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 January 31, 1998
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 January 31, 1998 is 17,862,226 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
January 31, 1998
(Unaudited - See Notice to Reader)
<PAGE>
NOTICE TO READER
We have compiled the consolidated balance sheets of Rich Coast, Inc. as at
January 31, 1998 and the consolidated statements of operations for the three
months and the nine months ended January 31, 1998 and 1997 and cash flows
for the nine months ended January 31, 1998 and 1997 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
March 12, 1998
<PAGE>
RICH COAST, INC.
Consolidated Balance Sheets
(United States Dollars) January 31, April 30,
1998 1997
(Unaudited)
Assets
Current
Cash $ 20,298 $ 12,919
Accounts receivable 606,685 288,265
Insurance claim receivable (note 4) 780,000 0
Inventory 108,958 135,673
Prepaid expenses 2,690 4,436
1,518,631 441,293
Distillation Unit 2,024,706 2,024,706
Capital Assets 2,930,918 3,210,485
Deferred Finance Charges and Other Assets 158,128 113,300
$ 6,632,383 $ 5,789,784
Liabilities
Current
Accounts payable and accrued liabilities $ 790,050 $ 739,128
Accrued oil and waste treatment costs 453,152 303,973
Due to shareholder 0 100,000
Deferred insurance proceeds (note 4) 309,500 0
Current portion of long-term debt (note 5) 98,151 84,194
1,650,853 1,227,295
Long-Term Debt (note 5) 2,598,719 2,116,811
4,249,572 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
January 31, 1998 and
April 30, 1997 respectively 17,862 16,156
Additional paid-in capital 24,186,336 23,793,298
Accumulated deficit (21,821,387) (21,363,776)
2,382,811 2,445,678
$ 6,632,383 $ 5,789,784
<PAGE>
RICH COAST, INC.
Consolidated Statements of Operations
(Unaudited - See Notice to Reader)
(United States Dollars)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended January 31, Ended January 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Sales $ 813,761 $ 388,538 $ 2,018,459 $ 1,413,789
Cost of Sales (exclusive of depreciation) 416,939 253,714 917,086 1,015,251
Gross Profit 396,822 134,824 1,101,373 398,538
Expenses
Salaries and wages 180,186 214,702 672,658 499,484
Consulting 3,242 49,390 148,852 657,443
Interest 69,781 49,078 184,271 111,660
Insurance 24,029 18,867 84,906 71,076
Utilities 36,823 26,074 89,376 98,303
Audit, accounting and legal 61,191 16,360 104,966 132,168
Travel 13,902 10,419 51,275 64,453
Repairs and maintenance 8,243 7,715 43,564 29,631
Office and general 47,119 27,527 93,439 106,736
Property taxes 19,421 13,742 71,959 55,848
Factoring fee 3,093 11,112 27,166 14,075
Telephone and facsimile 9,257 6,529 24,395 22,978
Shareholder relations 0 3,656 0 41,653
Bad debts 564 0 2,787 5,990
Depreciation 65,076 78,381 196,867 280,584
541,927 533,552 1,796,481 2,192,082
Loss for Period Before
Insurance Claim (145,105) (398,728) (695,108) (1,793,544)
Extraordinary Item
Insurance claim (note 4) 237,500 0 237,500 0
Income (Loss) for Period $ 92,395 $ (398,728) $ (457,608) $ (1,793,544)
Loss per Share $ (0.01) $ (0.03) $ (0.04) $ (0.12)
Earnings Per Share on
Extraordinary Item 0.02 0.00 0.01 0.00
Income (Loss) Per Share $ 0.01 $ (0.03) $ (0.03) $ (0.12)
Weighted Average Number of
Shares Outstanding 17,580,581 14,834,670 16,899,721 14,560,453
</TABLE>
<PAGE>
RICH COAST, INC.
Consolidated Statements of Cash Flows
(Unaudited - See Notice to Reader)
(United States Dollars)
Nine Months
Ended January 31,
1998 1997
Net Loss for Period $ (457,608) $ (1,793,544)
Adjustment to reconcile net
loss to net cash used by
operating activities
Shares issued for services 155,610 508,980
Settlement of debt 0 105,000
Depreciation 196,867 280,584
Insurance claim (237,500) 0
(342,631) (898,980)
Changes in operating assets and liabilities
Accounts receivable (318,420) 143,662
Inventory 26,715 (145,806)
Prepaids 1,746 25,431
Account payable and accrued liabilities 267,532 332,734
Due to shareholder (100,000) 65,615
(122,427) 421,636
Net Cash Used in Operating Activities (465,058) (477,344)
Investing Activities
Capital asset additions (117,300) (104,584)
Deferred finance charge (44,828) 0
(162,128) (104,584)
Financing Activities
Issue of capital stock for cash 138,700 557,780
Proceeds from promissory notes 526,950 0
Repayment of long-term debt (31,085) (3,504)
634,565 554,276
Increase (Decrease) in Cash 7,379 (27,652)
Cash, Beginning of Period 12,919 31,550
Cash, End of Period $ 20,298 $ 3,898
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
January 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 January 31, 1998
and April 30, 1997 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
January 31, 1998 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 1997 have been restated to conform to the
1998 presentation.
