<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1997
OR
( ) 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: 0-15859
RICH COAST INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 91-1835978
- ------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10200 Ford Road, Dearborn, MI 48126
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(313) 582-8866
- --------------------------------------------------------------------------------
(Issuer's telephone number)
RICH COAST RESOURCES LTD.
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
--- ---
The number of shares outstanding of the issuer's classes of common equity, as
of July 31, 1997 is 16,559,921 shares of Common Stock.
Transitional Small Business Disclosure Format (check one): YES NO X
--- ---
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
2
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NOTICE TO READER
We have compiled the consolidated balance sheets of Rich Coast, Inc. as at July
31, 1997 and 1996 and the consolidated statements of operations and cash flows
for the three months ended July 31, 1997 and 1996 from information provided by
management. We have not audited, reviewed or otherwise attempted to verify the
accuracy or completeness of such information. Readers are cautioned that these
statements may not be appropriate for their purposes.
"Smythe Ratcliffe"
Chartered Accountants
Vancouver, British Columbia
September 15, 1997
3
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RICH COAST, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED - SEE NOTICE TO READER)
(UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
July 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
CURRENT
Cash $ 110,680 $ 26,090
Accounts receivable 337,595 423,922
Prepaid expenses 5,081 67,299
Inventory 116,912 0
------------ ------------
570,268 517,311
DISTILLATION UNIT 2,024,706 2,024,705
CAPITAL ASSETS 3,193,152 3,541,987
DEFERRED FINANCE CHARGES AND OTHER ASSETS 171,258 50,037
------------ ------------
$ 5,959,384 $ 6,134,040
============ ============
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 744,380 $ 683,599
Accrued oil and waste treatment costs 291,973 150,283
Past services compensation payable 0 351,935
Due to shareholder 100,000 0
Current portion of long-term debt (note 4) 80,257 67,331
------------ ------------
1,216,610 1,253,148
CONVERTIBLE DEBENTURE 0 105,000
LONG-TERM DEBT (note 4) 2,546,834 2,144,061
------------ ------------
3,763,444 3,502,209
------------ ------------
Shareholders' Equity
Common stock, $0.001 par value; 100,000,000 shares
authorized, 16,560,113 and 14,425,843 shares issued
and outstanding at July 31, 1997 and 1996, respectively 16,560 14,426
Additional paid-in capital 23,906,848 23,562,878
Accumulated deficit (21,727,468) (20,945,473)
------------ ------------
2,195,940 2,631,831
------------ ------------
$ 5,959,384 $ 6,134,040
============ ============
</TABLE>
See notes to consolidated financial statements.
4
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RICH COAST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED - SEE NOTICE TO READER)
(UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
Three Months
Ended July 31,
1997 1996
---- ----
<S> <C> <C>
SALES $ 561,786 $ 534,048
COST OF SALES (exclusive of depreciation) 260,133 344,776
----------- -----------
GROSS PROFIT 301,653 189,272
----------- -----------
EXPENSES
Salaries and wages 240,723 84,471
Consulting 116,050 361,294
Interest 53,887 57,094
Insurance 32,621 28,173
Utilities 29,783 37,229
Audit, accounting and legal 23,053 16,869
Travel 21,282 31,524
Repairs and maintenance 19,644 9,442
Office and general 18,460 19,395
Property taxes 17,308 20,700
Financing 7,911 36,720
Telephone and facsimile 7,890 7,510
Rent and secretarial 7,353 7,042
Shareholder relations 2,006 19,774
Bad debts 1,210 5,990
Management fees 0 5,482
Depreciation 66,164 107,097
----------- -----------
665,345 855,806
----------- -----------
LOSS FOR PERIOD $ (363,692) $ (666,534)
=========== ===========
LOSS PER SHARE $ (0.02) (0.05)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 16,223,020 13,575,800
=========== ===========
</TABLE>
See notes to consolidated financial statements.
5
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RICH COAST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - SEE NOTICE TO READER)
(UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
Three Months
Ended July 31,
1997 1996
---- ----
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES $(236,243) $(417,081)
--------- ---------
INVESTING ACTIVITIES
Capital asset additions (47,082) (55,927)
Deferred finance charge (45,000) 0
--------- ---------
(92,082) (55,927)
--------- ---------
FINANCING ACTIVITIES
Issue of capital stock for cash 0 539,230
Proceeds from convertible debenture 450,000 105,000
Shareholders' loans repayment 0 (172,599)
Repayment of capital lease (13,336) (4,030)
Repayment of long-term debt (10,578) (53)
--------- ---------
426,086 467,548
--------- ---------
INCREASE (DECREASE) IN CASH 97,761 (5,460)
CASH, BEGINNING OF PERIOD 12,919 31,550
--------- ---------
CASH, END OF PERIOD $ 110,680 $ 26,090
========= =========
</TABLE>
See notes to consolidated financial statements.
