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 October 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)
(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 October 31, 1997 is 17,241,119 shares of Common Stock.
Transitional Small Business Disclosure Format (check one): YES NO X
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
RICH COAST, INC.
Interim Consolidated Financial Statements
October 31, 1997
(Unaudited - See Notice to Reader)
<PAGE>
NOTICE TO READER
We have compiled the consolidated balance sheets of Rich Coast, Inc. as at
October 31, 1997 and 1996 and the consolidated statements of operations and
cash flows for the six months ended October 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
December 12, 1997
<PAGE>
RICH COAST, INC.
Consolidated Balance Sheets
(Unaudited - See Notice to Reader)
(United States Dollars)
October 31, April 30,
1997 1997
Assets
Current
Cash $ 5,077 $ 12,919
Accounts receivable 418,440 288,265
Prepaid expenses 5,548 4,436
Inventory 110,549 135,673
539,614 441,293
Distillation Unit 2,024,706 2,024,706
Capital Assets 3,192,286 3,210,485
Deferred Finance Charges and Other Assets 163,411 113,300
$5,920,017 $5,789,784
Liabilities
Current
Accounts payable and accrued liabilities $ 831,492 $ 739,128
Accrued oil and waste treatment costs 276,351 303,973
Due to shareholder 0 100,000
Current portion of long-term debt (note 4) 89,091 84,194
1,196,934 1,227,295
Long-Term Debt (note 4) 2,571,393 2,116,811
3,768,327 3,344,106
Shareholders' Equity
Common stock, $0.001 par value; 100,000,000
shares authorized, 17,241,119 and
16,155,913 shares issued and outstanding
at October 31, 1997 and April 30, 1997
respectively
17,241 16,156
Additional paid-in capital 24,048,257 23,793,298
Accumulated deficit (21,913,808) (21,363,776)
2,151,690 2,445,678
$5,920,017 $5,789,784
<PAGE>
RICH COAST, INC.
Consolidated Statements of Operations
(Unaudited - See Notice to Reader)
(United States Dollars)
<TABLE>
<CAPTION>
Three Months Six Months
Ended October 31, Ended October 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Sales $642,912 $491,203 $1,204,698 $1,025,251
Cost of Sales (exclusive of depreciation) 240,014 416,761 500,147 761,537
Gross Profit 402,898 74,442 704,551 263,714
Expenses
Salaries and wages 251,749 191,491 492,472 275,962
Interest 60,603 5,488 114,490 62,582
Property taxes 35,230 29,623 52,538 42,106
Consulting 29,560 145,604 145,610 614,339
Insurance 28,256 24,036 60,877 52,209
Utilities 22,770 24,777 52,553 62,006
Audit, accounting and legal 20,722 98,939 43,775 115,808
Travel 21,282 22,510 37,373 54,034
Office and general 16,731 15,539 42,544 65,654
Financing 16,162 0 24,073 26,741
Repairs and maintenance 15,677 12,474 35,321 21,916
Telephone and facsimile 7,248 8,939 15,138 16,449
Bad debts 1,013 0 2,223 5,990
Shareholder relations 770 18,223 3,776 37,997
Depreciation 65,627 95,106 131,791 202,203
593,400 692,749 1,254,554 1,655,996
Loss For Period $(190,502) $(618,307) $(550,003) $(1,392,282)
Loss per Share $ (0.01) $ (0.04) $ (0.03) $ (0.06)
Weighted Average Number of
Shares Outstanding 16,590,315 14,425,843 16,359,212 13,848,630
</TABLE>
<PAGE>
RICH COAST, INC.
