8
Interest and Bank Charges
The increase in expenses from 1996 of $157,666 is more than accounted for by
the interest expense of the loan to purchase the Mobil terminal and will
continue until the five year loan is paid off.
Liquidity and Capital Resources
The Company is in a negative cash flow condition and will continue to be until
additional facilities can be financed, installed and placed in operation at its
recently acquired Mobil terminal. Deficits have been covered by private
placements, issuance of convertible debentures, factoring of receivables and by
an increase in accounts payable.
Subsequent to year end, the Company has received funds from the sale of
convertible notes described earlier. Proceeds from that financing will fund
expansion of the Company's business plan which forecasts significantly lower
losses in the first half of 1998 and profitability before the end of 1998.
Convertible note funds will be dedicated to completion of the biological
treatment system and two new oil process systems. Resultant revenues are being
depended upon to turn the Company profitable in 1998.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements and Supplementary Data following the signature page of
this Annual Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The names, ages, municipalities of residence, positions with the Registrant,
and principal occupations of the directors and executive officers of the
Registrant as of July 14, 1997 are as follows:
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<PAGE> 9
<TABLE>
<CAPTION>
NAME, AGE AND
MUNICIPALITY RESIDENCE OFFICE PRINCIPAL OCCUPATION
- ---------------------- ------ --------------------
<S> <C> <C>
ROBERT W. TRUXELL Chairman of the Board and Chairman and Chief Executive
Bloomfield Hills, MI Director since January 1996 Officer of Integrated Waste Systems,
Age: 72 1992-1995; President of Microcel,
Inc., 1990-1992; Vice-President of
General Dynamics, 1983-1990
JAMES P. FAGAN President and Director since President and Chief Operating
Michigan January 1996; Chief Okemos, Officer of Waste Reduction
Age: 46 Executive Officer since Systems 1992-1995; Vice-President
January 1997 of The Powers Fagan Group,
Inc.1990-1996
THORNTON J. DONALDSON Director since June 1984; Self-employed financial and mining
West Vancouver, B.C. Past President of the consultant; President of United
Age: 67 Company (June 1984 - Corporate Advisors Ltd. and Director
January 1996) of BYG Natural Resources Inc. (TSE
listed)
GEOFFREY HORNBY Director since June 1984 Geological Engineer - 10 years
Vancouver, B.C. experience in the mining field and 23
Age: 70 years experience in the forest industry
RANDALL POW Director since July 1993 and Consulting in investor relations for
Vancouver, B.C. Secretary since February 1994 public companies
Age: 46
MICHAEL M. GRUJICICH Chief Financial Officer and Director Sales Canada - WRS
Dearborn, MI Treasurer since August 1996 1993-1996, Director MRPII, General
Age: 54 Dynamics Land Systems Division
1983-1993, Divisional Controller -
Rockwell International 1981-1983
</TABLE>
The following are members of the Company's Audit Committee:
Thornton J. Donaldson
Geoffrey Hornby
Ronald Waltz, Comptroller, Rich Coast Inc.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16 (a) of the Securities Exchange Act of 1934 requires the Company's
directors and certain of its officers to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission and
Nasdaq. Executive officers and directors are required by SEC regulations to
furnish the Company with copies of all Section 16 (a) forms they file. Based
solely on a review of the copies of such forms furnished to the Company and
written representations
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<PAGE> 10
from the Company's executive officers and directors, the Company notes that its
directors and officers are in compliance.
ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION AND OTHER BENEFITS OF EXECUTIVE OFFICERS
The following table sets out the compensation received for the fiscal years
ended April 30, 1995, 1996, and 1997 in respect to each of the individuals who
were the Company's Chief Executive Officer at any time during that period and
the Company's other four most highly compensated executive officers whose total
salary and bonus exceeded $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------- --------------------------------------------
Awards Payouts
--------------------------- ---------
Restricted
Securities Shares or All other
Other Annual Under Option/ Restricted LTIP Compen-
Name and Salary Bonus Compensation SAR's granted Share Units Payouts sation
Principal Position (a) Year (b) ($) (c) ($) (d) ($) (e) (#) (f) ($) (g) ($) (h) ($) (i)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert W. 1997 108,750 -0- -0- 100,000 360,399 -0- -0-
Truxell/ CEO 1996 74,917 -0- -0- 400,000 -0- -0- -0-
Thornton J. 1997 8,800 -0- -0- 10,000 -0- -0- -0-
Donaldson 1996 30,000 -0- -0- 200,000 -0- -0- -0-
President/ CEO 1995 30,000 -0- -0- -0- -0- -0- -0-
James P. Fagan
CEO 1997 117,873 -0- -0- 100,000 180,200 -0- -0-
President 1996 105,290 -0- -0- 400,000 -0- -0- -0-
</TABLE>
Agreements with Management
As part of the Agreement of Merger dated October 31, 1995, the Company entered
into an Employment Contract with Robert W. Truxell pursuant to which he is
compensated for serving as the Company's Chief Executive Officer and Chairman
of the Board of Directors commencing in January 1996. Under the contract, Mr.
Truxell receives a salary of $150,000 per year until January 1, 1997 at which
time he will resign as Chief Executive Officer but will continue as Chairman of
the Board at a salary of $125,000 per year for an additional five years.
As part of the Agreement of Merger dated October 31, 1995, the Company entered
into an Employment Contract with James P. Fagan pursuant to which he was
compensated for serving as
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<PAGE> 11
the Company's President and Chief Operating Officer commencing in January 1996.
Under the contract, Mr. Fagan received a salary of $125,000 per year until
January 1, 1997 at which time he became the Company's President and Chief
Executive Officer.
