<PAGE>
As filed with the Securities and Exchange Commission on March 21, 2000
Registration Statement No. 333-63289
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4 TO FORM S-3 ON FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
RICH COAST, INC.
----------------
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
Nevada 4953 91-1835978
- ------------------------------ ---------------------------- -------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
10200 Ford Road Robert W. Truxell
Dearborn, Michigan 48126 10200 Ford Road
(313) 582 -8866 Dearborn, Michigan 48126
(Address and telephone number of (313) 582-8866
principal executive offices and address of (Name, address and telephone
principal place of business) number of agent for service)
</TABLE>
With a Copy to:
Theresa M. Mehringer, Esq.
Smith McCullough, P.C.
4643 South Ulster Street, Suite 900
Denver, Colorado 80237
(303) 221-6000
Approximate date of proposed sale to the public:
As soon as practicable following the date on which the Registration
Statement becomes effective.
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
=======================================================================================================================
Title of each class of Amount to Proposed maximum Proposed maximum Amount of
securities to be registered/(1)/ be registered offering price per aggregate offering registration
share/(2)/ price/(2)/ fee/(2)/
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock issuable 900,000 Shares $0.78125 $ 703,125 $ 185
upon exercise of Warrants
- -----------------------------------------------------------------------------------------------------------------------
Common Stock issuable 2,506,938 Shares/(3)/ $0.78125 $1,958,545 $ 517
upon conversion of
debentures
- -----------------------------------------------------------------------------------------------------------------------
Common Stock 3,300,000 Shares $0.78125 $2,578,125 $ 680
- -----------------------------------------------------------------------------------------------------------------------
Total 6,706,938 Shares/(4)/ $0.78125 $5,239,795 $1,383
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
__________________________________
(1) For a description of the various securities referred to herein and the
transactions in which they were issued, See "Description of Securities -
Securities Registered Hereby."
(2) Proposed maximum offering price and registration fee is based on the
average of the bid and asked prices as reported by NASDAQ on September 9,
1998 (a date within five business days prior to the initial filing hereof).
$1,786 of the registration fee was paid as a part of the registrant's
initial filing and amendment No. 3.
(3) Includes the registration for resale of shares of Common Stock issuable
upon conversion of the remaining $1,445,500 principal amount of 8%
Convertible Debentures (the "Debentures"). Estimated solely for purposes
of calculating the registration fee in connection with this Registration
Statement and assumes that all of the Debentures are converted into shares
of Common Stock based on a price of $0.76875 per share of Common Stock (the
average closing bid price of the Common Stock for the five trading days
ending on August 27, 1998) and using a discount rate of 25%.
(4) All shares offered pursuant to this Registration Statement relate only to
resales by Selling Shareholders.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE>
Subject to Completion - Preliminary Prospectus dated March ___, 2000
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
RICH COAST INC.
6,706,938 Shares of Common Stock to be issued to and offered by Selling
Shareholders
An aggregate of 6,706,938 shares (the "Shares") of $.001 par value Common
Stock (the "Common Stock") of Rich Coast Inc. ("Rich Coast" or the "Company")
may be offered by certain shareholders (the "Selling Shareholders") from time to
time in the public market. The shares of Common Stock offered hereby include the
resale of 2,506,938 shares of Common Stock issuable upon conversion of the
remaining $1,445,500 in principal amount of 8% Convertible Debentures. The
issuance of these 2,506,938 shares would represent approximately 20.2% of total
outstanding shares if issued on March 15, 2000. These Debentures are convertible
into Shares of Common Stock at the conversion price for each Share of Common
Stock equal to the lesser of (i) $2.50, or (ii) 75% of the five day average
closing bid price of the Common Stock for the five trading days immediately
preceding the conversion date of the Debentures. If all $1,445,500 principal
amount of Debentures was converted on March 16, 2000, then the aggregate shares
issued upon conversion would total 7,227,500 of which the 2,506,938 shares
registered hereby would constitute only 35%. Except in the case of mandatory
conversion of the Debentures, no holder of Debentures is entitled to convert an
amount of Debentures that would result in beneficial ownership of more than 4.9%
of the Company's outstanding common stock.
All proceeds received from the sale of the Shares offered by the Selling
Shareholders will accrue to the benefit of the Selling Shareholders and not to
the Company. 3,300,000 of the Shares which may be offered by the Selling
Shareholders are outstanding on the date of this Prospectus, and the remaining
3,406,938 Shares may be issued by the Company after the date of this Prospectus
upon exercise of outstanding warrants (the "Warrants") or conversion of
outstanding debentures (the "Debentures") held by Selling Shareholders. All of
the Shares may be resold in the public market by the Selling Shareholders. The
Company will receive the exercise price paid upon exercise of Warrants for
issuance of those shares; however, any difference between that price and the
price at which the shares are sold in the market by the Selling Shareholders
will accrue to the benefit of the Selling Shareholders. Sales of any of these
previously restricted Shares into the public market could impact the market
adversely so long as this Offering continues. See "Risk Factors."
The Common Stock is traded on the Over-The-Counter Bulletin Board under the
symbol "KRHC". On March 15, 2000, the closing bid price of the Common Stock
as reported on the Over-The-Counter Bulletin Board was $0.25.
i
<PAGE>
The securities offered hereby are speculative and involve a high degree of
risk. See "Risk Factors" on pages two through five for discussion of certain
material risks in connection with the Company which prospective investors should
consider prior to purchasing the securities offered hereby.
The Shares will be offered by the Selling Shareholders through dealers or
brokers on the OTC Bulletin Board. The Shares may also be sold in privately
negotiated transactions. Sales through dealers or brokers are expected to be
made with customary commissions being paid by the Selling Shareholders.
Payments to persons assisting the Selling Shareholders with respect to privately
negotiated transactions will be negotiated on a transaction-by-transaction
basis. The Selling Shareholders have advised the Company that prior to the date
of this Prospectus they have made no agreements or arrangements with any
underwriters, brokers or dealers regarding the sale of the Shares. See "Plan of
Distribution." Any commissions and/or discounts on the sale of Shares offered
by the Selling Shareholders will be paid by the Selling Shareholders, and all
other expenses related to the filing of the registration statement to which this
offering relates are being paid by the Company. Other expenses to be paid by
the Company may include SEC filing fee, printing costs, Edgar costs, legal fees
and accounting fees.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Price Per Total Number Aggregate Offering Proceeds to Selling
Share of Shares Price Shareholder
-------------- -------------------- ------------------- --------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares to be Outstanding
Offered by Selling $0.25(2) 6,706,938(3) $1,676,734 $1,676,734
Shareholders/(1)/
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
_____________________________
(1) These Shares will be offered by the Selling Shareholders. Some shares are
currently held by Selling Shareholders, and some shares will be held by
Selling Shareholders after exercise of outstanding Warrants and conversion
of Debentures. See "Description of Securities."
(2) The Price per Share represents the closing bid price as reported on the
Over-the-Counter Bulletin Board on March 15, 2000. These Shares will be
offered from time to time by the Selling Shareholders at market prices.
Underwriting discounts or commissions may be paid by the Selling
Shareholders. See "Plan of Distribution."
(3) The shares offered hereby include the resale of 3,300,000 shares
outstanding; 900,000 shares issuable upon exercise of Warrants; and
2,506,938 shares issuable upon conversion of the remaining $1,445,500
principal amount of 8% Convertible Debentures.
These securities are speculative and involve a high degree of risk and
immediate substantial dilution to investors. Potential purchasers should not
invest in these securities unless they can afford the risk of losing their
entire investment. See "Risk Factors" on page 2 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Prospectus dated ________________, 2000
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Forward-Looking Statements............................................................. 1
Prospectus Summary..................................................................... 1
Risk Factors........................................................................... 2
Use Of Proceeds........................................................................ 5
Selling Shareholders................................................................... 6
Plan of Distribution................................................................... 7
Legal Proceedings...................................................................... 10
Dividend Policy........................................................................ 10
Management............................................................................. 11
Security Ownership of Certain Beneficial Owners and Management......................... 12
Description of Securities.............................................................. 14
SEC Position on Indemnification........................................................ 15
Certain Relationships and Related Transactions......................................... 16
Description of Business................................................................ 16
Management's Discussion and Analysis of Financial Condition and Results of Operations.. 19
Description of Property................................................................ 26
Market for the Registrant's Common Stock and Related Stockholder Matters............... 27
Executive Compensation................................................................. 28
Legal Matters.......................................................................... 31
Experts................................................................................ 31
Changes in Accountants................................................................. 31
Additional Information................................................................. 32
Index to Consolidated Financial Statements for Rich Coast.............................. F-1
</TABLE>
iii
<PAGE>
FORWARD-LOOKING STATEMENTS
Statements made in this Prospectus, including statements contained in
information incorporated by reference, that are not historical or current facts
are "forward-looking statements" made pursuant to the safe harbor provisions of
Section 27A of the 1933 Act and Section 21E of the 1934 Act. The Company intends
that such forward-looking statements be subject to the safe harbors for such
statements. Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results of operations and events and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made.
Actual events may differ materially from those projected in any forward looking
statement. There are a number of important factors beyond the control of the
Company that could cause actual events to differ materially from those
anticipated by any forward looking information. These factors include those
discussed in this Prospectus under the heading "Risk Factors" and in the
"Management's Discussion and Analysis" sections of the Company's Securities and
Exchange Commission Filings incorporated herein by reference as well as factors
described in the Company's Current Reports on Form 8-K and other documents
incorporated herein by reference. The Company disclaims any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus and the documents
incorporated by reference herein.
The Company
- -----------
Rich Coast, Inc. is a non-hazardous waste treatment facility specializing
in recycling of waste oils. The Company operates equipment and oversees
processes at both its facilities and customers' facilities. The equipment and
processes separate liquid waste streams and pumpable waste streams containing a
mixture of liquids and solids. Some of the resulting streams are recyclable into
greases and oils that can be sold. The Company's executive offices are located
at 10200 Ford Road, Dearborn, Michigan 48126, telephone (313) 582-8866.
The Offering
- ------------
Pursuant to this Prospectus, the Selling Shareholders may from time to time
offer all or any portion of an aggregate of 6,706,938 Shares of Common Stock on
the OTC Bulletin Board through underwriters, dealers or brokers or in
independently negotiated transactions. This amount includes 2,506,938 shares to
be issued upon conversion of the remaining $1,445,500 principal amount of 8%
Convertible Debentures. See "Selling Shareholders" and "Plan of Distribution."
The Company will not receive any proceeds from the sale of Shares offered by the
Selling Shareholders. As of the date of this Prospectus, only 3,300,000 of the
Shares registered for public sale are outstanding. The remaining Shares have not
yet been issued, but may be purchased from the Company by Selling
<PAGE>
Shareholders and resold by them pursuant to this Prospectus. See "Description of
Securities." These 3,406,938 Shares of Common Stock underlie outstanding
warrants and convertible debentures exercisable or convertible at varying
prices.
The Company may receive the cash proceeds from the exercise of outstanding
Warrants and will benefit through reduction of indebtedness by conversion of
outstanding debentures; however, the prices at which the Company is obligated to
issue the Shares upon conversion of Debentures are below the market price. In
addition holders of Warrants may be able to exercise the Warrants through a
cashless exercise procedure, which would result in no cash proceeds to the
Company.
After this Offering there will be approximately 13,321,827 shares of Common
Stock outstanding. The Company's Common Stock is traded on the OTC-Bulletin
Board under the symbol "KRHC."
Risk Factors
- ------------
The securities offered are speculative and involve a high degree of risk.
Factors which may affect the Company's business and the securities offered
hereby include uncertain financial condition, lack of profitability, possible
need for additional capital, dependence on management, substantial debt and the
likely adverse effect of this Offering on the market price of the Company's
Common Stock. See "Risk Factors."
Use of Proceeds
- ---------------
Net proceeds, if any, to the Company from the exercise of outstanding
warrants will be used for working capital. See "Use of Proceeds."
RISK FACTORS
The securities offered in this prospectus are highly speculative and
involve a high degree of risk, including among other items the risk factors
described below. You should carefully consider the following risk factors and
other information in this prospectus before deciding to invest in the shares.
Risk Factors Related to the Business of the Company
---------------------------------------------------
Rich Coast has incurred loses in prior operations and may never operate
profitably.
As of January 31, 2000 Rich Coast had an accumulated deficit of
$23,876,035. The Company reported net losses of $1,050,566 for the nine months
ended January 31, 2000, and incurred net losses of $2,572,496 and $1,373,921 for
the fiscal years ended April 30, 1999 and 1998, respectively. There is no
assurance that the Company can generate net income, increase revenues or
successfully expand its operations in the future.
2
<PAGE>
The loss of current management may make it difficult to operate Rich Coast.
The Company's prospects for success currently are greatly dependent upon
the efforts and active participation of its management team, including its
President and Chief Executive Officer, James P. Fagan, and Chairman, Robert
Truxell. The Company has an employment contract with Mr. Truxell expiring
December 31, 2002, and an employment contract with Mr. Fagan which terminates
December 31, 2000. The loss of the services of Messrs. Fagan and Truxell could
be expected to have an adverse effect on the Company. The Company does not
maintain key person insurance for Messrs. Truxell and Fagan.
Debt service requirements drain cash flow and hinder other financing
opportunities.
