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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, 1999
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
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RICH COAST INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 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 ______
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The number of shares outstanding of the issuer's classes of common equity, as of
January 31, 1999 is 6,036,318 shares of Common Stock.
Transitional Small Business Disclosure Format (check one): YES _____ NO X
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
RICH COAST, INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
(UNAUDITED)
2
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RICH COAST, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(U.S. DOLLARS)
<TABLE>
<CAPTION>
=====================================================================================================
JANUARY 31, APRIL 30,
1999 1998
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<S> <C> <C>
ASSETS
CURRENT
Cash $ 13,745 $ 53,043
Accounts receivable 583,418 460,558
Insurance claim receivable 0 435,290
Shares subscription receivable 0 25,000
Inventory 37,576 108,265
- ----------------------------------------------------------------------------------------------------
634,739 1,082,156
DISTILLATION UNIT 2,024,706 2,024,706
PROPERTY AND EQUIPMENT, at cost (net) 3,510,469 2,990,373
DEFERRED FINANCE CHARGES AND OTHER ASSETS 302,049 146,413
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$ 6,471,963 $ 6,243,648
====================================================================================================
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 869,131 $ 838,966
Accrued oil and waste treatment costs 184,589 450,444
Current portion of long-term debt 52,218 595,309
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1,105,938 1,884,719
LONG-TERM DEBT 3,531,724 2,016,510
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4,637,662 3,901,229
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STOCKHOLDERS' EQUITY
Common stock, $0.001 par value;
100,000,000 shares authorized, $6,036,366 and 4,718,942 (post
reverse split) shares issued and outstanding at January 31, 1999 and 20,802 18,901
April 30, 1998, respectively
Additional paid-in capital 24,007,492 25,061,215
Accumulated deficit (22,193,993) (22,737,697)
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1,834,301 2,342,419
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$ 6,471,963 $ 6,243,648
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</TABLE>
See notes to financial statements
<PAGE>
RICH COAST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(U.S. DOLLARS)
<TABLE>
<CAPTION>
====================================================================================================
THREE MONTHS NINE MONTHS
ENDED JANUARY 31, ENDED JANUARY 31,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
SALES $ 565,188 $ 813,761 $ 1,705,216 $ 2,018,459
COST OF SALES (exclusive of
depreciation) 415,779 416,939 1,043,700 917,086
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GROSS PROFIT 149,409 396,822 661,516 1,101,373
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EXPENSES
Interest - beneficial conversion
feature 109,457 32,054 764,764 130,514
Salaries and wages 295,603 180,186 766,854 672,658
Consulting and finance fees 17,589 3,242 181,817 148,852
Interest 86,449 72,874 279,753 211,437
Insurance 22,059 24,029 70,722 84,906
Utilities 33,454 36,823 71,123 89,376
Audit, accounting and legal 66,349 61,191 180,872 104,966
Travel 10,111 13,902 101,648 51,275
Office and general 40,395 53,362 96,053 132,997
Property taxes 20,105 19,421 81,205 71,959
Telephone and facsimile 20,494 9,257 49,221 24,395
Advertising and shareholder relations 26,281 2,000 123,428 4,006
Bad debts 0 564 0 2,787
Depreciation 82,619 65,076 220,084 196,867
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830,965 573,981 2,987,544 1,926,995
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LOSS BEFORE OTHER ITEMS (681,556) (177,159) (2,326,028) (825,622)
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OTHER ITEMS
Gain on fire insurance claim 0 237,500 89,343 237,500
Accrued oil and waste treatment cost
reversal 0 0 285,588 0
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0 237,500 374,931 237,500
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INCOME (LOSS) FOR PERIOD $ (681,556) $ 60,341 $(1,951,097) $ (588,122)
====================================================================================================
LOSS PER SHARE BEFORE OTHER ITEMS $ (0.14) $ (0.04) $ (0.48) $ (0.20)
====================================================================================================
GAIN PER SHARE ON OTHER ITEMS $ 0.00 $ 0.05 $ 0.08 $ 0.06
====================================================================================================
INCOME (LOSS) PER SHARE $ (0.14) $ 0.01 $ (0.40) $ (0.14)
- ----------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (POST RELEASE SPLIT) 4,960,062 4,395,145 4,848,094 4,224,930