Pursuant to Mr. Truxell's Employment Contract, during fiscal 1996 the Board of
Directors of the Company authorized the issuance of 360,399 common shares under
the Company's 1995 Incentive Compensation Plan (the "1995 Plan"), subject to
certain conditions, to Robert W. Truxell and his wife, Linda C. Truxell, for
past services rendered by Mr. and Mrs. Truxell on behalf of Waste Reduction
Systems, Inc. prior to the Company's merger with WRS effective October 31,
1995. Such services were valued at $234,625. The issuance of such shares is
subject to the Company first filing a registration statement on Form S-8 with
the Securities and Exchange Commission registered such shares.
Subsequent to April 30, 1996, the Board of Directors authorized the issuance of
180,200 common shares under the plan to James P. Fagan as compensation for his
services in connection with the company's acquisition of the terminal facility
from Mobil Oil Corporation. Such services were valued at $117,310. The issuance
of such shares is subject to the Company first filing a registration statement
on Form S-8 with the Securities and Exchange Commission registering such
shares.
Option/Stock Appreciation Rights ("SAR") Grants during the
most recently completed Fiscal Year
The following table sets out the stock options granted by the Company during
the most recently completed fiscal year to the Named Executive Officers of the
Company.
Option/SAR Grants in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Market Price on Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date of Grant Date
- ----------------- ------------ ------------ ---------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Truxell 100,000 10.0% $.75 $.75 05/09/2001
James P. Fagan 100,000 10.0% $.75 $.75 05/09/2001
</TABLE>
Aggregated Option/SAR Exercises in Last Financial Year
and Fiscal Year-End Option/SAR Values
The following table sets out all Option/SAR exercises by the Named Executive
Officers during the most recently completed fiscal year and the Option/SAR
values for such persons as of the end of the most recently completed fiscal
year.
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<PAGE> 12
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- --------------------------- -------------------- ----------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
Robert W. Truxell -0- -0- 500,000 $ -0-
all exercisable
James P. Fagan -0- -0- 500,000 $ -0-
all exercisable
</TABLE>
COMPENSATION OF DIRECTORS
The following table summarizes options granted during the most recently
completed fiscal year to the Directors of the Company (excluding the Named
Executive Officers):
<TABLE>
<CAPTION>
Market Value of
% of Total Options Securities
Name of Director Securities Granted to All Exercise or Underlying Options
and Officer at Under Options Employees in the Base Price on the Date of Grant Date of Expiration
Fiscal Year-End Granted (#) Fiscal Year ($/Securities) ($/Security) Grant Date
- ---------------- ------------- ------------------ -------------- -------------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Randall Pow 10,000 1% $.25 $.25 09/08/96 09/08/2001
</TABLE>
No pension or retirement benefit plan has been instituted by the Company and
none is proposed at this time and there is no arrangement for compensation with
respect to termination of the directors in the event of change of control of
the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the knowledge of the Management of the Company the following tables set
forth the beneficial ownership of the Company's Common Stock as of July 14,
1997 by each Director and each Executive Officer named in the Summary
Compensation Table, and by all directors and Executive Officers as a group:
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<PAGE> 13
<TABLE>
<CAPTION>
NAME OF
BENEFICIAL OWNER/ SHARES PERCENT
NAME OF DIRECTOR/ BENEFICIALLY OF
IDENTITY OF GROUP OWNED CLASS
- ----------------- ----------------- --------
<S> <C> <C>
ROBERT W. TRUXELL 1,883,200 (1) 11.37%
Chairman/Director
JAMES P. FAGAN 808,400 (2) 4.88%
President/CEO/Director
THORNTON J. DONALDSON 233,856 (3) 1.41%
Director
GEOFFREY HORNBY 4,192 .03%
Director
RANDALL POW 210,000 1.27%
Director/Secretary
ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP 3,139,648 (5) 18.96%
- ---------------------------
</TABLE>
(1) Includes: (i) 1,383,200 shares held jointly; (ii) currently
exercisable options to purchase 400,000 common shares at $0.50 per
share; and (iii) currently exercisable options to purchase 100,000
shares at $0.75 per share. Does not include 360,399 common shares to
be issued to Mr. and Mrs. Truxell for services rendered. See
"Executive Compensation".
(2) Includes currently exercisable options to purchase: (i) 400,000 common
shares at $0.50 per share; and (ii) 100,000 common shares at $0.75 per
share. Does not include 180,200 common shares to be issued to Mr.
Fagan for services rendered.
(3) Includes currently exercisable options to purchase 200,000 common
share at $1.00 per share and 10,000 common shares at $0.25 per share.
(4) Randall Pow holds currently exercisable options to purchase 200,000
common shares at $1.00 per share and 10,000 common shares at $0.25 per
share.
(5) Includes securities reflected in footnotes 1-4.
To the knowledge of the Directors and Senior Officers of the Company, as of
July 14, 1997, there are no persons and/or companies who or which beneficially
own, directly or indirectly, shares
-12-
<PAGE> 14
carrying more than 5% of the voting rights attached to all outstanding shares
of the Company, other than:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
<S> <C> <C>
Robert W. and Linda C. Truxell 1,883,200 (1) 11.37%
10200 Ford Road
Dearborn, MI 48126
Alan Moore 3,600,000 (2) 21.74%
9441 LBJ Freeway
Suite 500
Dallas, TX 75243
- ---------------------------
</TABLE>
(1) Includes: (i) 1,383,200 shares held jointly; (ii) currently
exercisable options to purchase 400,000 common shares at $0.50 per
share; and (iii) currently exercisable options to purchase 100,000
shares at $0.75 per share. Does not include 360,399 common shares to
be issued to Mr. and Mrs. Truxell for services rendered. See
"Executive Compensation."
(2) Consists of currently exercisable warrants to purchase 3,600,000
common shares at $0.30 per share on or before January 10, 2006.