The Company's annual debt service requirement is $478,437, of which
$370,293 is required for interest and principal payments under the Company's 10%
Senior Secured Note due July 10, 2004 (the "10% Senior Note") and $108,144 is
required for miscellaneous indebtedness. Under the 10% Senior Note, interest
only payments must be made until August 10, 2000, at which time interest and
principal payments will be made until the $2,000,000 principal amount is repaid.
The Company also has outstanding $1,445,500 in 8% Convertible Debentures due
June 2003, on which interest accrues until repayment.
The Company's debt could have important consequences to the holders of
Common Stock by restricting the Company's ability to obtain additional financing
for working capital, acquisitions or other purposes in the future and by
creating the risk that violation of a covenant or other term of the loan
agreements could cause the outstanding balance of the loans to become due,
putting all of its assets at risk. The Company's ability to make scheduled
payments of principal or interest on, or to refinance, the Company's debt will
depend on future operating performance and cash flow, which are subject to
prevailing economic conditions and financial, competitive and other factors
beyond its control. A failure to comply with the loan agreements could result in
an event of default which could permit acceleration of the Company's debts. The
obligations of the Company under the loan agreement for the 10% Senior Note is
secured by a pledge of substantially all of the assets of the Company and its
subsidiaries. If the Company becomes insolvent or is liquidated, or if payment
under the loan agreement is accelerated, the investor would be entitled to
exercise remedies available to secured creditors under applicable law and
pursuant to the loan agreement. Accordingly, the holder of the 10% Senior Note
will have a prior claim on the assets of the Company and its subsidiaries. The
holders of the Debentures also have a security interest (junior to the holders
of the 10% Senior Note) in substantially all of the assets of the Company and
its subsidiaries. Foreclosure on the assets pledged to secure repayment of debt
could reduce the Company's assets to a level at which assets would not be
sufficient to make any distribution to shareholders in the event of liquidation.
3
<PAGE>
Rich Coast has numerous outstanding options, warrants and convertible debentures
which may adversely affect the price of Rich Coast's common stock.
The Company has reserved 2,997,813 shares for issuance upon exercise of
outstanding options under plans and warrants, and 16,061,111 shares for issuance
upon conversion of the Debentures, and has registered 3,406,938 shares for
public sale by the holders. Shares are issuable upon exercise of warrants and
options at prices as low as $0.125 per Share. The 2,506,938 shares issuable upon
conversion of the Debentures would represent 20.2% of the shares outstanding on
March 15, 2000. There is no floor on the conversion price of the Debentures
since the conversion price will be 75% of the average bid price of the Company's
Common Stock for the five trading days immediately preceding the conversion. Any
sale into the public market of Shares purchased privately at prices below the
current market price could be expected to have a depressive effect on the market
price of the Company's Common Stock. See "Description of Securities."
Issuance of Additional Shares Upon Conversion of Debentures if Market Price
Declines/Dilution. The Company had a net tangible book value of $919,412 or
$0.09 per share of the Company's Common Stock on January 31, 2000. Net tangible
book value per share is determined by dividing the tangible net worth of the
Company (tangible assets less total liabilities) by the total number of
outstanding shares of Common Stock. As the market price of the shares of Common
Stock declines, more shares will be issued upon conversion since the conversion
price is equal to the lesser of (i) $2.50, or (ii) 75% of the five day average
closing bid price of the Common Stock for the five trading days immediately
preceding the conversion date of the Debentures. If all $1,445,500 principal
amount of Debentures, was converted on March 15, 2000 when 75% of the five day
average closing bid price was $.20 per share, then the aggregate shares issued
upon conversion would total , of which the 2,506,938 shares registered hereby
would constitute only %. Since the conversion price of the Debentures and the
exercise price of the Warrants is currently in excess of the net tangible book
value per share of the Company's Common Stock, such conversion or exercise would
not be dilutive to existing shareholders. However, in the event that the
Company's net tangible book value per share exceeds the conversion price of the
Debentures or the exercise price of the Warrants on the date of conversion or
exercise, such conversion or exercise would have a dilutive effect.
Rich Coast does not expect to pay dividends.
The Company has not paid dividends since inception on its common stock, and
it does not contemplate paying dividends in the foreseeable future on its common
stock in order to use all of its earnings, if any, to finance expansion of its
operations.
Lack of trading market may make it difficult to sell Rich Coast's common stock.
The only trading in Rich Coast's common stock is conducted on the OTC
Bulletin Board. As a result, an investor may find it more difficult to dispose
of, or to obtain accurate quotations as to the market value of, the common
stock. In addition, the Company's common stock is defined as a "penny stock" by
rules adopted by the Commission. In such event, brokers and dealers effecting
transactions in the common stock with or for the account of a customer must
obtain the written
4
<PAGE>
consent of a customer prior to purchasing the common stock, must obtain certain
information from the customer and must provide certain disclosures to such
customer. These requirements may have the effect of reducing the level of
trading in the secondary market, if any, of the common stock and reducing the
liquidity of the common stock.
The stock price can be extremely volatile.
The Company's common stock is traded on the OTC Bulletin Board. There can
be no assurance that an active public market will continue for the common stock,
or that the market price for the common stock will not decline below its current
price. Such price may be influenced by many factors, including, but not limited
to, investor perception of the Company and its industry and general economic and
market conditions. The trading price of the common stock could be subject to
wide fluctuations in response to announcements of business developments by the
Company or its competitors, quarterly variations in operating results, and other
events or factors. In addition, stock markets have experienced extreme price
volatility in recent years. This volatility has had a substantial effect on the
market prices of companies, at times for reasons unrelated to their operating
performance. Such broad market fluctuations may adversely affect the price of
the common stock.
Issuance of preferred stock may adversely affect the price of Rich Coast's
common stock.
Rich Coast is authorized to issue 10,000,000 shares of preferred stock. The
preferred stock may be issued in series from time to time with such
designations, rights, preferences and limitations as the board of directors of
Rich Coast may determine by resolution. The directors of Rich Coast have no
current intention to issue preferred stock. However, the potential exists that
preferred stock might be issued which would grant dividend preferences and
liquidation preferences over the common stock, diminishing the value of the
common stock.
USE OF PROCEEDS
The Company will not receive any proceeds from sales of Shares by the
Selling Shareholders. The Company may receive cash proceeds from the exercise,
if any, of outstanding Warrants. However, certain holders of the Warrants have
the option to exercise the Warrants through a cashless exercise program, which
would result in no cash proceeds to the Company. As of the date of this
Prospectus, based on recent market prices for the Company's Common Stock,
management believes that it is unlikely that all of the Warrants will be
exercised since the exercise price of the Warrants is $0.60 per share. However,
if all of the Warrants were exercised with cash at the exercise price of $0.60
per share, then proceeds of the Offering to the Company would total an aggregate
of $540,000 in cash. After deduction of expenses of this Offering payable by the
Company, estimated to total $40,000, net cash proceeds are estimated to total
$500,000. Any net proceeds to the Company from the exercise of outstanding
warrants will be used for working capital.
5
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth information known to the Company regarding
the beneficial ownership of Shares of the Company's Common Stock as adjusted to
reflect the sale of the shares offered hereby by each Selling Shareholder. The
information set forth below is based upon information concerning beneficial
ownership provided to the Company by each Selling Shareholder. Except as
otherwise indicated below, each of the persons named in the table has sole
voting and investment power with respect to the shares set forth opposite such
person's name.
<TABLE>
<CAPTION>
Number of Shares Number of
Owned Prior to Shares Number of Shares Owned
Name Offering/(1)//(2)/ Offered Hereby/(1)/ After Offering/(1)//(3)/
- ------------------------------- -------------------- ------------------------ ---------------------------
<S> <C> <C> <C>
Alan Moore 925,000 900,000/(4)/ 25,000
Canadian Advantage Limited 333,854 333,854 0
Partnership/(6)/
Sovereign Partners, LP/(7)/ 835,935 835,935 0
Dominion Capital Fund Ltd./(8)/ 1,337,149 1,337,149 0
Frippoma S.A./(9)/ 2,550,000 2,550,000 0
S.B. Fletcher Consulting, 300,000 300,000/(5)/ 0
Inc./(10)/
Strauss Holding Limited/(11)/ 450,000 450,000 0
</TABLE>
_________________
(1) The number of Shares underlying the Warrants or Debentures are those Shares
registered for sale upon exercise or conversion of the Warrants or
Debentures held by Selling Shareholders. The number of shares of Common
Stock indicated to be issuable in connection with conversion of the
Debentures and offered for resale hereby is an estimate determined in
accordance with a formula based on the market prices of the Common Stock,
as described in this Prospectus, and is subject to adjustment and could be
materially less or more than such estimated amount depending upon the
market price of the Common Stock at the time the Debentures are converted.
(2) Assumes that the Warrants are exercised and the Debentures are converted
and all Shares are sold by the Selling Shareholders.
(3) Beneficial ownership is calculated in accordance with Rule 13d-3 (d) of the
Securities Exchange Act of 1934, as amended. Under Rule 13d-3 (d), shares
not outstanding that are subject to options, warrants, rights or conversion
privileges exercisable within 60 days are deemed outstanding for the
purpose of calculating the number and percentage owned by such person of
the class, but not deemed outstanding for the purpose of calculating the
percentage owned of the class by any other person.
(4) Includes Shares subject to a lock-up agreement with the holders of the
Debentures whereby Mr. Moore has agreed that without prior consent he will
not sell any Shares for six months from the registration statement
registering these shares for resale.
6
<PAGE>
(5) Includes Shares subject to a bleed out agreement with the Company whereby
S.B. Fletcher will limit its weekly sales based on the bid price of the
common stock.
(6) Mark Valentine and Ian McKinnon, both residents of Canada, are the control
persons of this offshore limited partnership in their positions as
directors of this limited partnership.
(7) Southridge Capital Management, LLC, a Delaware limited liability company,
is the general partner for this Delaware limited partnership. Stephen Hicks
and Daniel Pickett control the limited partnership in their positions as
the officers of the general partner.
(8) David Simms, a resident of British Virgin Islands, controls the fund in his
position of sole director of the offshore fund.
(9) This off shore entity is controlled by (and beneficially owned by) Paolo
Floriani and Floriana Cantarelli, both of Lugano, Switzerland.
(10) This entity is beneficially owned and controlled by David Karson of New
York.
(11) This off share entity is beneficially owned and controlled by Paolo Del Bue
of Lugano, Switzerland.
Relationships and Transactions with Certain Selling Shareholders
- ----------------------------------------------------------------
S.B. Fletcher Consulting, Inc. acted as a consultant for the Company over
the last year and received its 300,000 shares offered hereby as compensation for
consulting services. Except as described above, none of the Selling Shareholders
has had any position, office or other material relationship with the Company
during the past three years.
PLAN OF DISTRIBUTION
Sale of Securities by Selling Shareholders
- ------------------------------------------
The Selling Shareholders have advised the Company that prior to the date of
this Prospectus they have not made any agreements or arrangements with any
underwriters, brokers or dealers regarding the resale of the Shares. The Company
has been advised by the Selling Shareholders that the Shares may at any time or
from time to time be offered for sale either directly by the Selling
Shareholders or by their transferees or other successors in interest. Such sales
may be made in the over-the-counter market or in privately negotiated
transactions.
The Selling Shareholders have exercised their right to require the Company
to register the Shares which the Selling Shareholders purchased from the Company
in private transactions. The Selling Shareholders were granted certain
registration rights pursuant to which the Company has agreed to maintain a
current registration statement to permit public sale of the Shares for a period
of at least nine months from the date of this Prospectus or until the Shares
have been sold, whichever
7
<PAGE>
first occurs. The Company will pay all of the expenses incident to the offering
and sale of the Shares to the public by the Selling Shareholders other than
commissions and discounts of underwriters, dealers or agents, if any. Expenses
to be paid by the Company include legal and accounting fees in connection with
the preparation of the Registration Statement of which this Prospectus is a
part, legal fees in connection with the qualification of the sale of the Shares
under the laws of certain states, registration and filing fees, printing
expenses, and other expenses. The Company will not receive any proceeds from the
sale of the Shares by the Selling Shareholders. However, the Company will
receive the exercise price of the Warrants if and when the Warrants are
exercised, unless the cashless exercise feature is used by the Selling
Shareholders.
The Company anticipates that the Selling Shareholders from time to time
will offer the Shares through: (i) dealers or agents or in ordinary brokerage
transactions; (ii) direct sales to purchasers or sales effected through an
agent; (iii) privately negotiated transactions; or (iv) combinations of any such
methods. The Shares would be sold at market prices prevailing at the time of
sale or at negotiated prices. Dealers and brokers involved in the offer and sale
of the Shares may receive compensation in the form of discounts and commissions.
Such compensation, which may be in excess of ordinary brokerage commissions, may
be paid by the Selling Shareholders and/or the purchasers of Shares for whom
such underwriters, dealers or agents may act. The Selling Shareholders and any
dealers or agents which participate in the distribution of the Shares may be
deemed to be "underwriters" as defined in the 1933 Act and any profit on the
sale of the Shares and any discounts, commissions or concessions received by any
dealers or agents might be deemed by the NASD to constitute underwriting
compensation.
If the Company is notified by the Selling Shareholders that any material
arrangement has been entered into with an underwriter for the sale of Shares, a
supplemental prospectus will be filed to disclose such of the following
information as the Company believes appropriate: (i) the name of the
participating underwriter; (ii) the number of Shares involved; (iii) the price
at which such Shares are sold; (iv) the commissions paid or discounts or
concessions allowed to such underwriter; and (v) other facts material to the
transaction.