====================================================================================================
</TABLE>
See notes to financial statements
<PAGE>
RICH COAST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(U.S. DOLLARS)
<TABLE>
<CAPTION>
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NINE MONTHS
ENDED JANUARY 31,
1999 1998
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<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES $ (700,575) $ (465,058)
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INVESTMENT ACTIVITY
Capital asset additions (748,468) (117,300)
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FINANCING ACTIVITIES
Collection subscriptions receivable 25,000 0
Issue of capital stock for cash 187,955 138,700
Proceeds from convertible debenture 1,500,000 526,950
Repayment of long-term debt (95,642) (31,085)
Deferred finance charge (207,568) (44,828)
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1,409,745 589,737
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INCREASE (DECEASE) IN CASH (39,298) 7,379
CASH, BEGINNING OF PERIOD 53,043 12,919
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CASH, END OF PERIOD $ 13,745 $ 20,298
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Supplemental information
Interest paid $ 198,296 $ 111,437
=============================================================================
</TABLE>
See notes to financial statements.
<PAGE>
RICH COAST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999 AND APRIL 30, 1998
(UNAUDITED)
(U.S. 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. The organization and business of the Company, accounting
policies followed by the Company and other information are contained in the
notes to the Company's audited consolidated financial statements filed as
part of the Company's April 30, 1998 Form 10-KSB.
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, 1999 and 1998 and the
consolidated results of operations and the consolidated statement of cash
flows for the nine months then ended. The results of operations for the
nine months ended January 31, 1999 are not necessarily indicative of the
results to be expected for the entire fiscal year.
2. CAPITAL STOCK
(a) Authorized 100,000,000 common shares of $0.001 par value
(b) Issued during the period:
<TABLE>
<CAPTION>
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NUMBER PRICE PER
OF SHARES SHARE ($) AMOUNT
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<S> <C> <C> <C>
(post reverse split)
NINE MONTHS ENDED JANUARY 31, 1998
Shares issued
For cash, options and warrants 155,432 $ 0.88 $ 138,700
For services 103,653 $ 1.36 141,874
Financing fees 12,512 $ 1.00 12,500
Forbearance of interest 25,025 $ 0.01 25,000
Settlement of debt 130,430 $ 0.77 99,709
427,052 $ 417,783
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NINE MONTHS ENDED JANUARY 31, 1999
Shares issued
For cash - options 229,626 $ 0.83 $ 187,955
Interest on notes 47,499 $ 1.22 58,024
Settlement of debt 1,040,299 $ 0.67 697,000
1,317,424 $ 942,979
========================================================================================
</TABLE>
(c) Effective June 19, 1998 there was a one for four reverse split of
the authorized common stock.
<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.
Results of Operations
- ---------------------
Revenues for Rich Coast's third quarter are $565,188, up 4.6% from the previous
quarter, but disappointing and unacceptable to Rich Coast management. The
Company experienced a loss of $681,556 for the quarter, compared to a loss of
$177,159 for the same period in the prior year. Interviews with customers and
analysis of conditions show that consolidations in the industry have resulted in
larger but lower profit margin contracts between generators and the largest
waste disposal companies in the Detroit, Michigan area. For the most part waste
generators are manufacturers involved in the automotive industry where the trend
has been and continues to be toward doing business with highly integrated Tier I
companies, i.e., well financed companies that handle both hazardous and non-
hazardous wastes and have both landfills and truck fleets. Rich Coast's
financing is far too expensive to allow the company to compete in such a low
profit margin business. This situation has not evolved overnight and Rich
Coast's management has been exploring various technologies that could provide a
higher profit margin as well as some business exclusivity. That technology has
been identified and demonstrated successfully at a slaughterhouse, a paper pulp
company and at a trap grease processing company. All three demonstrations went
exceedingly well and have resulted in several requests for quotations for
systems incorporating Rich Coast's proprietary process which is a chemical air
sparged system (CASS) that separates liquids and solids to reduce, dramatically,
total fats, oils and greases (FOG); biological oxygen demand (BOD); and chemical
oxygen demand (COD). Rich Coast will sell, lease or provide and operate systems.