All percentages in this section were calculated on the basis of outstanding
securities plus securities deemed outstanding pursuant to Rule 13d-3 (d)(1)
under the United States Securities Act of 1934.
There are no arrangements or agreements pledging securities which could in the
future result in a change of control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None of the directors or executive officers of the Company, or any associate or
affiliate of such person or company, has any material interest, direct or
indirect, in any transaction during the past year or any proposed transaction
which has materially affected or will affect the Company.
PART IV
ITEM 14. FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS AND REPORTS ON
FORM 8-K
(a) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS:
-13-
<PAGE> 15
(1) FINANCIAL STATEMENTS - APRIL 30, 1997 AND THE FISCAL YEARS
ENDED APRIL 30, 1996 AND 1997
a) Index to Financial Statements;
b) Auditor's Report to the Shareholders;
c) Comments by Auditors for U.S. Readers on Canada-U.S.
Reporting Conflict;
d) Consolidated Balance Sheets;
e) Consolidated Statements of Operations;
f) Consolidated Statements of Deficit;
g) Consolidated Statements of Changes in Financial
Position;
h) Notes to Consolidated Financial Statements.
(2) SCHEDULES
Schedules are omitted as the information is not required or not
applicable, or the required information is shown in the financial
statements or notes thereto.
(3) EXHIBITS
The Exhibits listed in the Exhibit Index at Item 14(c) are filed as
part of this Annual Report.
(b) REPORTS ON FORM 8-K No reports on Form 8-K were filed during the last
quarter of the fiscal year covered by this report.
(c) EXHIBITS
<TABLE>
<C> <C>
2.1 Agreement of Merger dated October 31, 1995 between RCRL,
RCRI, IWS, Powers/Fagan, WRS and others. (2)
2.2 Certificate of Merger effective December 26, 1996 issued by
the Secretary of the State of Michigan. (3)
3.(i) Articles of Incorporation of Rich Coast Inc. (6)
3.(ii) Bylaws of Rich Coast Inc. (6)
10.1 Terminal Sales Agreement between Mobil Oil Corporation and
the Company. (P) Exhibits and Schedules, as listed following
the Table of Contents of this Agreement, are omitted from
this filing but will be furnished supplementally to the
Commission upon request.
10.2 Agreement of Sale and Purchase - Dearborn Products Pipeline.
(P)
</TABLE>
-14-
<PAGE> 16
<TABLE>
<S> <C>
10.3 Terminaling Agreement - Mobil Oil Corporation. (P)
10.4 Amendments dated September 27, 1995 to Terminal Sales
Agreement and Agreement of Sale and Purchase - Dearborn
Products Pipeline. (P)
10.5 Amendments dated November 3, 1995 to Terminal Sales Agreement
and Agreement of Sale and Purchase - Dearborn Products
Pipeline. (P)
10.6 License Agreement dated November 11, 1993 between New
Processing Technologies and Waste Reduction Systems. (1)
10.7 Agreement dated November 12, 1993 between Waste Reduction
Systems and Browning-Ferris Industries of Southeastern
Michigan, Inc. (1)
10.8 Management Agreement between the Company and United Corporate
Advisors Ltd. dated February 1, 1993. (1)
10.9 Management Agreement between the Company and Bullock
Consulting Ltd. dated February 1, 1993. (1)
10.10 Employment Contract between the Company and Robert W. Truxell
(Exhibit 1 to the Agreement of Merger dated October 31,
1995.) (2)
10.11 Employment Contract between the Company and James P. Fagan
(Exhibit 2 to the Agreement of Merger dated October 31,
1995.) (2)
10.12 Securities Purchase Agreement - January 10, 1996. (P)
10.13 1995 Incentive Compensation Plan. (4)
10.14 1996 Employee Stock Option and Bonus Plan. (5)
21.1 List of Subsidiaries of the Registrant. (7)
23.1 Consent of Smythe Ratcliffe with regard to Form S-8
Registration Statements filed November 6, 1995 (File No.
33-99040) and April 22, 1996 (File No. 333-3906). (7)
27.1 Financial Data Schedule. (7)
</TABLE>
- ---------------------------
<TABLE>
<S> <C>
(1) Incorporated by reference to the Company's 1993 Annual Report on Form
20-F.
(2) Incorporated by reference to the Company's Form 8-K dated November 16,
1995.
</TABLE>
-15-
<PAGE> 17
<TABLE>
<S> <C>
(3) Incorporated by reference to the Company's Form 8-K dated December 26,
1995.
(4) Incorporated by reference from the Company's Registration Statement on
Form S-8, File No. 33-99040.
(5) Incorporated by reference from the Company's Registration Statement on
Form S-8, File No. 333-3906.
(6) Incorporated by reference from Registration Statement on Form S-4,
File No. 333-6099, effective August 7, 1996.
(7) Filed herewith.
(P) Filed in paper format on August 13, 1996 under cover of Form SE.
</TABLE>
(D) SCHEDULES. Schedules are omitted as the information is not required or
not applicable, or the required information is shown in the financial
statements or notes thereto.
-16-
<PAGE> 18
RICH COAST INC.
("FORMERLY RICH COAST RESOURCES LTD.")
CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS)
APRIL 30, 1997 AND 1996
INDEX PAGE
- ----- ----
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS 1
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 2
CONSOLIDATED STATEMENTS OF OPERATIONS 3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6-13
<PAGE> 19
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF RICH COAST INC.
We have audited the accompanying consolidated balance sheets of Rich Coast Inc.
(formerly Rich Coast Resources Ltd.) as of April 30, 1997 and 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended April 30, 1997. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company as at
April 30, 1997 and 1996 and the consolidated results of its operations and cash
flows for each of the three years in the period ended April 30, 1997 in
conformity with generally accepted accounting principles in the United States.