Sales of Shares on the OTC Bulletin Board may be by means of one or more of
the following: (i) a block trade in which a broker or dealer will attempt to
sell the Shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (ii) purchases by a dealer as principal
and resale by such dealer for its account pursuant to this Prospectus; and (iii)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers. In effecting sales, brokers or dealers engaged by the Selling
Shareholders may arrange for other brokers or dealers to participate.
The Company is unable to predict the effect which sales of the Shares by
the Selling Shareholders might have upon the market price of the Company's
Common Stock or the Company's ability to raise further capital. See "Risk
Factors."
8
<PAGE>
Private Sale of Common Stock by the Company
- -------------------------------------------
The Company will issue Shares of "restricted" Common Stock to the Selling
Shareholders upon their exercise of the outstanding Warrants or conversion of
Debentures which they received from the Company in private transactions. The
Company anticipates that Shares issued upon exercise of the Warrants or
conversion of the Debentures will be sold by the Selling Shareholders as
described above.
Indemnification
- ---------------
The Company's Articles of Incorporation provide that the Company shall
indemnify any officer, employee, agent or director against liabilities
(including the obligation to pay a judgment, settlement, penalty, fine or
expense), incurred in a proceeding (including any civil, criminal or
investigative proceeding) to which the person was a party by reason of such
status. Such indemnity may be provided if the person's actions resulting in the
liabilities: (i) were taken in good faith; (ii) were reasonably believed to have
been in the Company's best interest with respect to actions taken in the
person's official capacity; (iii) were reasonably believed not to be opposed to
the Company's best interest with respect to other actions; and (iv) with respect
to any criminal action, the director had no reasonable grounds to believe the
actions were unlawful. Unless the person is successful upon the merits in such
an action, indemnification may generally be awarded only after a determination
of independent members of the Board of Directors or a committee thereof, by
independent legal counsel or by vote of the shareholders that the applicable
standard of conduct was met by the director to be indemnified.
A director, employee, agent, or officer who is wholly successful, on the
merits or otherwise, in defense of any proceeding to which he or she was a
party, is entitled to receive indemnification against reasonable expenses,
including attorneys' fees, incurred in connection with the proceeding. In
addition, a corporation may indemnify or advance expenses to an officer,
employee or agent who is not a director to a greater extent than permitted for
indemnification of directors, if consistent with law and if provided for by its
articles of incorporation, bylaws, resolution of its shareholders or directors
or in a contract.
In connection with this Offering the Company and the Selling Shareholders
have agreed to indemnify each other against certain civil liabilities, including
liabilities under the 1933 Act. Insofar as indemnification for liabilities
arising under the 1933 Act may be permitted to directors, officers and
controlling persons of the issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the 1933 Act, and is, therefore, unenforceable.
9
<PAGE>
LEGAL PROCEEDINGS
Neither the Company nor any of its officers and directors is currently a
party to any material legal proceeding.
DIVIDEND POLICY
The Company has never declared or paid any dividends or distributions on
its Common Stock. The Company anticipates that for the foreseeable future all
earnings will be retained for use in the Company's business and no cash
dividends will be paid to stockholders. Any payment of cash dividends in the
future on the Common Stock will be dependent upon the Company's financial
condition, results of operations, current and anticipated cash requirements,
plans for expansion, as well as other factors that the Board of Directors deems
relevant.
10
<PAGE>
MANAGEMENT
Executive officers of the Company are elected by the Board of Directors,
and serve for a term of one year and until their successors have been elected
and qualified or until their earlier resignation or removal by the Board of
Directors, except as otherwise provided in the employment agreements with
Messrs. Truxell and Fagan. There are no family relationships among any of the
directors and executive officers of the Company.
The following table sets forth names and ages of all executive officers and
directors of the Company:
<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 Officer of
Bloomfield Hills, MI Director since January 1996; Integrated Waste Systems, 1992-1995;
Age: 75 Secretary since December 1997; President of Microcel, Inc., 1990-1992;
CEO January 1996 to January 1997. Vice-President of General Dynamics,
1983-1990
James P. Fagan President and Director since President and Chief Operating Officer
Dearborn, Michigan January 1996; Chief of Waste Reduction Systems 1992-1995;
Age: 49 Executive Officer since Vice-President of The Powers Fagan
January 1997 Group, Inc. 1990-1996
George P. Nassos Director since August 1997 Director of environmental management
Glenview, IL program and adjunct professor for
Age: 60 Stuart School of Business; 1996 -
present - President - Fiber Energy,
Inc., an environmental consulting
company; 1992-1995, Director of Fiber
Fuels division for Cemtech LP;
1981-1992 employed by Chemical Waste
Management, Inc.
Michael M. Grujicich Chief Financial Officer and Director Sales Canada - WRS 1993-1996,
Dearborn, MI Treasurer since August 1996 Director MRPII, General Dynamics Land
Age: 54 Systems Division 1983-1993, Divisional
Controller - Rockwell International
1981-1983
Michael R. Fugler Director since December 1999 Self-employed Attorney since 1972, with
New York, New York a current practice emphasis in Securities,
Age: 51 Corporate Finance and International Law.
International Law; officer and shareholder
of Millenium Financial Group, Inc. from
1996 to present
</TABLE>
11
<PAGE>
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 February 29,
2000 by each Director and each Executive Officer named in the Summary
Compensation Table, and by all Directors and Executive Officers as a group.
<TABLE>
<CAPTION>
Name of Beneficial Owner/Name of
Director/Identity of Group Shares Beneficially Owned Percent of Class
- --------------------------- ------------------------- ----------------
<S> <C> <C>
Robert W. Truxell 1,367,013/(1)/ 12.5%
Chairman/Director
James P. Fagan 1,405,398/(2)/ 12.5%
President/CEO/Director
George P. Nassos 148,513/(3)/ 1.5%
Director
Michael R. Fugler 100,000/(4)/ 1.0%
Director
Michael Grujicich, 0 0
Treasurer
All directors and executive 3,020,924/(5)/ 24.2%
officers as a group (five persons)
</TABLE>
_______________________________
(1) Includes: (i) 345,800 shares held jointly; (ii) currently exercisable
options and warrants to purchase 50,000 shares at $0.125 per share; (iii)
currently exercisable options to purchase 505,662 shares at $0.125 per
share; (iv) currently exercisable options to purchase 125,000 common shares
at $0.125 per share; and (v) an option to acquire 12.5% (inclusive of
current holdings) of the fully diluted ownership of the Company,
exercisable at $0.30 per share, which vests upon the Company attaining six
consecutive months with EBITDA in excess of $600,000.
(2) Includes: (i) 77,100 shares held by James P. Fagan; (ii) currently
exercisable options and warrants to purchase 70,386 shares at $0.125 per
share; (iii) 125,000 shares at $0.125 per share; and (iv) 360,841 shares at
$0.125 per share; and (v) an option to acquire 12.5% (inclusive of current
holdings) of the fully diluted ownership of the Company, exercisable at
$0.30 per share, which vests upon the Company attaining six consecutive
months with EBITDA in excess of $600,000.
(3) Includes currently exercisable options to purchase 100,000 shares at $0.125
per share.
(4) Includes currently exercisable options to acquire 100,000 shares at $0.125
per share.
(5) Includes securities reflected in footnotes 1-4.
12
<PAGE>
To the knowledge of the Directors and Senior Officers of the Company, as of
February 29, 2000, there are no persons and/or companies who or which
beneficially own, directly or indirectly, shares 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
Beneficial Owner Beneficial Ownership Percent of Class
---------------- -------------------- ----------------
<S> <C> <C>
Robert W. and Linda C. Truxell 1,367,013/(1)/ 12.5%
10200 Ford Road
Dearborn, MI 48126
James P. Fagan 1,405,398/(2)/ 12.5%
4415 Comanche
Okemos, MI 48864
Alan Moore 925,000/(3)/ 8.6%
9441 LBJ Freeway
Suite 500
Dallas, TX 75243
</TABLE>
______________________
(1) Includes: (i) 345,800 shares held jointly; (ii) currently exercisable
options and warrants to purchase 50,000 shares at $0.125 per share; (iii)
currently exercisable options to purchase 505,662 shares at $0.125 per
share; (iv) currently exercisable options to purchase 125,000 common shares
at $0.125 per share; and (v) an option to acquire 12.5% (inclusive of
current holdings) of the fully diluted ownership of the Company,
exercisable at $0.30 per share, which vests upon the Company attaining six
consecutive months with EBITDA in excess of $600,000.
(2) Includes: (i) 77,100 shares held by James P. Fagan; (ii) currently
exercisable options and warrants to purchase 70,386 shares at $0.125 per
share; (iii) 125,000 shares at $0.125 per share; and (iv) 360,841 shares at
$0.125 per share; and (v) an option to acquire 12.5% (inclusive of current
holdings) of the fully diluted ownership of the Company, exercisable at
$0.30 per share, which vests upon the Company attaining six consecutive
months with EBITDA in excess of $600,000.
(3) Includes currently exercisable warrants to purchase 900,000 shares at $0.60
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 13-d-3(d)(1)
under the United States Securities Act of 1934.
Other than: (i) the possible conversion into the Company's Common Stock of
the remaining $1,445,500 principal amount of convertible debentures issued by
the Company in June 1998; and (ii) the option held by Messrs. Truxell and Fagan
to acquire 12.5% each (inclusive of current holdings) of the fully diluted
ownership of the Company (which vests upon the Company attaining six consecutive
months with EBITDA in excess of $600,000), there are no arrangements or
agreements which could in the future result in a change of control of the
Company.
13
<PAGE>
DESCRIPTION OF SECURITIES
The following summary description of the Company's securities is not
complete and is qualified in its entirety by reference to the Company's Articles
of Incorporation and Bylaws.
The authorized capital stock of the Company consists of 100,000,000 shares
of $.001 par value common stock (previously defined as "Common Stock") and
10,000,000 shares of $0.001 par value preferred stock ("Preferred Stock"), which
the Company may issue in one or more series as determined by the Board of
Directors. As of February 29, 2000 there were 9,914,889 shares of Common Stock
issued and outstanding that are held of record by 1346 shareholders.
Common Stock
Each holder of record of shares of the Company's Common Stock is entitled
to one vote for each share held on all matters properly submitted to the
shareholders for their vote. Cumulative voting in the election of directors is
not authorized by the Articles of Incorporation.
Holders of outstanding shares of Common Stock are entitled to those
dividends declared by the Board of Directors out of legally available funds,
and, in the event of liquidation, dissolution or winding up of the affairs of
the Company, holders are entitled to receive ratably the net assets of the
Company available to the shareholders. Holders of outstanding Common Stock have
no preemptive, conversion or redemption rights. All of the issued and
outstanding shares of Common Stock are, and all unissued shares of Common Stock,
when offered and sold will be, duly authorized, validly issued, fully paid and
nonassessable. To the extent that additional shares of Common Stock of the
Company may be issued in the future, the relative interests of the then existing
shareholders may be diluted.
Preferred Stock
The Company's Board of Directors is authorized to issue from time to time,
without shareholder authorization, in one or more designated series, any or all
of the authorized but unissued shares of Preferred Stock with such dividend,
redemption, conversion and exchange provisions as may be provided by the Board
of Directors with regard to such particular series. Any series of Preferred
Stock may possess voting, dividend, liquidation and redemption rights superior
to those of the Common Stock. The rights of the holders of Common Stock will be
subject to and may be adversely affected by the rights of the holders of any
Preferred Stock that may be issued in the future. Issuance of a new series of
Preferred Stock, or providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could make it more difficult for a
third party to acquire, or discourage a third party from acquiring the
outstanding shares of Common Stock of the Company and make removal of the Board
of Directors more difficult. No shares of Preferred Stock are currently issued
and outstanding, and the Company has no present plans to issue any shares of
Preferred Stock.
14
<PAGE>
Dividends
See the discussion under the heading "Dividend Policy" above in this
prospectus.
Anti-Takeover Provisions
The Company's Articles of Incorporation and Bylaws (the "Incorporation
Documents") contain provisions that may make it more difficult for a third party
to acquire, or may discourage acquisition bids for, the Company. The Board of
Directors of the Company is authorized, without action of its shareholders, to
issue authorized but unissued Common Stock and Preferred Stock. The existence of
undesignated Preferred Stock and authorized but unissued Common Stock enables
the Company to discourage or to make it more difficult to obtain control of the
Company by means of a merger, tender offer, proxy contest or otherwise.
SEC POSITION ON INDEMNIFICATION
Pursuant to the provisions of the Nevada General Corporation Law, the
Company has adopted provisions in its Articles of Incorporation which provide
that directors of the Company shall not be personally liable to the Company or
its stockholders for damages for breach of fiduciary duty as a director or
officer, except for liability for: (i) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of the law; or (ii) the
payment of distributions in violation of Nevada Revised Statutes 78.300.
The Company's Articles of Incorporation state that the Company shall
indemnify, to the fullest extent permitted by applicable law, any person, and
the estate and personal representative of any such person, against all liability
and expense (including attorneys' fees) incurred by reason of the fact that he
is or was a director, officer, employee or agent of the Company or, while
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or enterprise. The
Company also shall indemnify any person who is serving or has served the Company
as director, officer, employee, fiduciary, or agent, and that person's estate
and personal representative, to the extent and in the manner provided in any
bylaw, resolution of the shareholders or directors, contract, or otherwise, so
long as such provision is legally permissible.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable.