Consolidated Statements of Cash Flows
(Unaudited - See Notice to Reader)
(United States Dollars)
Six Months
Ended October 31
1997 1996
Net Loss for the Year $(550,003) $(1,392,282)
Adjustment to reconcile net
Loss to net cash used by operating activities
Shares issued for services 155,410 457,441
Depreciation 131,791 202,203
$(262,802) $(732,638)
Changes in operating assets and liabilities
Accounts receivable (130,175) 82,472
Inventory 25,124 (90,547)
Prepaids (1,112) (13,286)
Account payable and accrued liabilities 64,742 303,563
(41,421) 282,202
Net Cash Used in Operating Activities (304,223) (450,436)
Investing Activities
Capital asset additions (124,461) (102,296)
Deferred finance charge (38,637) (4,032)
(163,098) (106,328)
Financing Activities
Issue of capital stock for cash 0 539,230
Proceeds from convertible debenture 486,967 0
Repayment of long-term debt (27,488) (7,508)
459,479 531,722
Increase (Decrease) in Cash (7,842) (25,042)
Cash, Beginning of Period 12,919 31,550
Cash, End of Period $5,077 $6,508
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
October 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 October 31, 1997 and 1996 and the
consolidated results of operations and the consolidated statement of
changes in financial position for the three months and the six months
then ended. The results of operations for the three months and the
six months ended October 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 1996 have been restated to conform to the
1997 presentation.
<TABLE>
4. LONG-TERM DEBT
<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 $486,967 $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% 173,517 201,450
Equipment loan 0 2,487
2,660,484 2,203,937
Less: Current portion 89,091 71,332
$2,571,393 $2,132,605
</TABLE>
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
October 31
(Unaudited - See Notice to Reader)
(United States Dollars)
5. CAPITAL STOCK
(a) Authorized 100,000,000 common shares of $0.001 par value
<TABLE>
(b) Issued during the period:
<CAPTION>
Number of Par Additional Paid-in
Shares Value Capital
<S> <C> <C> <C>
Six months
ended October 31, 1996
Shares issued
For cash, private placements 640,000 $640 $489,010
For cash on exercise of options 61,750 62 $ 49,518
For services 400,000 400 $349,600
1,101,750 $888,128
Six months ended
October 31, 1997
Shares issued
For services 414,200 $414 $142,496
For financing fees 50,000 50 12,450
For settlement of debt 521,198 521 99,709
Forbearance of interest 100,000 100 100
1,085,398 $1,085 $254,755
</TABLE>
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
October 31
(Unaudited - See Notice to Reader)
(United States Dollars)
5. CAPITAL STOCK (Continued)
(c) At October 31, 1997, the following stock options were outstanding
Exercise Number
Expiry Date Price of Shares
May 9, 2006 $ 0.25 200,000
July 30, 2007 $ 0.20 1,032,348
July 30, 2007 $ 0.25 516,164
September 8, 2007 $ 0.18 1,310,000
September 8, 2007 $ 0.22 550,000
July 20, 2007 $ 0.20 427,201
July 20, 2007 $ 0.25 427,200
July 20, 2007 $ 0.50 5,000
September 8, 2006 $ 0.25 20,000
September 8, 2005 $ 0.25 400,000
December 27, 2005 $ 0.25 620,000
January 15, 2006 $ 0.25 800,000
(d) At October 31, 1997, share purchase warrants were outstanding for
3,600,000 shares exercisable at $0.30 per share to January 10, 2006,
235,000 shares exercisable at $1.00 per share to May 8, 1998 and
600,000 shares exercisable at $0.25 per share to January 12, 1999.
(e) In November 1997, the Company issued 180,000 shares at $0.25 per
share on exercise of warrants and 200,000 shares at $0.25 per share.
<PAGE>
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.
Board of Directors Change
In August 1997 Randall Pow resigned as a director of the Company. Recognizing a
need to strengthen it's Board membership while filling the newly-created
vacancy, Rich Coast announced the appointment of Mr. George Nassos to its
Board of Directors on August 7, 1997. With his extensive background in the
environmental industry, including over eleven years with the Chemical Waste
Management subsidiary of Waste Management, Inc., Mr. Nassos is capable of
expanding the Company's business base through his many industry contacts
and of developing strategies to grow the Company more rapidly.
Results of Operations
The Company's newly completed one million gallon biological treatment system
went into operation Nov. 3, 1997. Management believes that not only will this
system provide increased recurring revenues, it will also create a preferred
technology based service at lower cost, thus providing the Company with a
competitive advantage in many existing and new areas of business.
As indicated in Rich Coast's first quarter report for the 1998 fiscal year,
additional biological treatment revenues are being utilized to complete a
major expansion of the Company's oil processing capacity. Four 40 thousand
gallon treatment tanks are now being installed in a raised roof portion of
an existing building. Work remaining before the tanks can begin treatment
includes installation of heaters, mixers, pumps, valves and chemical feed
systems plus associated plumbing and boiler connections. When completed, the
system's capacity is designed to process two 40,000 gallon tank loads per
day or approximately 20 million gallons per year.