Smythe Ratcliffe
Chartered Accountants
Vancouver, Canada
July 11, 1997
1
<PAGE> 20
RICH COAST INC.
(FORMERLY RICH COAST RESOURCES LTD.)
CONSOLIDATED BALANCE SHEETS
APRIL 30
(U.S. DOLLARS)
<TABLE>
<CAPTION>
============ ============
1997 1996
------------ ------------
<S> <C> <C>
ASSETS (note 6)
CURRENT
Cash $ 12,919 $ 31,550
Accounts receivable 288,265 426,965
Inventory 135,673 0
Prepaid expenses 4,436 41,686
------------ ------------
441,293 500,201
DISTILLATION UNIT (note 4) 2,024,706 2,024,706
PROPERTY AND EQUIPMENT, at cost (net) (Notes 3 and 6) 3,210,485 3,590,858
PATENT AND TECHNOLOGY, net 30,525 38,321
DEFERRED FINANCE CHARGES AND DEPOSITS 82,775 305,492
------------ ------------
$ 5,789,784 6,459,578
============ ============
LIABILITIES
CURRENT
Accounts payable and accrued liabilities (note 5) $ 739,128 $ 864,370
Accrued oil and waste treatment costs 303,973 102,106
Past services compensation payable (note 5) 0 351,935
Due to shareholder (note 11) 100,000 104,763
Current portion of long-term debt (note 6) 78,673 66,154
Current portion of obligation under capital lease (note 7) 5,521 4,245
------------ ------------
1,227,295 1,493,573
LONG-TERM DEBT (note 6) 2,108,996 2,155,291
OBLIGATION UNDER CAPITAL LEASE (note 7) 7,815 9,910
------------ ------------
3,344,106 3,658,774
------------ ------------
COMMITMENT (note 7 and 8)
STOCKHOLDERS' EQUITY (note 9):
Common stock, $0.001 par value;
100,000,000 shares authorized, 16,155,913 and 13,324,093
shares issued and outstanding at April 30, 1997 and 1996,
respectively 16,156 13,324
Additional paid-in capital 23,793,298 22,222,927
Accumulated deficit (note 1) (21,363,776) (19,435,447)
------------ ------------
2,445,678 2,800,804
------------ ------------
$ 5,789,784 $ 6,459,578
============ ============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 21
RICH COAST INC.
(FORMERLY RICH COAST RESOURCES LTD.)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED APRIL 30
(U.S. DOLLARS)
<TABLE>
<CAPTION>
============ ============ ============
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
SALES $ 1,897,155 $ 1,741,352 $ 1,032,844
COST OF SALES (exclusive of depreciation shown separately below) 967,062 550,035 361,796
------------ ------------ ------------
GROSS PROFIT 930,093 1,191,317 671,048
------------ ------------ ------------
EXPENSES
Salaries and wages 713,605 565,670 835,299
Compensation for past services 581,299 351,935 0
Forgiveness of past service
compensation liability (note 5) (351,935) 0 0
Consulting 226,855 31,165 44,041
Audit, accounting and legal 213,911 129,108 58,462
Utilities 129,463 88,400 76,447
Equipment and storage leases 111,437 90,661 61,340
Insurance 83,364 65,079 63,812
Travel 79,939 80,343 74,276
Property taxes 72,612 61,017 26,923
Shareholder relations 41,630 98,030 128,739
Repairs and maintenance 40,983 129,036 112,334
Office and general 31,657 80,334 80,640
Telephone and facsimile 29,489 72,487 62,043
Financing 26,772 0 0
Listing and filing fees 24,830 29,967 43,441
Factoring costs 19,634 68,644 33,027
Advertising 12,356 10,139 2,200
Bad debts 11,984 47,704 0
Management fees 8,799 22,033 21,714
Rent and secretarial 4,300 46,578 54,809
Transfer agent 2,346 10,538 8,749
Courier and postage 200 15,243 17,203
Depreciation 359,168 387,982 363,727
------------ ------------ ------------
2,474,698 2,482,093 2,169,226
------------ ------------ ------------
LOSS BEFORE OTHER ITEMS 1,544,605 1,290,776 1,498,178
OTHER ITEMS
Interest expense 213,912 56,246 14,239
Loss on equipment disposal 147,752 2,478 0
Amortization of deferred financing costs 22,060 0 0
Write-down investment in and expenditures on
mineral properties (note 2) 0 2,480 35,966
Resource properties disposal loss (note 2) 0 73,868 0
Loss (gain) from oil and gas operations (note 2) 0 (4,929) 26,773
------------ ------------ ------------
NET LOSS FOR YEAR $ 1,928,329 $ 1,420,919 $ 1,575,156
============ ============ ============
NET LOSS PER SHARE $ 0.13 $ 0.14 $ 0.24
============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 15,035,155 9,843,419 6,321,863
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 22
RICH COAST INC.
(FORMERLY RICH COAST RESOURCES LTD.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED APRIL 30
(U.S. DOLLARS)
<TABLE>
<CAPTION>
============ ============ ============ ============ ============
COMMON COMMON ADDITIONAL TOTAL
SHARES SHARES PAID-IN ACCUMULATED STOCKHOLDERS'
NUMBER AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
------------ ------------ ------------ ------------ ----------------
(note 1)
<S> <C> <C> <C> <C> <C>
Balance, April 30, 1994 4,861,883 $ 4,862 $ 14,251,978 $(13,944,571) $ 312,269
Issuance of common
stock (note 9) 2,887,539 2,887 4,277,851 0 4,280,738
Net loss 0 0 0 (1,575,156) (1,575,156)
------------ ------------ ------------ ------------ ------------
Balance April 30, 1995 7,749,422 7,749 18,529,829 (15,519,727) 3,017,851
Issuance of common
stock (note 9) 5,574,671 5,575 4,144,921 0 4,150,496
Share issue costs 0 0 (451,823) 0 (451,823)
Adjustment to assets on
acquisition of
partnership 0 0 0 (2,494,801) (2,494,801)
Net loss 0 0 0 (1,420,919) (1,420,919)
------------ ------------ ------------ ------------ ------------
Balance, April 30, 1996 13,324,093 13,324 22,222,927 (19,435,447) 2,800,804
Issuance of common
stock (note 9) 2,831,820 2,832 1,585,239 0 1,588,071
Financing cost 0 (14,868) 0 (14,868)
Net loss 0 0 (1,928,329) (1,928,329)
------------ ------------ ------------ ------------ ------------
Balance, April 30, 1997 $ 16,155,913 $ 16,156 $ 23,793,298 $(21,363,776) $ 2,445,678
============ ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 23
RICH COAST INC.