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1999 the Company, Robert Truxell and James Fagan entered into
an agreement regarding compensation with the holders of the Debentures and
Millennium Financial Group, Inc. whereby, among other things, Messrs. Truxell
and Fagan agreed to substantially reduced salaries for a period of time and each
was granted an option to acquire 12.5% (inclusive of his current holdings) of
the fully diluted ownership of the Company, exercisable at $0.30 per share,
which vests upon the Company attaining six consecutive months with EBITDA in
excess of $600,000. This option was approved by the Company's then Board of
Directors in April 1999, and again in November 1999.
DESCRIPTION OF BUSINESS
General Development of Business
- -------------------------------
Rich Coast Inc. (the "Company" and/or "Rich Coast") is a non-hazardous
waste treatment and disposal facility. Its primary operations have been
receiving recyclable liquid waste transported to Rich Coast by trucking
companies, and separating the waste into liquid waste streams and pumpable waste
streams containing a mixture of liquids and solids. 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 6011 Wyoming
Avenue.
The Company was initially incorporated in the Province of British Columbia
and through 1996 operated under the name of Rich Coast Resources Ltd. In
February 1997 the Company was reincorporated in Delaware under the name Rich
Coast Inc. Effective July 14,1998 the Company reincorporated in the State of
Nevada (from Delaware).
On January 16, 1996, the Company acquired a new plant and processing
facility located in Dearborn, Michigan from Mobil Oil Corporation (the "Wyoming
Terminal Facility"). 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, management hoped would 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. At the time the
pipeline was acquired management expected to be able to use the waterway access
to be able to ship and receive products by water vessel, and therefore increase
the Company's customer base. The Company currently does not expect to utilize
the pipeline until certain repairs are made and sufficient oil processing and
customers are in place to justify year round costs. 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%, may be prepaid at any
time without penalty, and is secured by the Wyoming Terminal Facility.
The Company placed its Ford Road facility on the market in 1998, and the
property was under contract from late 1998 to mid-1999. However, the buyer was
unable to obtain financing. A new sales contract with de Monte Fabricators, Ltd.
was signed September 9, 1999, but closing is
16
<PAGE>
contingent on the buyer obtaining a Baseline Environmental Assessment. The buyer
has 180 days from September 9/th/ to obtain the assessment. Upon closing of the
sale, all Dearborn operations will be consolidated at the Company's Wyoming
Avenue terminal site and will allow significant savings to be realized.
Rich Coast operates a 250 gallon per minute waste stream separation system
at the Wyoming Road facility. This system separates liquid waste streams and
pumpable waste streams containing a mixture of liquids and solids. This
production system has also been used to demonstrate waste processing to
prospective customers. Demonstrations have been highly successful in separation
and recovery of wastes discharged by slaughterhouse operations and by the
paper/pulp industry. On-customer-site installations have occurred for both
industries. Rich Coast revised its business strategy in mid 1999 to concentrate
on installation of proprietary Rich Coast waste treatment systems at
slaughterhouse and pulp-paper company locations. A production installation has
been completed and successfully tested at Murco, Inc., a slaughterhouse
operation in Plainwell, Michigan that is owned by Packerland Packing, Green Bay,
Wisconsin. Full-scale production will commence once Murco obtains an additional
air permit from the State of Michigan.
A pulp-paper demonstration has also been completed successfully with the
result that an engineering contract for a production system has been received
and fulfilled. A production contract is now being negotiated for the pulp-paper
plant which includes a substantial down payment to expedite installation and
operation of an over 500,000 gallon per day system.
The foregoing two successful and unique waste treatment systems in two very
environmentally troubled industries are expected to develop a large backlog of
business for Rich Coast in the near term. Results are expected to be very
profitable for both the customer and Rich Coast. More significantly to the
future of Rich Coast, the Company can go worldwide with installations without
having to depend on trucking companies and brokers to bring business into the
Company's facility.
Currently, the Company's waste treatment business is generated through
"blanket" contracts between the large automotive companies and Tier I suppliers
(the largest waste disposal companies). These contracts consisted of pricing to
handle a large variety of waste streams. Rich Coast submits pricing for specific
waste streams included in the "blanket" contracts. Written contracts are seldom
awarded by tyhe Tier I companies to Tier II companies such as Rich Coast.
Rather, Rich Coast conducts its business under oral contracts.
Currently, the Company has no written contracts for its waste treatment
business, and no customer represents more than 10% of sales. However, the
Company's recent foray into the business of on-customer-site installations
should result in a written contract with Murco, Inc. or its parent company.
Ford Road Facility
- ------------------
The total site area at the Ford Road location 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
17
<PAGE>
ample parking and room for tanker trucks to maneuver. WRS entered into 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, oil wastes, drum and pallet loads, waste waters
and leachates are treated at Ford Road for disposal to the Detroit sewage
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 Terminal Facility, as will be much of the waste and leachate.
Rich Coast Inc. Pipeline
- ------------------------
The 17-mile long pipeline from Rich Coast's Wyoming Avenue site to Mobil's
Woodhaven Terminal Facility was purchased knowing that some repairs probably
would be required. Before the pipeline would be repaired and utilized, the
Company would require a long term contract with several large volume users to
justify the expense and to justify barge shipments throughout the Great Lakes
Region and the St. Lawrence Seaway. Currently, the pipeline is not operational.
Wyoming Terminal Facility
- -------------------------
When the Wyoming Terminal Facility came on the market, Rich Coast was faced
with an unprecedented opportunity but without adequate funding to acquire and
facilitate the property. Realizing that to replicate the Wyoming Terminal
facility 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, 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.
Additionally, the Wyoming site can accommodate all of the various types of waste
treatment and disposal being conducted at the Ford Road facility, thereby
allowing the Company to sell its Ford Road building and consolidate all
operations at the Wyoming site.
Liquid waste disposal operations have been gradually transferred from the
Company's Ford Road facility to its Wyoming site. Currently, about 50%, or
$140,000 of monthly revenues, are generated by operations at the Wyoming site.
When the Ford Road facility is sold, all operations will be transferred to the
Wyoming site. Adequate space exists at the Wyoming site for additional
processing equipment to meet capacity demands expected over the next several
years.
Rich Coast's 17 acre Wyoming Avenue 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, inasmuch as they avoid liability for
any pollution that existed at the time borings were made. Rich Coast has
successfully passed customer audits that allow the Company to compete for the
oily wastes coming out of the auto industry. The biological treatment system is
an excellent complementary system to the waste oil treatment in that the oily
water separated during the treatment
18
<PAGE>
process can go directly to the biological treatment system and then to the sewer
with assurances that even the more stringent discharge regulations now being
considered by the EPA can be met.
Research and Development
- ------------------------
In the past two fiscal years, the Company estimates it has spent $100,000
per year on research and development activities. Development work related to
separation of various liquid phases and light solids has been done on an air-
sparged hydrocyclone system. Separation of phenols, fats, oils, greases and
other impurities from water based waste streams has been developed and
incorporated in a commercial-size installation at the Wyoming site.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with 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.
As a result of the January 16, 1996 acquisition of the Mobil Oil
Corporation terminal in Dearborn, Michigan, and redomiciling of the Company from
British Columbia, Canada, to Delaware, U.S.A. on February 25, 1997, the Company
reorganized into the parent company, Rich Coast Inc. and four subsidiary
corporations identified as:
Rich Coast Resources, Inc.
Rich Coast Oil, Inc.
Waste Reduction Systems, Inc.
Rich Coast Pipeline, Inc.
On June 19, 1998, the Company reverse split its Common Stock one-for-four.
Effective July 14, 1998 the Company incorporated in the State of Nevada. Rich
Coast's primary operations have been receiving non-hazardous liquid waste
transported to Rich Coast by trucking companies, and separating the waste into
liquid streams and pumpable waste streams. In mid 1999 the Company changed its
long term strategy to eventually concentrate on installation of proprietary Rich
Coast waste treatment systems with on-customer-site location of equipment.
Results of Operation
- --------------------
Nine Months Ended January 31, 2000 Compared to Nine Months Ended January 31,
1999
Revenues for the nine month period ended January 31, 1999 increased
$390,478, or 22.9%, from $1,705,216 to $2,095,694 for the nine month period
ended January 31, 2000. Price increases averaging 3% were implemented in the
fall of 1999. The price increases and revenues from our customers resulted in
approximately $306,478 of the increase. The remaining approximately $84,000
increase in revenues came from
19
<PAGE>
the diversion of business from the area's largest waste disposal company, City
Environmental, located in Detroit, Michigan, which was shut down in October,
November and December 1999 for violation of environmental regulations. City
Environmental resumed their non-hazardous waste operations in January 2000. Rich
Coast retained 75% of the diverted business through January, 2000 and expects
this percentage to drop 50% during the current quarter. Rich Coast's lower
prices and the opportunity to demonstrate its service capabilities should help
to retain this business. A loss of the entire amount of diverted business would
cause a revenue loss of 12%. Worst case scenario would be a revenue loss of 6%,
or $126,000, for the nine month period. Prices of the diverted business were
kept competitive so impact on monthly net income is estimated at less than
$2,000. Net loss for the latest quarter ended January 31, 2000 was $186,131,
compared to the previous quarterly loss of $496,435. Included in the $186,131
loss was depreciation of $95,789, a non-cash event.
The Company's revenues are generally spread evenly throughout the year, and
the Company does not experience seasonal fluctuations.
The Rich Coast owned equipment which was demonstrated last October at
Packerland Packing's Murco slaughterhouse in Plainwell, Michigan, and proved
effective in grease recovery, was temporarily shut down until plans to increase
production and return rendering operations to Murco are implemented. This
implementation is planned for mid 2000; however, more critical operating
problems exist at Packerland's Green Bay, Wisconsin plant and Rich Coast
engineers and equipment have been utilized to recognize Green Bay's operations
as top priority. Green Bay operations also promise to be more profitable for
Rich Coast than operations at Murco so to minimize delays, engineering and
process plans are being developed concurrently with development of a mutually
beneficial contract. Currently a five-year contract is being negotiated with
Packerland which is expected to be the model for future contracts anticipated
with both Packerland's Murco, Michigan facility and their Tolleson, Arizona
plant.
A pulp-paper demonstration has also been completed successfully with the
result that an engineering contract for a production system has been received
and fulfilled. Rich Coast is still negotiating a production contract for the
pulp-paper plant; however, environmental issues are still being discussed with
regulatory authorities and until those issues are resolved, Rich Coast cannot
develop a meaningful proposal for a production installation.
On September 9, 1999 Rich Coast entered into a new contract with DeMonte
Fabricators, Ltd. for the purchase of its Ford Road facility. The contract
states a purchase price of $450,000 and is contingent on the purchaser obtaining
a Baseline Environmental Assessment and closing by the extended deadline of May
9, 2000. The Ford Road operations will continue at its current pace until April
14, 2000, at which time all waste receiving and treatment operations will be
consolidated at the Wyoming Road facility. The Company recognized an impairment
loss of $169,739 during the nine months ended January 31, 2000 in connection
with this sales contract. The impairment loss adjusts the carrying value of the
Ford Road facility to the sales proceeds anticipated to be received.
No major capital expenditures were made by the Company during the third
quarter, and there were no outstanding commitments for material capital
expenditures at January 31, 2000.
20
<PAGE>
The changes in sales and cost of sales resulted in an increase in gross
profit of $489,869, or 74%, from $661,516 for the nine months ended January 31,
1999 to $1,151,385 for the corresponding period in 2000. Gross profit as a
percent of sales increased from 39% in 1999 to 55% in 2000. This improvement is
due in part to a reduction in landfill and transportation costs.
Interest expense consists of the amortization of beneficial conversion
features of convertible debt instruments and other interest. The beneficial
conversion features related to the 10% convertible promissory notes (converted
to common stock during the year ended April 30, 1999) and the 8% convertible
debentures ($1,375,500 outstanding principal at January 31, 2000) and were fully
amortized to interest expense during the year ended April 30, 1999. Therefore,
the amount of interest expense-beneficial conversion feature decreased from
$764,764 for the nine month period ended January 31, 1999 to $0 for the nine
month period ended January 31, 2000. Other interest expense decreased $74,259,
or 27%, from $279,753 in 1999 to $205,494 in 2000. This decrease was due to
interest paid on convertible debt ($697,000 principal outstanding) during the
nine month period ended January 31, 1999. These debentures converted to common
stock in December 1998, so no similar interest expense was necessary during the
nine months ended January 31, 2000.
During the nine months ended January 31, 2000, the Company incurred
$150,000 of expense from the settlement of separate lawsuits involving Mobil Oil
Corp. and Comer Holdings, Ltd.
Consulting and financing fees decreased from $91,313, or 50%, from $181,817
during the nine months ended January 31, 1999 to $90,504 during the nine months
ended January 31, 2000. This decrease was due to replacement of consultants with
salaried employees.
Audit, accounting and legal expenses decreased $76,329, or 42%, from
$180,872 during the nine months ended January 31, 1999 to $104,543 during the
nine months ended January 31, 2000. This decrease was due to reduced legal
expenses.
Travel expenses decreased $51,112, or 50%, from $101,648 during the nine
months ended January 31, 1999 to $50,536 during the nine months ended January
31, 2000. This decrease was due to a stringent cost reduction program.