Waste oil, that the Company is paid to receive, is being accumulated at its ten
million gallon Wyoming Road terminal facility in Dearborn, Michigan. Until the
new oil processing capacity comes on stream, accumulated oil will be recycled
into saleable product at the Company's Ford Road facility in Dearborn. Over
two million gallons of oily wastes are in the Company's inventory and will be
processed during the third quarter at a rate which management hopes will
gradually accelerate to over 10,000 gallons per day at its Ford Road facility
before increased capacity comes on stream at the Wyoming Road facility.
Changes in Financial Condition
The Company's second quarter revenues of $642,912 are up 30.9% from the same
period in its last fiscal year and up to 14.5% from its previous quarter.
Losses for the second quarter were reduced from $363,692 in the first quarter
of fiscal 1998 to $190,502 in the current quarter and are in the line with the
Company's business plan. Increasing revenues from the biological treatment
system and from remediation services for more than 1.6 million gallons of
waste oil being received from one of the big three automotive companies
account for Rich Coast's improving financial condition. The increasing
revenues and cost reduction programs that were implemented during the second
quarter are expected to continue and to generate positive cash flow for
reinvestment in facilities.
In October, 1997, the last month of this reporting quarter, Rich Coast
realized record monthly revenue of $223,961 which resulted in approximate
break-even cash flow operation. The October revenue increase and improved net
income reflect initiation of the Company's waste oil activities which are now
beginning to function as intended, i.e., profits are realized from receipt of
oil waste streams as well as from sale of oil recycled from the oily waste
streams.
Liquidity and Capital Resources
Management is confident that operations will produce net income in the fiscal
quarter November 1997 thru January 1998. However, overdue accounts payable and
expenditures for additional facilities to improve profitability require
supplemental funding if an acceptable growth rate is to be achieved.
Fortunately, the financial needs of the Company are now being seriously
considered by local banks due to the Company's improved financial performance
and because of available equity in its Ford Road location. At this time a
real estate loan is being pursued which will provide necessary supplemental
funding until Rich Coast's net income provides sufficient funds for growth or
the net income results in a per share value that would make equity financing
attractive. The Company is also conducting a note offering to complete the
installation of its four 40,000 gallon tanks. The funds from this offering
will be in addition to the revenues generated from the biological treatment
system.
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 and the inability to obtain funding from third parties, unexpected
costs, and failure to capitalize upon access to new clientele.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On October 15, 1997 the Company sold 521,198 of its Common Stock to William
McCullagh in cancellation of a loan from him to the Company in the principal
amount of $100,000 plus cancellation of accrued interest in the amount of
$4,239.58. The shares were issued in an off shore transaction intended to be
exempt from registration under Regulation S promulgated under the Securities
Act of 1933 (the "Act").
On December 5, 1997 the Company sold an additional 200,000 shares of its Common
Stock to Mr. McCullagh for $50,000 in an off shore transaction intended to be
exempt from registration under Regulation S promulgated under the Act.
The Company is conducting a private placement of 10% 18 month convertible
promissory notes. The Notes will not be or have not been registered under the
Act and may not be offered or sold in the United States absent registration or
an applicable exemption from registration requirements.
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 October 31, 1997,
the Company filed no reports on Form 8-K.
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: December 18, 1997 by: /s/ James P. Fagan
James P. Fagan, President
Date: December 18, 1997 by: /s/ Michael M. Grujucich
Michael M. Grujucich, Chief Financial
and Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> OCT-31-1997
<CASH> 5,077
<SECURITIES> 0
<RECEIVABLES> 418,440
<ALLOWANCES> 0
<INVENTORY> 110,549
<CURRENT-ASSETS> 539,614
<PP&E> 6,312,838
<DEPRECIATION> 1,095,846
<TOTAL-ASSETS> 5,920,017
<CURRENT-LIABILITIES> 1,196,934
<BONDS> 2,571,393
0
0
<COMMON> 4,065,498
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,920,017
<SALES> 0
<TOTAL-REVENUES> 1,204,698
<CGS> 0
<TOTAL-COSTS> 500,147
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114,490
<INCOME-PRETAX> (550,003)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (550,003)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