(FORMERLY RICH COAST RESOURCES LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30
(U.S. DOLLARS)
<TABLE>
<CAPTION>
============ ============ ============
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss for year $ (1,928,329 $ (1,420,919) $ (1,575,155)
Adjustments to reconcile net loss to net cash
used by operating activities
Depreciation and amortization 381,228 387,982 363,727
Write-down investment in and expenditures on
mineral properties 0 2,480 35,966
Resource properties disposal loss 0 73,868 0
Oil and gas properties loss 0 (2,446) 26,773
Loss on equipment disposal 147,752 0 0
------------ ------------ ------------
(1,399,349) (959,035) (1,148,689)
------------ ------------ ------------
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts receivable 138,700 (281,430) (124,172)
Inventory (135,673) 0 0
Prepaid expenses 37,250 (40,049) 8,274
Accounts payable and accrued liabilities (125,241) (54,372) 90,720
Accrued oil and waste treatment costs 201,867 102,106 0
Past services compensation payable (351,935) 351,935 0
------------ ------------ ------------
(235,032) 78,190 (25,178)
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (1,634,381) (880,845) (1,173,867)
------------ ------------ ------------
INVESTING ACTIVITIES
Purchase of property and equipment (123,054) (2,160,338) (110,261)
Investment in and expenditures on mineral properties 0 (2,480) (35,966)
Distillation unit costs incurred 0 (16,156) 0
Proceeds on sale of oil and gas properties 0 4,933 0
Proceeds on sale of equipment 2,000 7,253 0
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (121,054) (2,166,788) (35,966)
------------ ------------ ------------
FINANCING ACTIVITIES
Issue of common stock 1,573,221 1,315,251 1,760,165
Land contract (repayments) (33,776) 0 659,436
Shareholders' loans (4,763) 0 18,400
Obligation under capital lease (1,181) (4,245) 0
Capital stock subscribed 0 0 (1,137,811)
Note payable 0 2,000,000 0
Finders' fees and share issue costs 0 (248,100) 0
Deferred finance charges and other 203,303 0 0
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,736,804 3,062,906 (459,975)
------------ ------------ ------------
INCREASE (DECREASE) IN CASH (18,631) 15,273 (1,669,808)
CASH, BEGINNING OF YEAR 31,550 16,277 36,181
------------ ------------ ------------
CASH, END OF YEAR $ 12,919 $ 31,550 $ (1,633,627)
============ ============ ============
Supplemental information
Issue of common stock
For settlement of debt $ 531,061 $ 104,487 $ 2,367,050
For partnership interest $ 0 $ 2,484,724 $ 153,523
For services $ 608,548 $ 246,034 $ 0
For finder's fee $ 14,850 $ 0 $ 0
Interest paid $ 213,912 $ 56,246 $ 14,239
Income taxes paid $ 0 $ 0 $ 0
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 24
RICH COAST INC.
(FORMERLY RICH COAST RESOURCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1997 AND 1996
(U.S. DOLLARS)
===============================================================================
1. ORGANIZATION AND BASIS OF PRESENTATION
Pursuant to an Agreement of Merger, effective October 31, 1995
and executed on November 16, 1995, the Company acquired the
remaining 45.454% interest in Waste Reduction Systems (a
partnership), by merger of Integrated Waste Systems, Inc., a
Michigan corporation ("IWS"), and The Powers Fagan Group, Inc.,
a Michigan corporation ("Powers/Fagan"), with the Company's
wholly-owned subsidiary, Rich Coast Resources Inc., a Michigan
corporation ("RCRI").
This reorganization of the companies has resulted in Waste
Reduction Systems becoming 100% owned by RCRI. The
reorganization has been accounted for as a combination of
entities under common control which is a method similar to a
pooling of interests. The accounts of the entities acquired are
combined in the accompanying financial statements using
historical data since their inception. As a result of the merger
the Company owns 100% of the former partnership, consequently
all the assets, liabilities and income and expense of that
entity are included in the consolidated financial statements
with effect from the commencement of business of Waste Reduction
Systems in August 1992. The accumulated losses of that business
approximates $8,153,030 to April 30, 1997. Prior to acquiring
the waste reduction business, the Company was engaged in mineral
exploration and had accumulated a deficit of $13,210,746 related
thereto which is included in the April 30, 1997 balance of
$21,363,776
These consolidated financial statements are prepared in
accordance with generally accepted accounting principles in the
United States and all amounts are in U.S. dollars.
During the 1997 fiscal year the Company was discontinued in
British Columbia and continued in the State of Delaware under
the General Corporate Law of that jurisdiction under the name
Rich Coast Inc.. The Company operates a non-hazardous waste
treatment facility in Dearborn, Michigan specializing in
recycling of waste oils.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
These financial statements include the accounts of Rich
Coast Inc. (a Delaware Corporation) and its wholly-owned
subsidiaries Rich Coast Oil, Inc., Waste Reduction
Systems, Inc., Rich Coast Pipeline, Inc., and Rich Coast
Resources Inc. all being Michigan corporations. All
intercompany balances and transactions have been
eliminated.