During the nine months ended January 31, 2000, the Company incurred $16,905
of pipeline relocation cost due to pipeline's interference with a county
project.
Property taxes increased $51,675, or 64%, from $81,205 during the nine
months ended January 31, 1999 to $132,880 during the nine months ended January
31, 2000. This increase was due to recognition of property tax penalties and
interest charges.
Advertising and shareholder relations expenses decreased $121,890, or 99%,
from $123,428 during the nine months ended January 31, 1999 to $1,538 during the
nine months ended January 31, 2000. This decrease was due to termination of
contracts with new business developments and a corresponding decrease in warrant
expenses.
21
<PAGE>
Depreciation expense increased $88,860, or 40%, from $220,084 during the
nine months ended January 31, 1999 to $308,944 during the nine months ended
January 31, 2000. This increase was due to purchase and installation of a new
aeration waste treatment system at the Company's Wyoming Avenue terminal
facility.
During the nine months ended January 31, 1999, the Company recognized a
gain of $89,343 related to the final insurance settlement of the Company's
December 15, 1997 fire damage and a gain of $285,588 of accrued oil waste
treatment cost reversal related to savings from an improved waste oil treatment
process.
Net loss for the nine months ended January 31, 2000 was $1,050,566 compared
to a net loss of $1,951,097 for the nine months ended January 31, 1999, a
decrease of $900,531, or 46%. Loss per share decreased $0.26, or 65%, from $0.40
per share for the nine month period ended January 31, 1999 to $0.14 per share
for the same period in 2000. Loss per share was also impacted by an increase in
the weighted average number of shares of 2,425,154.
Changes in Financial Condition
- ------------------------------
Rich Coast obtained $600,000 of equity financing during its third quarter
ending January 31, 2000 through the sale 3,000,000 shares of common stock for
$.20 per share. Net losses for the nine months ended January 31, 2000 totaled
$1,050,566 and included depreciation of $308,944. The Company expects to
continue to increase revenues in future quarters as traditional business
continues to improve and revenues are realized from anticipated contracts from
installation of waste treatment systems at waste generator's sites. With cash of
$75,043 as of January 31, 2000 plus an anticipated $300,000 of positive cash
flow from the close of sale of the Ford Road property by May 9, 2000, future
fund raising will only be necessary if the favorable outlook changed or if
additional funds allow an economically attractive improvement in the Company's
growth. The Company has no outstanding commitments for material capital
expenditures.
Results of Operation
- --------------------
Fiscal Year Ended April 30, 1999 Compared to Fiscal Year Ended April 30, 1998
Sales decreased $279,631, or 11%, from $2,547,083 to $2,267,452 for the
fiscal years ended April 30, 1998 and 1999, respectively. This decrease is due
in part to customers trending away from small waste treatment, storage and
disposal facilities such as the two facilities owned and operated by the
Company. The fiscal year 1999 sales were $370,297, or 19%, higher than sales for
the 1997 fiscal year.
Cost of Sales increased $297,810, or 28%, from $1,080,557 to $1,378,367 for
the fiscal years ended April 30, 1998 and 1999, respectively. The fiscal 1999
Cost of Sales also increased by $411,305 compared to fiscal 1997. When Cost of
Sales of $1,378,367 from the latest fiscal year is combined with Accrued Oil and
Waste Treatment Cost Reversal of $285,588, the result is a modest 1% increase
over Cost of Sales from the previous fiscal year.
22
<PAGE>
Audit, Accounting and Legal increased $133,740, or 102%, from $130,626 to
$264,366 for the fiscal years ended April 30, 1998 and 1999, respectively. This
change is mostly due to an increase in time spent on lawsuits filed against the
company and amendments made to the company's financial documents. Audit,
Accounting and Legal increased by $50,455 from fiscal 1997 to fiscal 1999.
Consulting and Management Fees increased $47,730, or 31% from $152,223 to
$199,953 for the fiscal years ended April 30, 1998 and 1999, respectively. These
fees decreased by $617,000 in fiscal 1999 from fiscal 1997. When Consulting and
Management Fees of $199,953 from the latest fiscal year are combined with
Advertising, Shareholder Relations and Listing and Filing Fees of $120,905,
$2,692, and $0, respectively, the result is a modest 3% decrease over the same
combination from the previous fiscal year.
Equipment and Storage Leases decreased $37,949, or 45%, from $83,820 to
$45,871 for the fiscal years ended April 30, 1998 and 1999, respectively. This
change is mostly due to the company's termination of its offsite tank storage
agreement with Usher Oil Company. The fiscal 1999 amounts reflect a decrease of
$65,566 from fiscal 1997.
Bad Debts increased $36,426, or 435%, from $8,375 to $44,801 for the fiscal
years ended April 30, 1998 and 1999, respectively. This increase is due
primarily to additional reserves deemed necessary for the fiscal year ended
April 30, 1999. Fiscal 1999 Bad Debts increased by $32,817 from fiscal 1997.
Depreciation increased $62,263, or 24%, from $256,398 to $318,661 for the
fiscal years ended April 30, 1998 and 1999, respectively. This change is mostly
due to the additions of computer, transportation and waste processing equipment.
Fiscal 1999 Depreciation decreased by $40,507 from fiscal 1997.
Amortization of Deferred Financing Costs increased $59,593, or 338%, from
$17,646 to $77,239 for the fiscal year ended April 30, 1998 and increased
$55,179 compared to the fiscal year ended April 30, 1997. This increase is
mostly due to the conversion of the 10%-18 Month Convertible Notes ($697,000)
and the addition of the 8% Convertible Debentures ($1,500,000) during the fiscal
year ended April 30, 1999.
Analysis of Financial Condition
- -------------------------------
During 1998 and 1999, the Company has required significant capital
resources to finance:
a. operating cash needs and working capital; and
b. the purchase of property and equipment.
23
<PAGE>
During the year ended April 30, 1999 cash used in operating activities was
approximately $995,000. Cash used for the purchase of property and equipment was
approximately $380,000 during the year ended April 30, 1999.
These cash needs have been financed primarily through long-term debt and
equity transactions. During the year ended April 30, 1999, 8% convertible
debentures in the amount of $1,500,000 were issued and cash of approximately
$209,000 was received upon the exercise of stock options.
The Company's business focus continues its shift toward waste treatment
operations at the waste generator's plants. The Company believes this transition
will occur over the next two years and will require some capital expenditures
for investment in new equipment. Investments will be minimized by leasing.
However, modified standard equipment and used equipment must be purchased. The
Company will rely on additional private equity financing to purchase special
filter presses, centrifuges and media filtration systems. Currently the Company
has no outstanding material commitments for capital expenditures.
Until the transition in business is completed, the Company expects to
continue to incur net losses. The Company may rely on additional equity
financing to allow for economically attractive improvements in the Company's
growth. The Company's sale of its Ford Road facility will generate a $300,000
positive cash flow after clean-up and repairs required as part of the sales
agreement. This amount, along with cash on hand, is expected to offset losses
until profitability is attained.
Rich Coast has passed customer audits that allow the Company to compete for
the oily wastes coming out of the auto industry. These audits are performed by
Tier I waste disposal companies that contract for the majority of the automotive
industry's wastes. Liquid wastes, such as the waste handled by Rich Coast, is
sublet by the Tier I companies and winning that business for Rich Coast is
dependent on audit approval by Tier I companies of the Rich Coast facility.
Audits of waste treatment facilities are focused on safety and environmental
protection, processing effectiveness and capacity, plus efficient handling of
truck traffic. The Company's facilities compare well to the competition but
audit discrepancies do occur and must be corrected before audit approval can be
obtained. Audit approvals by Tier I companies have been the bases for previous
financial forecasts. Extensive test borings from the Wyoming Terminal Facility
have been analyzed to establish a baseline of soil conditions and, as a result,
Michigan's Department of Environmental Quality has granted Rich Coast a covenant
not to be sued for pre-existing soil conditions. This covenant has proven to be
invaluable when large corporations audit the Wyoming Terminal Facility. By
passing an audit for one Tier I supplier, the Company is qualified to supply
services to all of that Tier I supplier's customers. Each Tier I supplier
requires its own audit. If the Company would fail an audit, then the Tier I
company would itemize the discrepancies and, once corrected, a follow up audit
would be done. The continued failure to pass audits would mean the Company would
not be qualified to service that Tier I company's customers.
24
<PAGE>
Impact of Environmental Regulations and Environmental Risks.
- ------------------------------------------------------------
As environmental regulations become more stringent they tend to generate
more business for Rich Coast. For example, as sewer discharge limits are reduced
more companies are compelled to either install additional waste treatment
systems or to transport their wastes to companies like Rich Coast for treatment
and disposal. Rich Coast has a discharge permit from the Detroit Sewerage and
Water Department ("DSWD"). Rich Coast's discharges to the sewer are randomly
monitored by both the DSWD and Rich Coast. Material that is not discharged to
the sewer is either trucked to a non-hazardous waste landfill or is sold as
recycled product such as oil. The risk of pollution occurring at Rich Coast's
treatment sites are extremely low and, if any spillage or leakage did occur, it
would be a non-hazardous waste and would probably occur in a contained area.
Rich Coast has carried $1.0 million of pollution insurance since operations
started in 1993 and has not filed a single claim. Insurance is one recurring
cost item of approximately $38,000 per year (which has not increased for the
last three years) in Rich Coast's pollution protection program and is required
by its customers. Approximately $40,000 per year is spent on salaries for
environmental compliance, and an estimated $10,000 per year is spent in
operating costs attributable to environmental compliance. Rich Coast must carry
the $1.0 million insurance coverage even though it believes its risks are low.
If a spill did occur, it would likely occur very near processes designed to
clean up such material. Management believes a spill cost clean up of $1.0
million would be highly unlikely.
Long Term Obligations
- ---------------------
Rich Coast currently has three long term debt obligations including the
installment land contract on the Ford Road building. A principal balance of
approximately $80,000 exists on the Ford Road facility. The Company has received
an offer for the facility that will result in net proceeds to the Company of
$300,000. The closing on the sale of this facility has been extended to May 9,
2000.
The second long term obligation is a $2,000,000 Senior Secured Note due
January 10, 2001 which was used to purchase the Company's 17 acre Wyoming
Terminal Facility. Interest only payments are being made until August, 2000,
with interest and principal payments made thereafter until the note is paid in
full. This obligation is secured by the Wyoming Terminal Facility.
The third long term obligation is in the form of an aggregate of $1,500,000
8% Convertible Debentures, convertible over five years at the option of the
holder into shares of Common Stock of Rich Coast. These Convertible Debentures
are secured by a second position on the Company's assets, including the Wyoming
Terminal Facility.
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
25
<PAGE>
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, unexpected costs, and failure to capitalize
upon access to new clientele.
Recent Accounting Pronouncements
- --------------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 131, Accounting for
Derivative Instruments and Hedging Activities. This statement, as amended by
SFAS No. 137, is effective for fiscal years beginning after June 15, 2000.
Currently, the Company does not have any derivative financial instruments and
does not participate in hedging activities. Therefore, management believes SFAS
No. 131 will not impact its financial position or results of operations.
DESCRIPTION OF PROPERTY
Ford Road Facility
- ------------------
The total site area at the Ford Road location 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. This property is subject to a security interest
granted to the holders of the 8% Convertible Debentures.
Rich Coast, Inc. Pipeline
- -------------------------
The 17 mile long pipeline from Rich Coast's Wyoming Avenue site to the
Wyoming Terminal Facility was purchased from Mobil knowing that some repairs
probably would be required. The pipeline is currently not operational. The
Company cannot utilize the pipeline until it is repaired. Once repaired, the
pipeline and terminalling facility would not be used unless and until sufficient
oil processing and customers are in place to justify the year round costs. This
property is subject to a security interest granted to the holders of the 8%
Convertible Debentures.
Wyoming Terminal Facility
- -------------------------
Rich Coast borrowed $2,000,000 and acquired Mobil's 17 acres in the heart
of the automobile industry. This acreage includes 12 storage buildings, six
tanker truck loading and unloading racks
26
<PAGE>
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 17 mile long pipeline to the Detroit River. The facility is encumbered as
security for the $2,000,000 used to purchase the property, and a second security
interest granted to the holders of the 8% Convertible Debentures issued in June
1998.
MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
Market Information
- ------------------
The Common Stock of the Company is listed on the OTC Bulletin Board under
the trading symbol "KRHC." The following table sets forth the high and low bid
prices of the Company's Common Stock during the periods indicated. All amounts
reflect prices adjusted for the one-for-four reverse split which was effective
June 19, 1998.
<TABLE>
<CAPTION>
OTC Market
Calendar High Bid Price Low Bid Price
-------- --------------- -------------
<S> <C> <C> <C>
1999 October 1 - December 31 $ 0.32 $ 0.10
July 1- October 31 0.33 0.09
April 1-June 30 0.50 0.21
January 1-March 31 1.50 0.37
1998 October 1-December 31 2.00 0.62
July 1-September 30 1.85 0.50
April 1-June 30 4.12 1.25
January 1-March 31 4.12 1.37
1997 October 1-December 31 2.00 0.75
July 1-September 30 1.37 0.75
April 1-June 30 1.37 0.81
January 1-March 31 2.00 0.81
</TABLE>
____________________________
The closing bid price of the OTC Common Stock on March 15, 2000, was
$0.25 per share.