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
January 31
(Unaudited - See Notice to Reader)
(United States Dollars)
4. INSURANCE CLAIM
On December 15, 1997, a fire destroyed certain assets at the
Company's facility located at 10200 Ford Road in Dearborn resulting
in shut down of production through January 31, 1998. As a result of
the damage, the Company has filed an insurance claim totalling
$780,000 for repairs and replacement of equipment, damages to the
building and loss of income. The amount of the claim is currently
being reviewed and the outcome is not determinable at this time.
5. LONG-TERM DEBT
1997 1996
10% senior secured note, due
October 1, 2001, interest
payable monthly
$2,000,000 $2,000,000
10% convertible promissory
notes due 18 months after
date of issue, convertible into
common stock at the option of
the holder at maturity 526,950 0
Land contract payable in monthly
instalments of $4,753 each including
principal and interest at 8% 169,920 187,669
Obligation under capital lease 0 13,336
2,696,870 2,201,005
Less: Current portion 98,151 84,194
$2,598,719 $2,116,811
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
January 31
(Unaudited - See Notice to Reader)
(United States Dollars)
6.CAPITAL STOCK
(a)Authorized 100,000,000 common shares of $0.001 par value
(b)Issued during the period:
<TABLE>
<CAPTION>
Additional
Number of Paid-In
Shares Capital
<S> <C> <C> <C>
Nine months
ended January 31, 1997
Shares issued
For cash, private placements 635,000 $ 335 $ 489,650
For cash on exercise of options 81,750 82 68,131
For services 708,400 708 508,980
For settlement of debt 152,470 152 105,000
1,577,620 1,277 $ 1,171,761
Nine months ended
January 31, 1998
Shares issued
For services 414,200 $ 414 $ 142,496
For cash
Exercise of options 40,000 40 7,160
Exercise of warrants 581,107 581 130,918
For financing fees 50,000 50 12,450
For settlement of debt 521,198 521 99,709
Forbearance of interest 100,000 100 100
1,706,505 $ 1,706 $ 392,833
</TABLE>
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
January 31
(Unaudited - See Notice to Reader)
(United States Dollars)
6. CAPITAL STOCK (Continued)
(c) At January 31, 1998, 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 $ 0.25 590,000
January 15, 2006 $ 0.25 800,000
November 11, 2007 $ 0.22 30,000
September 8, 2007 $ 0.18 300,000
(d) At January 31, 1998, the following stock warrants were
outstanding:
Exercise Number
Expiry Date Price of Shares
September 8, 1998 $ 2.50 200,000
January 10, 2006 $ 0.30 3,600,000
January 15, 2001 $ 0.25 150,000
January 13, 2002 $ 0.25 600,000
July 30, 2002 $ 0.20 844,643
May 5, 1998 $ 0.25 100,000
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 consolidated operations in Dearborn, Michigan are running
effectively and the steadily increasing business volume is being handled
promptly with excellent customer reactions. The biological treatment system
is complete and in use at the Company's Wyoming Avenue facility in Dearborn;
however, the additional oil recycling capacity being installed at the Wyoming
site has not been completed and is not expected to be in operation before
mid-1998.
Mr. George Nassos, the Company's most recent addition to its Board, has been
actively participating in exploring business growth prospects for Rich Coast.
As a result, Rich Coast has had an opportunity to describe its capabilities
to one of the world's leading engineering firms in design and installation of
environmental systems. Rich Coast's capabilities were well understood and
appreciated as evidenced by the firm's desire for development of
non-disclosure agreements and further pursuit of studies relating to possible
joint projects. This type of business relationship has been identified as a
high priority by Rich Coast's Board of Directors.
Results of Operations
Since November 3, 1997 when the new one million gallon biological treatment
system went into operation at the Company's Wyoming Avenue site, the Company
has achieved significant gains in revenue. In the case of one customer,
revenue of $166,000 was realized from the customer in the first month of
operation of the biological treatment system. While record revenues were
attained for the quarter ended January 31, 1998, they would have been higher
if the Company could have avoided a shut down of part its operations to
repair damage from a fire on December 15, 1997 at its Ford Road facility.
That facility is now back in partial operation. The Company does expect the
shut down to have a continuing impact on business growth. However, the
Company still expects revenues to increase. The Company has filed an
insurance claim relating to the fire, and that claim is currently being
reviewed by the insurance adjuster.