(b) Inventory
Inventories are stated at the lower of cost or market.
Cost is determined on a first in, first out (FIFO) basis.
(c) Distillation unit, property and equipment
The distillation unit and the property and equipment are
recorded at cost. Property and equipment are depreciated
on the double declining balance basis over the estimated
useful lives of the assets. No depreciation has been taken
on the distillation unit or the property and equipment
that have not yet been put into use.
6
<PAGE> 25
RICH COAST INC.
(FORMERLY RICH COAST RESOURCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1997 AND 1996
(U.S. DOLLARS)
===============================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(d) Resource properties
During the 1996 fiscal year the Company disposed of its
remaining mineral and oil and gas properties concurrent
with the merger referred to in note 1 above.
(e) Deferred finance charges
Costs related to long-term financing are being amortized
over the term of the note payable on a straight-line
basis.
(f) Currency translation
Financial statements for reporting periods up to and
including the year ended April 30, 1996 were originally
presented in Canadian dollars, the currency of the
incorporation jurisdiction of the parent company.
Effective May 1, 1995 financial statements are presented
in United States dollars (except for certain per share
amounts which are expressed in Canadian dollars as the
operations, effective control and management are located
in the United States. This change has been given
retroactive effect for comparative purposes. Common stock,
additional paid-in capital and accumulated deficit of the
parent have been restated in United States dollars using
historical rates of exchange.
(g) Net loss per share
Net loss per share computations are based on the weighted
average number of common shares outstanding during the
year.
(h) Income taxes
The Company uses the asset and liability approach in its
method of accounting for income taxes which requires the
recognition of deferred tax liabilities and assets for
expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets
and liabilities. A valuation allowance against deferred
tax assets is recorded if, based upon weighted available
evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized.
(i) Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates and would
impact future results of operations and cash flows.
(j) Financial instruments
The Company's financial instruments include cash, accounts
receivable, accounts payable and accrued liabilities and
long-term debt. In the opinion of management, the carrying
amount of these financial instruments approximate their
fair value.
7
<PAGE> 26
RICH COAST INC.
(FORMERLY RICH COAST RESOURCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1997 AND 1996
(U.S. DOLLARS)
===============================================================================
3. PROPERTY AND EQUIPMENT
The Company's offices, plant, processing equipment and bulk
storage terminal located in Dearborn, Michigan are comprised of
the following:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Land $ 250,041 $ 250,041
Buildings 1,370,903 1,364,003
Machinery and equipment 1,558,465 1,911,811
Bulk storage tanks 636,534 636,534
Pipeline 296,187 296,187
Furniture, fixtures, computers, etc 86,309 86,309
------------ ------------
4,198,439 4,544,885
Accumulated depreciation 987,954 954,027
------------ ------------
$ 3,210,485 $ 3,590,858
============ ============
</TABLE>
4. DISTILLATION UNIT
The Company has a mineral distillation unit acquired at an
original cost of $2,000,000 from GAP Energy, Inc. The mineral
distillation unit was originally purchased for use on the
proposed joint venture project with GAP Minerals, Inc. in the
development of the Gongora Property in Costa Rica. The price of
sulphur dropped making the development of the project
uneconomical, however; the Company had intended to proceed with
the project once world prices improve to the point the project
becomes profitable. In view of this, the Company searched for an
alternate use of the unit and found that it could possibly be
used for soil remediation for such things as oil pits polluted
with hydrocarbons. Testing was conducted on the unit to confirm
this use. Preliminary results indicate the system is capable of
removing soil contaminants to a level acceptable to the
Environmental Protection Agency of the United States.
The investment in the distillation unit comprises a significant
portion of the Company's assets. Realization of the Company's
investment in the distillation unit is dependent upon the
successful development of the unit for soil remediation
purposes, the attainment of successful production from the unit
or from the proceeds of the unit's disposal.
8
<PAGE> 27
RICH COAST INC.
(FORMERLY RICH COAST RESOURCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1997 AND 1996
(U.S. DOLLARS)
===============================================================================
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Trade payables $587,925 $706,031
Accrued salaries, wages 70,491 107,900
Accrued property taxes 45,367 32,128
Payroll taxes 18,679 18,311
Accrued interest 16,666 0
-------- --------
$739,128 $864,370
======== ========
</TABLE>
Compensation of $351,935 for past services to Waste Reduction
Systems accrued in the fiscal year-ended April 30, 1996 was
subsequently waived by the payees.
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Land contract payable in monthly instalments of $4,753
each including principal and interest at 8% unless
the Company falls behind in its payments at which
time the interest rate increases to 12% and monthly
installments increase to $5,384 until the payments
are back to schedule (the Company is currently
behind in seven payments) $ 187,669 $ 221,445
10% senior secured note, due October 1, 2001 interest
payable monthly 2,000,000 2,000,000
---------- ----------
2,187,669 2,221,445
Less: Current portion 78,673 66,154
---------- ----------
$2,108,996 $2,155,291
========== ==========
</TABLE>
9
<PAGE> 28
RICH COAST INC.
(FORMERLY RICH COAST RESOURCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1997 AND 1996
(U.S. DOLLARS)
===============================================================================
6. LONG TERM DEBT (Continued)
The land contract payable relates to premises occupied at 10200
Ford Road, Dearborn, Michigan.
The senior secured note payable is secured by a $2,000,000
mortgage granted by the Company over the real property at 6011
and 6051 Wyoming, Dearborn, Michigan and a charge on all other
assets of the Company. The loan agreement contains covenants
relating to financial requirements, expenditures, etc. for the
Company. The holder may convert the loan into common shares at
$0.50 per share in the event of default by the Company.