Holders
- -------
As of February 29, 2000, there were approximately 1,346 holders of the
Company's Common Stock, and the number of shares issued and outstanding was
9,914,889.
27
<PAGE>
Dividends
- ---------
During the two most recent fiscal years, the Company has not declared or
paid any cash or other dividends on its Common Stock. The Company does not
expect to pay any dividends in the near future. The Company is prohibited from
paying dividends on its Common Stock while certain long-term indebtedness
remains outstanding.
EXECUTIVE COMPENSATION
Compensation and other Benefits of Executive Officers
- -----------------------------------------------------
The following table sets out the compensation received for the fiscal years
end April 30, 1997, 1998, and 1999 in respect to each of the individuals who
were the Company's chief executive officer at any time during the last fiscal
year and the Company's four most highly compensated executive officers whose
total salary and bonus exceeded $100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
FISCAL YEAR COMPENSATION LONG TERM COMPENSATION
Awards Payouts
------ -------
Restricted
Share
Securities/(1)/ or All other
Name and Other Annual under Restricted LTIP compen-
Principal Salary Bonus Compen- Option/SARs Share Payouts sation
Position Year ($) ($) sation Granted Units ($) ($)
-------- ---- --- --- ------ ------- ----- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert W. 1999 114,233 0 0 755,662 0 0 0
Truxell/ 1998 117,851 0 0 0 0 0 0
Chairman 1997 113,458 0 0 0 0 0 0
James P. 1999 230,000 0 0 556,227 0 0 0
Fagan 1998 144,316 0 0 0 0 0 0
CEO and 1997 124,382 0 0 0 0 0 0
President
</TABLE>
_____________________________
(1) All share amounts have been adjusted to reflect the reverse split effective
June 19, 1998.
Agreements with Management
- --------------------------
On 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 received a salary of
$150,000 per year until January 1, 1997 at which time he resigned as
28
<PAGE>
Chief Executive Officer but agreed to continue as Chairman of the Board at a
salary of $125,000 per year for an additional five years.
On October 31, 1995 the Company entered into an Employment Contract with
James P. Fagan pursuant to which he was compensated for serving as 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 at a
salary of $150,000 per year.
Option/Stock Appreciation Rights ("SAR") Grants during the most recently
- ------------------------------------------------------------------------
completed Fiscal Year
- ---------------------
The following table sets out the stock options granted by the Company
during the previous fiscal year to the Named Executive Officers of the Company.
The following amounts include options that were granted prior to the previous
fiscal year but were repriced during that year.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN PREVIOUS YEAR
INDIVIDUAL GAINS
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Market Price on
Name Granted (#) Fiscal Year Price ($/Sh) Date of Grant Expiration Date
- ---- ---------- ----------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
Robert W. Truxell 258,087 16.45% $0.80 $1.00 07/30/07
Robert W. Truxell 140,775 8.97% .80 1.00 07/30/02
Robert W. Truxell 100,000 6.37% 1.00 1.25 01/15/06
Robert W. Truxell 25,000 1.59% 1.00 1.25 05/09/06
Robert W. Truxell 48,675 3.10% .80 1.00 07/20/07
Robert W. Truxell 50,000 3.19% .72 .90 07/30/07
Robert W. Truxell 58,125 3.70% .80 1.00 07/20/07
Robert W. Truxell 75,000 4.78% .72 .90 09/08/07
James P. Fagan 129,041 8.22% 1.00 1.00 07/30/07
James P. Fagan 70,386 4.48% .80 1.00 07/30/02
James P. Fagan 100,000 6.37% 1.00 1.00 01/15/06
James P. Fagan 25,000 1.59% 1.00 1.00 05/09/06
James P. Fagan 58,125 3.70% 1.00 1.00 07/20/07
James P. Fagan 125,000 7.96% .88 .88 09/08/07
James P. Fagan 48,675 3.10% 1.00 1.00 07/20/07
</TABLE>
_______________________
No stock shares or options were granted to the foregoing named executives
during this fiscal year ended 4/30/99.
29
<PAGE>
Aggregated Option/SAR Exercised in Last Financial Year and Fiscal Year-End
- --------------------------------------------------------------------------
Option/SAR Values
- -----------------
The following table sets out all Option/SAR exercised by the Named
Executive Officers during the most recently completed fiscal year and the
Option/SAR values for such persons as of the end of the most recently completed
fiscal year.
Aggregated Option/SAR Exercised in Last Fiscal Year and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities
Underlying
Unexercised Value of
Options/SARs at Unexercised
FY-End (#) Options/SARs at
FY-End ($)
Shares Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ---- ------------------ ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Robert W. Truxell -0- -0- 680,662 $51,050
all exercisable
James P. Fagan -0- -0- 556,227 $41,717
all exercisable
</TABLE>
____________________
Repricing of Options
- --------------------
The Company's Board of Directors approved a reduction to $0.30 in option
exercise prices for all options under the 1995, 1996 and 1997 option plans to
reflect market values on April 20, 1999. This was done in lieu of unaffordable
competitive salaries and benefits to provide incentive and to retain the
services of management.
Compensation of Directors
- -------------------------
No salaries paid to directors. No bonuses paid or awarded to directors or
officers for fiscal year ending 4/30/99.
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.
30
<PAGE>
LEGAL MATTERS
Legal matters in connection with the shares of common stock being offered
hereby have been passed on for the Company by the law firm of Smith McCullough,
P.C., Denver, Colorado.
EXPERTS
The consolidated financial statements of Rich Coast Inc. as of April 30,
1999 and 1998 and for the years then ended included in this Prospectus and
Registration Statement have been audited by Smythe Ratcliffe, Chartered
Accounts, independent auditors, as set forth in their report appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accountant and auditing.
With respect to the unaudited interim consolidated financial information
for the nine months ended January 31, 2000, the independent auditors have not
audited such consolidated financial information and have not expressed an
opinion or any other form of assurance with respect to such consolidated
financial information.
CHANGES IN ACCOUNTANTS
The Board of Directors of the Company dismissed Smythe Ratcliffe, Chartered
Accountants on November 19, 1999 as its independent auditors and retained
Gelfond Hochstadt Pangburn, P.C. as its independent auditors for the fiscal year
ending April 30, 2000. None of the reports of Smythe Ratcliffe on the Company's
financial statements contained an adverse opinion or a disclaimer of opinion, or
was qualified or modified as to uncertainty, audit scope or accounting
principles. Further, there were no disagreements with the former accountants on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure.
The Company has not consulted Gelfond Hochstadt Pangburn, P.C. regarding
the application of accounting principles to a specific transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, or on any matter that was the subject of a
disagreement on a reportable event.
31
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission, a registration statement
(together with all amendments thereto, the "Registration Statement") under the
1933 Act with respect to the securities offered hereby. This prospectus, filed
as part of the Registration Statement, omits certain information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement and to the exhibits filed therewith, which may be
inspected without charge at the principal office of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of the material contained
therein may be obtained from the Commission upon payment of applicable copying
charges. Statements contained in this prospectus as to the contents of any
contract or other document referred to herein are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement.
Upon completion of this offering, the Company will be subject to the
reporting and other informational requirements of the 1934 Act and, in
accordance therewith, will file reports and other information with the
Commission. Such reports, proxy statements and other information, once filed by
the Company, can be inspected and copied at the public reference facilities
maintained by the Commission at the offices of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, New
York, New York 10048. Information on the operations of the Public Reference Room
may be obtained by calling the Commission at 1-800-SEC-0330. The Commission also
maintains a Web site on the Internet that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission. The address of such site is
http:/www.sec.gov.
The Company intends to furnish annual reports to stockholders containing
audited financial statements and will also make available quarterly reports and
such other periodic reports as it may determine to be appropriate or as may be
required by law.
32
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR RICH COAST INC.
___________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Unaudited Statements--For the nine months ended January 31, 2000.................................... F-2
Report of Independent Auditors...................................................................... F-6
Consolidated Balance Sheet--April 30, 1998 and 1999................................................. F-7
Consolidated Statements of Operations--For the years ended April 30, 1998 and 1999.................. F-8
Consolidated Statements of Stockholders' Equity--For the years ended April 30, 1998 and 1999........ F-9
Consolidated Statements of Cash Flows--For the years ended April 30, 1998 and 1999.................. F-10
Notes to Consolidated Financial Statements.......................................................... F-11
</TABLE>
F-1
<PAGE>
Rich Coast Inc.
Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(United States Dollars)
- ----------------------------------------------------------------------------
January 31 April 30
2000 1999
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Current:
Cash $ 75,043 $ 0
Accounts receivable, net 608,272 491,418
Prepaid expenses 16,200 0
- ----------------------------------------------------------------------------
699,515 491,418
Distillation unit 2,024,706 2,024,706
Property and equipment, net 2,904,092 3,354,493
Patent and technology, net 19,089 21,914
Deferred finance charges and deposits 168,542 226,320
- ----------------------------------------------------------------------------
$ 5,815,944 $ 6,118,851
- ----------------------------------------------------------------------------
Liabilities
Current:
Bank overdraft $ 0 $ 5,682
Accounts payable and accrued liabilities 998,064 849,960
Accrued oil and waste treatment costs 225,255 257,635
Current portion of long-term debt 371,836 100,733
- ----------------------------------------------------------------------------
1,595,155 1,214,010
Long-Term Debt 3,282,288 3,670,339
- ----------------------------------------------------------------------------
4,877,443 4,884,349
Stockholders' Equity
Preferred stock, $0.001 par value;
10,000,000 shares authorized, 0 outstanding;
Common stock, $0.001 par value;
100,000,000 shares authorized,
9,914,889 and 6,066,318 shares issued
and outstanding at January 31, 2000
and April 30, 1999, respectively 20,714 16,865
Additional paid-in capital 24,793,822 24,043,106
Accumulated deficit (23,876,035) (22,825,469)
- ----------------------------------------------------------------------------
938,501 1,234,502
- ----------------------------------------------------------------------------
$ 5,815,944 $ 6,118,851
- ----------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
F-2
<PAGE>
RICH COAST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED - PREPARED BY MANAGEMENT)
(UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Three Months Nine Months
Ended January 31, Ended January 31,
2000 1999 2000 1999
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 776,674 $ 565,188 $ 2,095,694 $ 1,705,216
Cost of sales
(exclusive of
depreciation) 340,418 415,779 944,309 1,043,700
- -------------------------------------------------------------------------------------
Gross Profit 436,256 149,409 1,151,385 661,516
Expenses:
Interest-beneficial
conversion feature 0 109,457 0 764,764
Salaries and wages 224,113 295,603 750,700 766,854
Interest 68,905 86,449 205,494 279,753
Lawsuit Settlement 0 0 150,000 0
Office and General 21,969 40,395 53,380 96,053
Consulting and
financing fee 55,091 17,589 90,504 181,817
Audit, accounting
and legal 39,812 66,349 104,543 180,872
Travel 17,597 10,111 50,536 101,648
Pipeline Staking fee 0 0 16,905 0
Property Taxes 37,203 20,105 132,880 81,205
Insurance 19,111 22,059 47,929 70,722
Utilities 32,017 33,454 78,131 71,123
Telephone and
facsimile 10,960 20,494 30,967 49,221
Advertising and
shareholder relations 0 26,281 1,538 123,428
Impairment loss on building 0 0 169,739 0
Bad debts (180) 0 9,761 0
Depreciation 95,789 82,619 308,944 220,084
- -------------------------------------------------------------------------------------
622,387 830,965 2,201,951 2,987,544
- -------------------------------------------------------------------------------------
Loss Before
Other Items (186,131) (681,556) (1,050,566) (2,326,028)
Gain on fire 0 0 0 89,343
Accrued oil and
waste treatment cost
reversal 0 0 0 285,588
- -------------------------------------------------------------------------------------
0 0 0 374,931
- -------------------------------------------------------------------------------------
Loss for Period $ (186,131) $ (681,556) $(1,050,566) $(1,951,097)
=====================================================================================
Loss Per Share $ (0.02) $ (0.14) $ (0.14) $ (0.40)
=====================================================================================
Weighted Average
Number of Shares
Outstanding 9,144,780 4,960,062 7,273,248 4,848,094
=====================================================================================
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
RICH COAST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - PREPARED BY MANAGEMENT)
(UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Nine Months
Ended January 31,
2000 1999
- -------------------------------------------------------------------------
<S> <C> <C>
Net Cash (used in)
Operating Activities $ (423,819) $ (700,575)
Investing Activities:
Capital asset additions (25,456) (748,468)
Deferred finance charge 0 (207,568)
- -------------------------------------------------------------------------
(25,456) (956,036)
Financing Activities:
Decrease in bank overdraft (5,682) 0
Collection subscriptions receivables 0 25,000
Issue of Capital stock for cash 600,000 187,955
Proceeds from convertible
debenture 0 1,500,000
Repayment of long-term debt (70,000) (95,642)
- -------------------------------------------------------------------------
524,318 1,617,313
- -------------------------------------------------------------------------
Increase (Decrease) in Cash 75,043 (39,298)
Cash,
Beginning of Period 0 53,043
- -------------------------------------------------------------------------
Cash, End of Period $ 75,043 $ 13,745
- -------------------------------------------------------------------------
Supplemental disclosure of non cash investing
and financing activities:
250,000 shares of common stock
issued upon settlement of lawsuit $ 50,000
==========
298,571 shares of common stock
issued in exchange of principle &
interest due on convertible
debentures $ 59,565
==========
300,000 shares of common stock
issued for consulting services $ 45,000
==========
47,499 shares of common stock
issued in exchange of accrued
interest $ 58,024
==========
1,040,299 shares of common stock
issued in exchange of principal due
on convertible debt $ 697,000
==========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
RICH COAST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2000 AND APRIL 30, 1999
(UNAUDITED - PREPARED BY MANAGEMENT)
(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. 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, 1999 Form 10-KSB.