6
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RICH COAST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31
(UNAUDITED - SEE NOTICE TO READER)
(UNITED STATES DOLLARS)
1. BASIS OF PRESENTATION
These unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United
States for interim financial information. These financial statements
are condensed and do not include all disclosures required for annual
financial statements. These financial statements should be read in
conjunction with the Company's audited consolidated financial
statements included in the Company's Annual Report on Form 10-KSB for
the year ended April 30, 1997.
In the opinion of the Company's management, these financial statements
reflect all adjustments necessary to present fairly the Company's
consolidated financial position at July 31, 1997 and 1996 and the
consolidated results of operations and the consolidated statement of
changes in financial position for the three months then ended. The
results of operations for the three months ended July 31, 1997 are not
necessarily indicative of the results to be expected for the entire
fiscal year.
2. LOSS PER SHARE
Loss per share is computed using the weighted average number of common
shares outstanding during each of the periods.
3. COMPARATIVE FIGURES
Certain of the figures for the comparative prior quarter have been
restated to conform to the 1997 presentation.
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
10% convertible promissory notes due 18 months after date of issue,
convertible into common stock at the option of the holder at maturity $ 450,000 $ 0
10% senior secured note, due October 1, 2001, interest payable monthly 2,000,000 2,000,000
Land contract payable in monthly instalments of $4,753 each including
principal and interest at 8% 177,091 208,203
Equipment loan 0 3,189
---------- ----------
2,627,091 2,211,392
Less: Current portion 80,257 67,331
---------- ----------
$2,546,834 $2,144,061
========== ==========
</TABLE>
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RICH COAST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31
(UNAUDITED - SEE NOTICE TO READER)
(UNITED STATES DOLLARS)
5. CAPITAL STOCK
(a) Authorized 100,000,000 common shares of $.001 par value
(b) Issued during the period:
<TABLE>
<CAPTION>
Number of Price Per
Shares Share ($) Amount
--------- --------- ------
<S> <C> <C> <C>
Quarter July 31, 1996
Shares issued
For cash, private placements 640,000 $ 0.765 $489,650
For cash on exercise of options 61,750 CDN $ 1.10 49,580
For services 400,000 $ 0.875 350,000
--------- ------- --------
1,101,750 $889,230
========= ========
Quarter July 31, 1997
Shares issued
For services 154,200 $ 0.25 $ 38,550
150,000 $ 0.50 75,000
Forbearance of interest 100,000 0 0
--------- ------- --------
404,200 $113,550
========= ========
</TABLE>
8
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RICH COAST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31
(UNAUDITED - SEE NOTICE TO READER)
(UNITED STATES DOLLARS)
5. CAPITAL STOCK (Continued)
(c) At July 31, 1997, the following stock options were outstanding
<TABLE>
<CAPTION>
EXERCISE NUMBER
EXPIRY DATE PRICE OF SHARES
- ----------- -------- ---------
<S> <C> <C>
October 3, 1998 $ 0.62 15,000
October 21, 1996 $ 1.80 15,000
February 1, 1997 $ 0.98 40,218
March 12, 1997 $ 0.93 10,031
May 10, 1997 $ 1.08 184,453
September 8, 2005 $ 1.00 400,000
December 27, 2005 $ 0.50 800,000
January 15, 2006 $ 0.50 800,000
</TABLE>
(d) At July 31, 1997, share purchase warrants were outstanding for
3,600,000 shares exercisable at $0.30 per share to January 10, 2006
and 235,000 shares exercisable at $1.00 per share to May 8, 1998.
(e) In August 1997, the Company issued 50,000 shares at $0.50 per share
for financial services and 10,000 shares for other services.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the unaudited
consolidated financial statements included herein which are prepared in
accordance with generally accepted accounting principles ("GAAP") in the United
States for interim financial information.
The Company's management functions and all operations have been consolidated in
Dearborn, Michigan. Nonhazardous waste disposal and oil recycling operations
continue at the Ford Road site while the biological treatment system and
additional oil recycling capacity are being installed at the Company's recently
acquired terminal located at 6011 Wyoming Avenue in Dearborn.
RESULTS OF OPERATIONS
Currently the biological treatment system is in pilot operation with start of
commercial operation expected in October, 1997. Additional oil recycling
capacity is also under construction but sufficient funding is not available to
allow completion at this time. The Company completed subscriptions for $450,000
of convertible debentures during the first quarter of the 1997 fiscal year and
utilized those funds for completion of its bio-system and toward substantial
progress in constructing added oil recycling capacity. The Company hopes to
generate sufficient revenues from operations in order to complete the oil
recycling project. If sufficient revenues cannot be generated, the Company may
need to obtain additional financing, the availability of which cannot be
assured. Pilot operation of the bio-treatment system has not disclosed any
significant problems to date; however, micro-organisms must now be introduced
into the system and monitored to ensure they remain in a healthy condition so
that commercial quantities of organic wastes can be processed. This requires
establishment of commercial delivery schedules for organic wastes and blending
of incoming waste streams to accommodate needs of the micro-organism colony.