At the time the loan arrangements were made, the note holder was
issued warrants to purchase 3,600,000 shares of the Company
(note 10(d)).
The amount of long-term obligations outstanding at April 30,
1997 mature as follows:
<TABLE>
<S> <C>
1998 $ 78,673
1999 78,673
2000 30,323
2002 2,000,000
------------
$ 2,187,669
============
</TABLE>
7. OBLIGATION UNDER CAPITAL LEASE
The following is a schedule of future minimum lease payments
under capital lease.
<TABLE>
<S> <C>
1998 $ 5,521
1999 5,521
2000 2,294
----------
Total Minimum Lease Payments 13,336
Less: Current Portion 5,521
----------
Obligation Under Capital Lease $ 7,815
==========
</TABLE>
8. COMMITMENT
(a) The Company has committed to issue 250,000 shares of
common stock at an agreed price of $0.50 per share
in payment of ongoing financial services.
(b) The Company may issue up to a total of 1,000,000
additional bonus shares to certain directors and
officers subject to the Company achieving positive
pretax net income for a defined period and obtaining
certain funding.
10
<PAGE> 29
RICH COAST INC.
(FORMERLY RICH COAST RESOURCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1997 AND 1996
(U.S. DOLLARS)
===============================================================================
9. STOCKHOLDERS' EQUITY
Activity of the common stock account for the years 1995, 1996
and 1997 is as follows:
<TABLE>
<CAPTION>
ADDITIONAL
NUMBER PAR PAID-IN
OF SHARES VALUE CAPITAL
------------ ------------ ------------
<S> <C> <C> <C>
FISCAL 1995
Shares issued
For cash, private placements 500,000 $ 500 $ 1,137,311
For cash on exercise of stock options 589,327 589 621,765
For settlement of Gap Energy Inc. debt 864,865 865 1,566,825
For settlement of loan payable to shareholder 684,648 685 515,921
For settlement of Kyra Holdings, Inc. debt 110,470 110 221,372
For settlement of debt 30,560 30 61,242
For investment in partnership 107,669 108 153,415
------------ ------------ ------------
2,887,539 $ 2,887 $ 4,277,851
------------ ------------ ------------
FISCAL 1996
Shares issued
For cash, private placements 1,198,945 $ 1,199 $ 835,445
For cash on exercise of stock options 575,150 575 478,032
For services 250,000 250 245,784
For settlement of loan payable to shareholder 167,376 168 104,319
Acquisition of Waste Reduction Systems 3,383,200 3,383 2,481,341
------------ ------------ ------------
5,574,671 $ 5,575 $ 4,144,921
------------ ------------ ------------
FISCAL 1997
Shares issued
For financing fees 50,000 $ 50 $ 14,800
For settlement of debt 1,104,470 1,104 529,957
For cash, private placements 475,000 475 354,000
For cash on exercise of options 81,750 82 79,055
For services 1,120,600 1,121 607,427
------------ ------------ ------------
2,831,820 $ 2,832 $ 1,585,239
------------ ------------ ------------
</TABLE>
Subsequent to April 30, 1997 shares were issued as follows:
(i) 100,000 shares at a deemed value of $0.50 per share for financial services
(note 8(a)).
(ii) 100,000 shares at no deemed value as consideration for forbearance to July
1, 1997 of interest on $2 million note payable.
(iii)154,200 shares at a deemed value of $0.25 per share pursuant to the terms
of an agreement of May 20, 1996 for the issue of up to 616,800 shares for
services (all issued at July 11, 1997).
11
<PAGE> 30
RICH COAST INC.
(FORMERLY RICH COAST RESOURCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1997 AND 1996
(U.S. DOLLARS)
===============================================================================
10. STOCK OPTIONS AND WARRANTS
Options
Pursuant to the Company's 1995 Incentive Compensation Plan as
subsequently amended in 1996 ("the Plan"), the Company may issue
stock options, stock appreciation rights and performance awards
for up to 2,600,000 shares in the capital stock of the Company
to provide incentives to officers, directors, key employees and
other persons who contribute to the success of the Company. The
exercise price of the Incentive Options (employees of the
Company or its subsidiaries) is no less than the fair market
value of the stock at the date of grant and for non-qualified
options (non employees) the exercise price is no less than 80%
of the fair market value (defined as the most recent closing
sale price reported by NASDAQ) on the date of the grant.
At April 30, the following stock options were outstanding:
<TABLE>
<CAPTION>
==========================================================================
EXERCISE NUMBER OF SHARES
EXPIRY DATE PRICE 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C> <C>
October 3, 1998 $0.62 15,000 15,000
October 21, 1996 $0.80 15,000 72,300
February 1, 1997 $0.98 40,218 40,218
March 12, 1997 $0.93 10,031 30,031
May 10, 1997 $1.08 184,453 184,453
October 26, 2005 $0.60 0 14,450
September 8, 2005 $1.00 400,000 400,000
December 27, 2005 $0.50 800,000 800,000
January 15, 2006 $0.50 800,000 800,000
==========================================================================
</TABLE>
Warrants
At April 30, 1997 share purchase warrants were outstanding for 3,600,000 shares
exercisable at $0.62 per share to January 10, 2006, and for 235,000 shares
exercisable at $1 per share to May 8, 1998.
12
<PAGE> 31
RICH COAST INC.
(FORMERLY RICH COAST RESOURCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1997 AND 1996
(U.S. DOLLARS)
===============================================================================
11. RELATED PARTY TRANSACTIONS
(a) Management fees of $30,000 were paid to directors or
companies controlled by directors for the year ended April
30, 1997 (1996 - $30,000; 1995 - $30,000)
(b) Shareholder advanced $100,000 to the Company for working
capital purposes.