In the opinion of the Company's management, these financial statements
reflect all adjustments, including normal recurring adjustments, considered
necessary to present fairly the Company's consolidated financial position
at January 31, 2000 and the consolidated results of operations and the
consolidated statement of cash flows for the three and nine months ended
January 31, 2000 and January 31, 1999.
2. CAPITAL STOCK
(a) Authorized 100,000,000 common shares of $0.001 par value and
10,000,000 preferred shares of $0.001 par value.
(b) Issued during the period:
---------------------------------------------------------------------------
NUMBER PRICE PER
OF SHARES SHARE($) AMOUNT
---------------------------------------------------------------------------
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 (principal) 1,040,299 $ 0.67 697,000
---------------------------------------------------------------------------
1,317,424 $ 942,979
===========================================================================
Nine months ended January 31, 2000
Shares issued
Lawsuit settlement 250,000 $ 0.20 $ 50,000
Convertible Debenture 298,571 $0.1995 59,565
(principal and
accrued interest)
For cash 3,000,000 $ 0.20 600,000
Consulting services 300,000 $ 0.15 45,000
---------------------------------------------------------------------------
3,848,571 $754,565
===========================================================================
F-5
<PAGE>
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.
as of April 30, 1999 and 1998 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended April 30, 1999. 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
in the United States. 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, 1999 and 1998 and the consolidated results of its operations and cash
flows for each of the three years in the period ended April 30, 1999 in
conformity with generally accepted accounting principles in the United States.
"Smythe Ratcliffe"
Chartered Accountants
Vancouver, Canada
August 12, 1999
F-6
<PAGE>
RICH COAST, INC.
Consolidated Balance Sheets
April 30
(U.S. Dollars)
<TABLE>
<CAPTION>
===================================================================================================================
1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets (note 7)
Current
Cash $ 0 $ 53,043
Accounts receivable 491,418 460,558
Insurance claim receivable (note 3) 0 435,290
Shares subscription receivable 0 25,000
Inventory 0 108,265
- -------------------------------------------------------------------------------------------------------------------
491,418 1,082,156
Distillation Unit (note 5) 2,024,706 2,024,706
Property and Equipment, at cost (net) (notes 4 and 7) 3,354,493 2,990,373
Patent and Technology, net 21,914 25,681
Deferred Finance Charges and Deposits 226,320 120,732
- -------------------------------------------------------------------------------------------------------------------
$ 6,118,851 $ 6,243,648
===================================================================================================================
Liabilities
Current
Bank overdraft $ 5,682 $ 0
Accounts payable and accrued liabilities (note 6) 849,960 838,966
Accrued oil and waste treatment costs 257,635 450,444
Current portion of long-term debt (note 7) 100,733 595,309
- -------------------------------------------------------------------------------------------------------------------
1,214,010 1,884,719
Long-Term Debt (note 7) 3,670,339 2,016,510
- -------------------------------------------------------------------------------------------------------------------
4,884,349 3,901,229
- -------------------------------------------------------------------------------------------------------------------
Stockholders' Equity (note 8)
Common stock, $0.001 par value;
100,000,000 shares authorized, 6,066,318 and 4,718,894 (18,875,579 pre reverse 16,865 15,518
split) shares issued and outstanding at April 30, 1999 and 1998,
respectively (note 1)
Additional paid-in capital (note 1) 24,043,106 22,579,874
Accumulated deficit (note 1) (22,825,469) (20,252,973)
- -------------------------------------------------------------------------------------------------------------------
1,234,502 2,342,419
- -------------------------------------------------------------------------------------------------------------------
$ 6,118,851 $ 6,243,648
===================================================================================================================
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
RICH COAST, INC.
Consolidated Statements of Operations
Years Ended April 30
(U.S. Dollars)
<TABLE>
<CAPTION>
==============================================================================================================
1999 1998 1997
<S> <C> <C> <C>
Sales $ 2,267,452 $ 2,547,083 $ 1,897,155
Cost of Sales (exclusive of depreciation
shown separately below) 1,378,367 1,080,557 967,062
Gross Profit 889,085 1,466,526 930,093
Expenses
Salaries and wages 1,045,669 982,918 713,605
Audit, accounting and legal 264,366 130,626 213,911
Consulting and management fees 199,953 152,223 816,953
Travel 129,201 125,030 79,939
Advertising 120,905 5,853 12,356
Office and general 120,769 59,122 31,857
Property taxes 100,078 85,760 72,612
Utilities 93,300 121,168 129,463
Insurance 81,750 103,805 83,364
Telephone and facsimile 67,784 40,693 29,489
Equipment and storage leases 45,871 83,820 111,437
Bad debts 44,801 8,375 11,984
Shareholder relations 2,692 149,406 41,630
Repairs and maintenance 0 62,603 40,983
Listing, transfer agent and filing fees 0 24,573 27,176
Factoring costs 0 24,304 19,634
Rent and secretarial 0 7,353 4,300
Financing 0 0 26,772
Forgiveness of past service
compensation liability 0 0 (351,935)
Depreciation 318,661 256,398 359,168
- --------------------------------------------------------------------------------------------------------------
2,635,800 2,424,030 2,474,698
- --------------------------------------------------------------------------------------------------------------
Loss Before Other Items 1,746,715 957,504 1,544,605
Other Items
Interest - beneficial conversion feature (note 2(k)) 764,766 198,626 0
Interest expense 216,217 303,648 213,912
Amortization of deferred financing costs 77,239 17,646 22,060
Lawsuit settlement (note 12) 50,000 0 0
Loss on equipment disposal 3,147 0 147,752
Accrued oil and waste treatment cost reversal (285,588) 0 0
Insurance proceeds in excess of current expenditures (note 3) 0 (103,503) 0
- --------------------------------------------------------------------------------------------------------------
Net Loss for Year $ 2,572,496 $ 1,373,921 $ 1,928,329
==============================================================================================================
Net Loss per Share $ 0.49 $ 0.32 $ 0.52
==============================================================================================================
(Pre Reverse Split) $ 0.12 $ 0.08 $ 0.13
==============================================================================================================
Weighted Average Number of Shares Outstanding 5,208,693 4,318,038 3,758,788
(Pre Reverse Split) 20,834,772 17,272,153 15,035,155
==============================================================================================================
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
RICH COAST, INC.
Consolidated Statements of Stockholders' Equity
Years Ended April 30
(U.S. Dollars)
<TABLE>
<CAPTION>
===================================================================================================================================
Common (Pre Common Additional Total
Shares Reverse Shares Paid-In Accumulated Stockholders'
Number Split) Amount Capital Deficit Equity (Deficit)
- -----------------------------------------------------------------------------------------------------------------------------------
(note 1)
<S> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1996 3,330,974 13,323,901 $ 9,941 $ 19,741,586 $(16,950,723) $ 2,800,804
Issuance of common stock (note 8) 707,955 2,831,820 2,832 1,585,239 0 1,588,071
Financing cost 0 0 0 (14,868) 0 (14,868)
Net loss 0 0 0 0 (1,928,329) (1,928,329)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1997 4,038,929 16,155,721 12,773 21,311,957 (18,879,052) 2,445,678
Issuance of common stock (note 8) 679,965 2,719,858 2,745 804,526 0 807,271
Interest - beneficial conversion (note 2(k)) 0 0 0 463,391 0 463,391
Net loss 0 0 0 0 (1,373,921) (1,373,921)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1998 4,718,894 18,875,579 15,518 22,579,874 (20,252,973) 2,342,419
Issuance of common stock (note 8) 1,347,424 5,389,692 1,347 963,232 0 964,579
Interest - Beneficial conversion (note 2(k)) 0 0 0 500,000 0 500,000
Reverse stock split 0 (24,265,271) 0 0 0 0
Net loss 0 0 0 0 (2,572,496) (2,572,496)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1999 6,066,318 0 $16,865 $ 24,043,106 $(22,825,469) $ 1,234,502
===================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE>
RICH COAST, INC.
Consolidated Statements of Cash Flows
Years Ended April 30
(U.S. Dollars)
<TABLE>
<CAPTION>
=============================================================================================
1999 1998 1997
<S> <C> <C> <C>
Operating Activities
Net loss for year $(2,572,496) $(1,373,921) $(1,928,329)
Adjustments to reconcile net loss to net cash
used by operating activities
Interest - beneficial conversion feature 764,766 198,626 0
- expense 58,024 64,356 0
Salaries and wages 0 231,405 0
Depreciation and amortization 395,900 274,045 381,228
Consulting and management fees 0 155,410 608,548
Loss on equipment disposal 3,147 0 147,752
Changes in operating assets and liabilities
Accounts receivable (30,860) (172,293) 138,700
Insurance claim receivable 435,290 (435,290) 0
Subscriptions receivable 25,000 (25,000) 0
Inventory 108,265 27,408 (135,673)
Prepaid expenses 0 4,436 37,250
Accounts payable and accrued liabilities 10,994 99,839 (125,241)
Accrued oil and waste treatment costs (192,809) 146,470 201,867
Past services compensation payable 0 0 (351,935)
- ---------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (994,779) (804,509) (1,025,833)
- ---------------------------------------------------------------------------------------------
Investing Activities
Purchase of property and equipment (379,671) (163,230) (123,054)
Fire insurance proceeds for fixed assets 0 131,714 0
Proceeds on sale of equipment 0 0 2,000
- ---------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (379,671) (31,516) (121,054)
- ---------------------------------------------------------------------------------------------
Financing Activities
Issue of common stock 209,555 256,100 964,673
Land contract repayments (104,059) (8,085) (33,776)
Shareholders' loans 0 0 (4,763)
Obligation under capital lease 0 (13,336) (1,181)
Notes payable 0 697,000 0
Payment on equipment loan (14,453) 0 0
Deferred finance charges and deposits (67,648) (55,530) 203,303
Bank overdraft 5,682 0 0
Proceeds from long-term debt 1,292,330 0 0
- ---------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 1,321,407 876,149 1,128,256
- ---------------------------------------------------------------------------------------------
Increase (Decrease) in Cash (53,043) 40,124 (18,631)
Cash, Beginning of Year 53,043 12,919 31,550
- ---------------------------------------------------------------------------------------------
Cash, End of Year $ 0 $ 53,043 $ 12,919
=============================================================================================
Supplemental information
Issue of common stock
For short-term shareholders advances received $ 0 $ 0 $ 531,061
For conversion of promissory notes 697,000 0 0
For services and compensation 0 386,815 608,548
For finder's fee 0 0 14,850
For interest 58,024 64,126 0
Interest paid 158,193 154,860 211,808
Purchase of equipment financed 210,000 0 0
=============================================================================================
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(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. Rich Coast, Inc. ("the Company")
acquired Integrated Waste Systems, Inc., a Michigan corporation ("IWS")
and The Powers Fagan Group, Inc., a Michigan corporation
("Powers/Fagan") through the issuance of 3,383,200 shares of its common
shares. At April 30, 1995 and prior to the merger, the Company held a
controlling interest (approximately 55%) in Waste Reduction Systems
("the Partnership"). IWS and Powers/Fagan together held the remaining
(approximately 45%) interest in the Partnership. Neither IWS nor
Powers/Fagan had any assets, liabilities or operations other than their
interest in the Partnership which amounted to Nil.
The acquisition was accounted for as a combination of entities under
common control, a method similar to a pooling of interests. Management
subsequently determined that this method did not reflect the substance
of the transaction. The error in the prior period financial statements
was reported as a prior period adjustment with the acquisition of IWS
and Powers/Fagan accounted for using the purchase method of accounting.
Because the Company had accounted for virtually all the partnership
losses on an equity basis to April 30, 1995 the prior period adjustment
would change individual balance sheet and operations items for
reporting periods prior to the acquisition and not losses reported. The
net book value of the assets received approximated their fair value.
The net book value of the assets received was determined to be the
purchase cost as such value was more clearly evident than the fair
value of the common stock issued. The Company, pursuant to the
partnership agreement with the Partnership had been including its
approximately majority interest in the partnership's losses and also
absorbing the losses pertaining to the Partnership interests held by
IWS and Powers/Fagan.
Consolidated operating results as if the Company's acquisition of IWS
and Powers/Fagan had been consummated as of May 1, 1995 would not be
different from the results shown in the financial statements.
Prior to the acquisition of its interest in the Partnership and the
acquisition of IWS and Powers/Fagan, the Company was engaged in mineral
exploration and had accumulated a deficit of $13,210,746. The Company
now operates a non-hazardous waste treatment facility in Dearborn,
Michigan specializing in recycling of waste oils.
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.
Effective July 14, 1998 the Company reincorporated in the State of
Nevada.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
These financial statements include the accounts of Rich Coast,
Inc. (a Delaware Corporation which became a Nevada Corporation
effective July 14, 1998) 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.