Rich Coast has customers awaiting start-up of the bio-system and the Company
also has a three million gallon blending tank but there is a risk of delay if
waste stream schedules create difficulty in blending.
CHANGES IN FINANCIAL CONDITION
The Company's first quarter revenues of $561,786 are up 5.2% from the same
period in 1996 and up 16.6% from its previous quarter. Losses for the first
quarter were reduced from $666,534 in the first quarter of fiscal 1996 to
$363,692 and are in line with the Company's business plan. Losses were reduced
by an improvement in cost of sales but were offset by a build-up in personnel
required to operate the new biological treatment system and to support
operations at both the Wyoming and Ford Road sites. As revenues are increased
from the biological treatment system going commercial and from increases that
are expected to continue in all other segments of the business, the Company
looks forward to generating positive cash flow for reinvestment in facilities.
Cost control activities will continue and are reflected in the accompanying
first quarter financials which detail a 69% reduction in consulting expenses, a
32% reduction in travel expenses and a 78% reduction in financing expenses, as
compared to the corresponding quarter in 1996. While shareholder relations
costs were also reduced
10
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substantially those costs will soon increase as the Company brings new business
on stream.
Cash at the end of the first quarter increased by $84,590 from a year earlier
and reflects proceeds received from the sale of convertible debentures. This
cash is being used for additional facilities required to generate business and
move the Company towards profitability. The Company is growth orientated and
has well defined opportunities to improve its business and competitive position.
Growth is expected from new businesses which can improve their profitability by
utilizing the unique services of Rich Coast in the disposal of oily sludges and
food processing wastes.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has not generated sufficient revenue to fund operations.
Since its inception, the Company has financed its business primarily from the
sale of equity securities. As at July 31, 1997 the Company had $110,680 cash on
hand and a working capital deficit of $646,342. Management expects additional
revenues from bio-treatment and revenues from new contracts involving existing
capabilities to support operations until generation of positive cash flow.
The Company does not have any material commitments or anticipated material
capital expenditures to third parties for the coming years, however, the
Company has committed to raising funds through the private sale of equity or
debt instruments in order to facilitate the expansion. The Company presently
has no firm commitments for such financing and there can be no assurance that
adequate financing will be available in a timely manner or on favorable terms
or at all.
FORWARD-LOOKING STATEMENTS
The following cautionary statements are made pursuant to the Private Securities
Litigation Reform Act of 1995 in order for Rich Coast to avail itself of the
"safe harbor" provisions of that Act. Discussions and information in this
document which are not historical facts should be considered forward-looking
statements. With regard to forward-looking statements, including those
regarding the potential revenues from the commercialization of the biological
treatment system, and the business prospects or any other aspect of Rich Coast,
be advised that actual results and business performance may differ materially
from that projected or estimated in such forward-looking statements. Rich Coast
has attempted to identify in this document certain of the factors that it
currently believes may cause actual future experience and results to differ from
its current expectations. In addition to the risks cited above specific to the
biological treatment system, differences may be caused by a variety of factors,
including but not limited to, adverse economic conditions, entry of new and
stronger competitors, inadequate capital, unexpected costs, and failure to
capitalize upon access to new clientele.
11
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 3(i) - Articles of Incorporation. (1)
Exhibit 3(ii) - Bylaws. (1)
Exhibit 27.1 - Financial Data Schedule. Filed herewith.
__________
(1) Incorporated by reference from Registration Statement on Form S-4, File
No. 333-6099, effective August 7, 1996.
(b) Reports on Form 8-K: None. During the quarter ended July 31, 1997, the
Company filed no reports on Form 8-K.
12
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SIGNATURES
Pursuant to the requirements 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: September 19, 1997 by: /s/ James P. Fagan
------------------------------------
James P. Fagan, President
Date: September 19, 1997 by: /s/ Michael M. Grujucich
------------------------------------
Michael M. Grujucich, Chief
Financial and Accounting Officer
13
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EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
(a) Exhibit 3(i) - Articles of Incorporation. (1)
Exhibit 3(ii) - Bylaws. (1)
Exhibit 27.1 - Financial Data Schedule. Filed herewith.
__________
(1) Incorporated by reference from Registration Statement on Form S-4, File
No. 333-6099, effective August 7, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> APR-30-1997
<PERIOD-END> JUL-31-1997
<CASH> 110,680
<SECURITIES> 0
<RECEIVABLES> 337,595
<ALLOWANCES> 0
<INVENTORY> 116,912
<CURRENT-ASSETS> 570,268
<PP&E> 6,249,288
<DEPRECIATION> 1,031,430
<TOTAL-ASSETS> 5,959,384
<CURRENT-LIABILITIES> 1,216,610
<BONDS> 2,546,834
0
0
<COMMON> 23,923,408
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,959,384
<SALES> 0
<TOTAL-REVENUES> 561,786
<CGS> 0
<TOTAL-COSTS> 260,133
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,887
<INCOME-PRETAX> (363,692)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (363,692)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