Now that the Ford Road facility is partially back on stream along with
accelerating operations of the biological treatment system at the Wyoming
Avenue site, more customers are being attracted to Rich Coast because of
diverse capabilities. Typical of new opportunities for Rich Coast is
finalization of an exclusive arrangement with a major trucking company that
hauls as much as ten million gallons of waste per year for out of state
generators that are all new customers for Rich Coast. Furthermore, a second
very similar trucking company has requested meetings to negotiate an
exclusive arrangement for utilization of Rich Coast's biological treatment
system. In anticipation of selling out the Company's total existing
biological treatment capacity, a doubling of capacity is being explored in
which an adjacent unused one million gallon tank could be equipped for
biological treatment at a significantly lower investment cost per gallon of
capacity than originally experienced.
<PAGE>
The Company's schedule for completion of added oil recycling capacity has been
delayed due to problems in obtaining building permits to raise the roof as
required to install four 40 thousand gallon treatment tanks. More extensive
structural steel changes must be made to satisfy the City of Dearborn's
building requirements. In the interim, Rich Coast is augmenting its oil
heating systems at Ford Road to break its production bottleneck while
improving quality of the end product. The installation of oil processing
capacity designed for 20 million gallons per year is still proceeding at the
Company's Wyoming Avenue site, but this capacity will not be in operation
before mid 1998.
Changes in Financial Condition
Rich Coast revenues for its third quarter ended January 31, 1998 totaled
$814,228 compared to $338,538 in the same period last year for an increase of
110%. Compared to the previous quarter revenues of $642,912, revenues grew
by 27%.
Most important to the Company is its attainment of net income of $92,395
(after allowing for depreciation and the insurance claim) for the period of
November 1, 1997 through January 31, 1998. Realization of net income allows
the Company to gradually reduce its payables and to negotiate more favorable
debt or equity financing which will be required to complete oil processes and
implement additional processes at its Wyoming terminal site. The Company
still had a net loss of $457,608 for the nine months ended January 31, 1998
(after allowing for depreciation and the insurance claim). However, that net
loss was 26% of the loss for the same nine-month period in the prior year.
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, the continuing increase
in revenues, 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, the rejection of the Company's insurance claim
relating to the fire, unexpected costs, and failure to capitalize upon access
to new clientele.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about December 29, 1997 the Company was served with a complaint
filed against it in U.S. District Court for the Eastern District of Michigan
by Mobil Oil Corporation. The Complaint alleges breach of contract by the
Company in connection with a Terminaling Agreement dated May 18, 1995 relating
to through-put fees at Mobil's Woodhaven, Michigan facility. The dispute
under the Terminaling Agreement will not affect the Company's purchase of the
Mobil terminal which occurred January 15, 1996, and should not be confused
with the Mobil terminal. Mobil claims damages through December 1, 1997 in
the amount of at least $225,556.80, representing unpaid monthly fees, and
claims that it will continue to incur damages in the amount of unpaid monthly
fees under the Terminaling Agreement. Management expects the Terminaling
Agreement to be renegotiated and the claims to be settled prior to trial.
On December 30, 1997 an unrelated complaint was filed against the
Company and two of its directors personally in U.S. District Court for the
Eastern District of Michigan by Comer Holdings Ltd., an Irish corporation
("Comer") in which Comer claims, among other things, breach of contract
relating to an alleged loan made to the Company in 1994. Comer claims damages
in an amount in excess of $75,000. The Company, in its response filed on
January 20, 1998, denied all liability and proffered several defenses.
Management expects that the suit will be dismissed or settled prior to trial.
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: During the quarter ended January 31, 1998, the
Company filed only one report on Form 8-K. The report was dated
December 29, 1997 and reported on Item 5 information.
<PAGE>
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: March 16, 1998 by: /s/ James P. Fagan
James P. Fagan, President
Date: March 16, 1998 by: /s/ Michael M. Grujucich
Michael M. Grujucich, Chief Financial
and Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JAN-31-1998
<CASH> 20,298
<SECURITIES> 0
<RECEIVABLES> 606,685
<ALLOWANCES> 0
<INVENTORY> 108,958
<CURRENT-ASSETS> 1,518,631
<PP&E> 6,115,605
<DEPRECIATION> 1,159,981
<TOTAL-ASSETS> 6,632,383
<CURRENT-LIABILITIES> 1,650,853
<BONDS> 2,598,719
0
0
<COMMON> 24,204,198
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,632,383
<SALES> 0
<TOTAL-REVENUES> 2,018,459
<CGS> 0
<TOTAL-COSTS> 917,086
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 184,271
<INCOME-PRETAX> (695,108)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 237,500
<CHANGES> 0
<NET-INCOME> (457,608)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