Funding requirements for manufacturing the cash systems are minimal as a result
of Rich Coast's utilization of manufacturing facilities at a local company
experienced in fabricating similar equipment.
The closing for the sale of the Company's Ford Road facility is scheduled for
March 30, 1999. Rich Coast will receive $215,000 at closing to pay off its
principal balance of $79,747 due on the property and utilize remaining funds for
consolidation at the Company's Wyoming Avenue terminal. Rich Coast will also
hold a five year land contract for the $235,000 balance due which will produce
monthly payments to Rich Coast of $4,765. The combination of additional
consolidated savings and revenues from an agreement with Murco, Inc., a
slaughterhouse operation in Plainwell, Michigan, should take Rich Coast to
essentially breakeven. Thereafter, rapid expansion of CASS system installations
is expected as a result of successful demonstrations, thus generating
profitability early in the fiscal year starting May 1, 1999.
Changes in Financial Condition
- ------------------------------
The Company's net tangible assets have improved to $1,834,301 from $1,634,168
last quarter, mostly as a result of converting $697,000.00 of promissory notes
into 1,040,299 Rich Coast common shares
7
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and offset by $681,556 of net loss for the quarter. The Company still intends to
hold a shareholder's meeting, now tentatively scheduled for April 30, 1999, to
vote on approval of issuance of preferred shares. Management has been assured
that the holders of $1,500,000 in convertible debentures intend to convert to
preferred stock, thus improving the Company's net tangible assets by that
amount. The Company found it necessary to postpone its meeting previously
scheduled for January 1999.
In February 1999, the Company's shares were de-listed from Nasdaq. The
Company is appealing the decision to de-list its shares.
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 CASS
treatment system, the expected installations at slaughterhouses, the expected
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 CASS 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.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
(c) In December 1999 the Company issued an aggregate of 1,087,798 shares for
accrued interest and conversion of principle on the Company's outstanding
10% 18-Month Convertible Promissory Notes. The shares were issued in
reliance on Section 4(2) of the Securities Act since the shares were issued
in connection with the private placement of the 10% Notes relying on the
same exemption and the investment decision to take shares in lieu of cash
payments was made at the time the 10% Notes were purchased.
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-3, File No.
333-63289, filed with the SEC on September 11, 1998.
(b) Reports on Form 8-K: During the quarter ended October 31, 1998, the Company
filed no reports on Form 8-K.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-QSB to be signed on its behalf by the
undersigned thereunto duly authorized.
RICH COAST INC.
Date: March 18, 1999 by: /s/ James P. Fagan
------------------------------------------
James P. Fagan, President
Date: March 18, 1999 by: /s/ Michael M. Grujicich
------------------------------------------
Michael M. Grujicich, Chief Financial
and Accounting Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JAN-31-1999
<CASH> 13,745
<SECURITIES> 0
<RECEIVABLES> 583,418
<ALLOWANCES> 0
<INVENTORY> 37,576
<CURRENT-ASSETS> 634,739
<PP&E> 6,881,659
<DEPRECIATION> (1,346,484)
<TOTAL-ASSETS> 6,471,963
<CURRENT-LIABILITIES> 1,105,938
<BONDS> 3,531,724
24,028,294
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,471,963
<SALES> 0
<TOTAL-REVENUES> 1,705,216
<CGS> 0
<TOTAL-COSTS> 1,043,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 279,753
<INCOME-PRETAX> (1,951,097)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,951,097)
<EPS-PRIMARY> (.40)
<EPS-DILUTED> (.40)
</TABLE>