12. INCOME TAXES
A deferred tax asset stemming from the Company's net operating
loss carryforward, has been reduced by a valuation account to
zero due to uncertainties regarding the utilization of the
deferred assets.
At April 30, 1997 the Company has available net operating loss
carryforward of approximately $5,400,000 which it may use to
offset future federal taxable income. The net operating loss
carryforwards, if not utilized, will begin to expire in 2007.
13. SUBSEQUENT EVENT
Subsequent to April 30, 1997 the Company completed a private
placement of $450,000 of 10% 18 month convertible promissory
notes. The notes may be converted at the option of the holder at
maturity into common stock at a price per share equal to 50% of
the quoted NASDAQ bid price at the conversion date.
14. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board
issued SFAS 128, "Earnings per Share." The statement is
effective for financial statements for periods ending after
December 15, 1997. SFAS 128 changes the method in which earnings
per share will be determined. Adoption of this statement by the
Company will not have a material impact on earnings per share.
13
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
RICH COAST INC.
Date: August 12, 1997 By: /s/ James P. Fagan
- ----------------------- --------------------
James P. Fagan, President and Chief
Executive Officer
Date: August 12, 1997 By: /s/ Michael M. Grujicich
- ----------------------- --------------------------
Michael M. Grujicich, Chief Financial
and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Robert W. Truxell Chairman, August 12, 1997
- ---------------------------- and Director
Robert W. Truxell
/s/ James P. Fagan President, CEO August 12, 1997
- ---------------------------- and Director
James P. Fagan
/s/ Thornton J. Donaldson Director August 12, 1997
- ----------------------------
Thornton J. Donaldson
/s/ Geoffrey Hornby Director August 12, 1997
- ----------------------------
Geoffrey Hornby
Director
- ----------------------------
George P. Nassos
</TABLE>
<PAGE> 33
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C>
2.1 Agreement of Merger dated October 31, 1995 between RCRL,
RCRI, IWS, Powers/Fagan, WRS and others. (2)
2.2 Certificate of Merger effective December 26, 1996 issued by
the Secretary of the State of Michigan. (3)
3.(i) Articles of Incorporation of Rich Coast Inc. (6)
3.(ii) Bylaws of Rich Coast Inc. (6)
10.1 Terminal Sales Agreement between Mobil Oil Corporation and
the Company. (P) Exhibits and Schedules, as listed following
the Table of Contents of this Agreement, are omitted from
this filing but will be furnished supplementally to the
Commission upon request.
10.2 Agreement of Sale and Purchase - Dearborn Products Pipeline.
(P)
10.3 Terminaling Agreement - Mobil Oil Corporation. (P)
10.4 Amendments dated September 27, 1995 to Terminal Sales
Agreement and Agreement of Sale and Purchase - Dearborn
Products Pipeline. (P)
10.5 Amendments dated November 3, 1995 to Terminal Sales Agreement
and Agreement of Sale and Purchase - Dearborn Products
Pipeline. (P)
10.6 License Agreement dated November 11, 1993 between New
Processing Technologies and Waste Reduction Systems. (1)
10.7 Agreement dated November 12, 1993 between Waste Reduction
Systems and Browning-Ferris Industries of Southeastern
Michigan, Inc. (1)
10.8 Management Agreement between the Company and United Corporate
Advisors Ltd. dated February 1, 1993. (1)
10.9 Management Agreement between the Company and Bullock
Consulting Ltd. dated February 1, 1993. (1)
10.10 Employment Contract between the Company and Robert W. Truxell
(Exhibit 1 to the Agreement of Merger dated October 31,
1995.) (2)
10.11 Employment Contract between the Company and James P. Fagan
(Exhibit 2 to the Agreement of Merger dated October 31,
1995.) (2)
10.12 Securities Purchase Agreement - January 10, 1996. (P)
10.13 1995 Incentive Compensation Plan. (4)
10.14 1996 Employee Stock Option and Bonus Plan. (5)
21.1 List of Subsidiaries of the Registrant. (7)
27.1 Financial Data Schedule. (7)
</TABLE>
- ---------------------------
<PAGE> 34
<TABLE>
<S> <C>
(1) Incorporated by reference to the Company's 1993 Annual Report on Form
20-F.
(2) Incorporated by reference to the Company's Form 8-K dated November 16,
1995.
(3) Incorporated by reference to the Company's Form 8-K dated December 26,
1995.
(4) Incorporated by reference from the Company's Registration Statement on
Form S-8, File No. 33-99040.
(5) Incorporated by reference from the Company's Registration Statement on
Form S-8, File No. 333-3906.
(6) Incorporated by reference from Registration Statement on Form S-4,
File No. 333-6099, effective August 7, 1996.
(7) Filed herewith.
(P) Filed in paper format on August 13, 1996 under cover of Form SE.
</TABLE>
<PAGE> 1
Exhibit 21
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
<S> <C>
Rich Coast Resources, Inc (d/b/a Waste Michigan
Reduction Systems, Inc.)
Rich Coast Oil, Inc. Michigan
Rich Coast Pipeline, Inc. Michigan
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> APR-30-1997
<CASH> 12,919
<SECURITIES> 0
<RECEIVABLES> 372,142
<ALLOWANCES> 0
<INVENTORY> 135,673
<CURRENT-ASSETS> 525,170
<PP&E> 6,235,617
<DEPRECIATION> 1,000,426
<TOTAL-ASSETS> 5,795,878
<CURRENT-LIABILITIES> 1,311,172
<BONDS> 2,108,996
0
0
<COMMON> 24,276,145
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,795,878
<SALES> 0
<TOTAL-REVENUES> 1,897,155
<CGS> 0
<TOTAL-COSTS> 967,062
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 220,419
<INCOME-PRETAX> (1,906,269)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,906,269)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