F-11
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Distillation unit, property and equipment
The distillation unit and the property and equipment are
recorded at cost. These assets are depreciated over their
estimated useful lives as follows:
Buildings - Straight line basis
Machinery and equipment - Double declining balance basis
Bulk storage tanks - 1.5 Declining balance basis
Furniture and fixtures - Double declining basis
Computer - Double declining basis
No depreciation has been taken on the distillation unit or the
property and equipment and pipeline that have not yet been put
into use.
The Company reviews long term assets such as the distillation
unit to determine if the carrying amount is recoverable based
on the estimate of future cash flows expected to result from
the use of the asset and its eventual disposition. If in this
determination there is an apparent short fall, the loss will
be recognized as a current charge to operations.
(d) Deferred finance charges
Costs related to long-term financing are being amortized over
the terms of the related debt on a straight-line basis, which
is not materially different from the effective interest
method.
(e) Reporting currency
Financial statements for reporting periods up to and including
the year ended April 30, 1996 were originally presented in
Canadian dollars because that was the reporting currency. As
discussed in note 1, the Company became a U.S. corporation
during the 1997 fiscal year. Effective May 1, 1996 financial
statements are presented in United States dollars, the
functional currency for recording the operations and
activities of the Company.
(f) Net loss per share
Net loss per share computations are based on the weighted
average number of common shares outstanding during the year.
The effect of exercising share warrants and options is not
reflected as the result would be anti-dilutive.
(g) 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.
(h) 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.
F-12
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(i) Financial instruments
The carrying value of cash, accounts receivable, insurance
claim receivable and accounts payable and accrued liabilities
approximate their fair value because of the short maturity of
these financial instruments. In the opinion of management, the
carrying amounts of these financial instruments approximate
their fair value because of the short maturity of these
financial instruments. Long term debt approximates its fair
value because interest payments over the term of the debt
approximated market rates at inception of the debt.
(j) Stock based compensation
The Company applies APB Opinion No. 25 and related
interpretations in accounting for its stock option plans and,
accordingly, no compensation cost has been recognized because
stock options granted under the plans were at exercise prices
which were equal to market value at date of grant.
Compensation expense is recorded when options are granted to
management at discounts to market.
(k) Long-term debt
The beneficial conversion features relating to the 10% 18
month promissory notes and the 8% debenture are accounted for
as an interest charge and are amortized over the period from
the date of issue through the date the debt is first
convertible. This policy confirms to the accounting for these
transactions announced by the SEC staff in March, 1997.
3. INSURANCE CLAIM
In December 1997 the Company incurred damage to its premises at 10200
Ford Road, Dearborn as a result of a fire. The accounts at April 30,
1998 reflect the amounts subsequently received from the insurers and
the expenditures incurred for repairs (note 6).
4. 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>
===================================================================================
Estimated Useful
Lives (Years) 1999 1998
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Land $250,041 $250,041
Buildings 39 1,364,002 1,388,117
Machinery and equipment 7 2,163,585 1,586,789
Bulk storage tanks 15 649,664 636,534
Pipeline 15 296,187 296,187
Furniture, fixtures, computers, etc 5 to 7 50,169 51,274
-----------------------------------------------------------------------------------
Total at cost 4,773,648 4,208,942
Accumulated depreciation 1,419,155 1,218,569
-----------------------------------------------------------------------------------
$3,354,493 $2,990,373
===================================================================================
</TABLE>
The Company's premises at 10200 Ford Road in Dearborn, Michigan are
currently listed for sale. The property is occupied under the terms of
a land contract (note 7). The premises were occupied and used
throughout 1999 and 1998 fiscal year. Depreciation charges based on
historical cost have been recorded.
F-13
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
5. 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.
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
=================================================================
1999 1998
-----------------------------------------------------------------
Trade payables $670,712 $516,482
Lawsuite settlement (note 12) 50,000 0
Accrued salaries and wages 81,951 50,325
Accrued property taxes 40,089 55,296
Payroll taxes 7,208 11,676
Building repair (fire damage) (note 3) 0 200,187
Accrued interest 0 5,000
-----------------------------------------------------------------
$849,960 $838,966
=================================================================
F-14
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
<TABLE>
<CAPTION>
================================================================================================================================
7. LONG-TERM DEBT
=====================================================================================================================
1999 1998
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10% 18 month convertible promissory notes - series 1997, interest $0 $697,000
payable quarterly. Holders elected at the time of purchase to receive
interest in shares of the Company's common stock values at a price per
share equal to the average closing bid price as quoted on NASDAQ over
the 20 trading days preceding the close of the calendar quarter. The
notes may be converted at the option of the holder at maturity into
shares of common stock at a price per share equal to 50% of the quoted
NASDAQ bid price at the conversion date.
Unamortized interest charge relating to beneficial conversion feature
(note 2(k)) 0 (264,765)
---------------------------------------------------------------------------------------------------------------------
0 432,235
10% senior secured note, due October 1, 2001 interest payable monthly 2,000,000 2,000,000
(see below for security)
8% convertible debenture due June 11, 2003 secured by a security 1,500,000 0
agreement over land and building. The debenture and accrued interest
thereon may be converted at the option of the holder at any time into
common stock at a price per share equal to the lesser of the closing bid
price of the shares at the date of issuance of the debenture or 75% of
the five day average closing bid price for the five trading days
immediately preceding the conversion date.
8% loan due August 1, 2003 repayable in monthly blended instalments of 195,547 0
$4,259 secured by a security agreement over machinery and equipment
Land contract payable in monthly instalments of $4,753 each including 75,525 179,584
principal and interest at 8% unless the Company falls behind in its
payments at which time the interest rate increases to 12% and monthly
instalments increase to $5,384 until the payments are back to schedule
(the Company's arrears payments were corrected by a payment of $84,371
on June 1, 1998). After the land contract is paid in full, the Company
may lease the property for a 7 year term which will cause the land to be
titled to the Company for $1, either after satisfactory clean up by
others or after 91 years.
---------------------------------------------------------------------------------------------------------------------
3,771,072 2,611,819
Less: Current portion 100,733 595,309
---------------------------------------------------------------------------------------------------------------------
$3,670,339 $2,016,510
=====================================================================================================================
</TABLE>
F-15
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
7. LONG TERM DEBT (Continued)
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 9).
The land contract payable relates to premises occupied at 10200 Ford
Road, Dearborn, Michigan which is currently listed for sale.
The amount of long-term obligations outstanding at April 30, 1999
mature as follows:
=========================================================
2000 $ 100,733
2001 58,384
2002 2,043,729
2003 47,359
2004 1,520,867
---------------------------------------------------------
$3,771,072
=========================================================
F-16
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
8. STOCKHOLDERS' EQUITY
(a) Activity of the common stock account for the years 1997, 1998 and
1999 is as follows:
<TABLE>
<CAPTION>
============================================================================================
Number Number
of Shares of Shares Additional
(Pre Reverse (Post Reverse Par Paid-In
Split) Split) Value Capital
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal 1997
Shares issued
For financing fees 50,000 12,500 $ 50 $ 14,800
For settlement of debt 1,104,470 276,118 1,104 529,957
For cash - private placements 475,000 118,750 475 354,000
For cash - exercise of stock options 81,750 20,437 82 79,055
For services 1,120,600 280,150 1,121 607,427
--------------------------------------------------------------------------------------------
2,831,820 707,955 2,832 1,585,239
--------------------------------------------------------------------------------------------
Fiscal 1998
Shares issued
For services and compensation 921,892 230,473 922 385,893
For cash - private placements 430,000 107,500 430 107,070
For cash - exercise of stock options 355,000 88,750 355 78,245
For cash - exercise of warrants 280,000 70,000 280 69,720
For settlement of loan payable to a
shareholder 521,198 130,299 521 99,709
For interest 211,768 52,943 237 63,889
--------------------------------------------------------------------------------------------
2,719,858 679,965 2,745 804,526
--------------------------------------------------------------------------------------------
Fiscal 1999
Shares issued
For cash - exercise of stock options 1,038,504 259,626 260 209,295
Conversion of promissory note (note 7) 4,161,194 1,040,299 1,040 695,960
For interest 189,994 47,499 47 57,977
--------------------------------------------------------------------------------------------
5,389,692 1,347,424 $ 1,347 $ 963,232
============================================================================================
</TABLE>
Effective June 19, 1998, there was a one for four reverse split of the
authorized common stock.
On May 26, 1999, the shareholders approved the creation of 10,000,000
shares of preferred stock of $0.001 par value.
F-17
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
8. STOCKHOLDERS' EQUITY (Continued)
(b) Subsequent to April 30, 1999, the Company issued 250,000 shares
related to settlement of litigation (note 12).
(c) The share subscription receivable was collected July 28, 1998.
9. STOCK OPTIONS AND WARRANTS
Options
Pursuant to the Company's 1995 Incentive Compensation Plan as
subsequently amended in 1996 ("the 1995 Plan"), the 1996 Employee Stock
Option and Stock Bonus Plan ("the 1996 Plan"), and the 1997 Stock
Option and Bonus Plan ("the 1997 Plan") the Company may issue stock
options and stock bonuses for 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 the 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.
The following table summarizes the Company's stock option activity for
the years ended April 30, 1999 and 1998:
<TABLE>
<CAPTION>
============================================================================================
1999 1998
--------------------------------------------------------------------------------------------
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
--------------------------------------------------------------------------------------------
Outstanding, Beginning of Year 1,566,978 $ 0.87 503,750 $ 1.00
Granted 0 $ 0.00 1,073,228 $ 0.83
Exercised (259,626) $ 0.87 (10,000) $ 0.72
Expired 0 $ 0.00 0 $ 0.00
--------------------------------------------------------------------------------------------
Outstanding, End of Year 1,307,352 1,566,978
============================================================================================
The following table summarizes information about the Company's stock
options outstanding:
<CAPTION>
==========================================================================================================
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
<S> <C> <C> <C> <C> <C> <C>
April 30, 1999 $ 0.72 - $ 2.00 1,307,352 2.50 $ 0.88 1,239,852 $ 0.85
April 30, 1998 $ 0.72 - $ 2.00 1,566,978 3.50 $ 0.88 1,524,478 $ 0.85
----------------------------------------------------------------------------------------------------------
</TABLE>
F-18
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
9. STOCK OPTIONS AND WARRANTS (Continued)
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans and, accordingly, no compensation
cost has been recognized because stock options granted under the plans
were at exercise prices which were equal to market value at date of
grant. Had compensation expense been determined as provided in SFAS 123
using the Black-Sholes option-pricing model, the pro-forma effect on
the Company's net income (loss) and per share amounts would have been:
<TABLE>
<CAPTION>
==========================================================================================
1999 1998
------------------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss), as reported $(2,572,496) $(1,373,921)
Net income (loss), pro-forma $(5,736,910) $(4,339,709)
Net income (loss) per share, as reported $ 0.49 $ 0.32
Net income (loss) per share, as reported
- pre reverse split $ 0.12 $ 0.08
Net income (loss) per share, pro-forma $ 1.10 $ 1.00
Net income (loss) per share, pro-forma
- pre reverse split $ 0.28 $ 0.25
==========================================================================================
</TABLE>
The fair value of each option grant is calculated using the following
weighted average assumptions:
<TABLE>
<CAPTION>
==========================================================================================
1999 1998
------------------------------------------------------------------------------------------
<S> <C> <C>
Expected life (years) 3 3
Interest rate 6.28% 6.28%
Volatility 101.14% 101.14%
Dividend yield 0.00% 0.00%
==========================================================================================
</TABLE>
Warrants
At April 30, 1999 there were 1,298,660 share purchase warrants
outstanding.
<TABLE>
<CAPTION>
=================================================================================================
Number Pre
Exercise Price of Warrants Reverse
-------------------------------------------------------------------------------------------------
(Pre Reverse Split) (Post Reverse Split)
<S> <C> <C> <C> <C>
June 15, 2001 $ 0.25 $ 1.00 37,500 150,000
November 5, 2001 $ 0.25 $ 1.00 45,000 180,000
January 13, 2002 $ 0.25 $ 1.00 105,000 420,000
July 30, 2002 $ 0.20 $ 0.80 211,160 844,643
June 10, 2006 $ 0.30 $ 1.20 900,000 3,600,000
-------------------------------------------------------------------------------------------------
1,298,660 5,194,643
=================================================================================================
</TABLE>
F-19
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
10. RELATED PARTY TRANSACTIONS
(a) Management fees of $Nil were paid to directors or companies
controlled by directors for the year ended April 30, 1999
(1998 - $30,000; 1997 - $30,000)
(b) Shareholder advance of $100,000 to the Company for working
capital purposes in 1997 fiscal year was settled by the
issuance of 521,198 shares in 1998 fiscal year which included
an interest component of $4,240. The shares were issued at a
discount to market of 20%.
11. INCOME TAXES
A deferred tax asset stemming from the Company's net operating loss
carry forward, has been reduced by a valuation account to zero due to
uncertainties regarding the utilization of the deferred assets.
At April 30, 1999 the Company has available net operating loss carry
forward of approximately $8,400,000 which it may use to offset future
federal taxable income. The net operating loss carry forwards, if not
utilized, will begin to expire in 2008.
12. LITIGATION
(a) In December 1997 a complaint was filed against the Company
relating to alleged payments of $225,000 due by the Company
under a Terminaling Agreement of May 18, 1995. The outcome of
the dispute is not determinable at this time, however,
management is of the opinion the matter will be settled prior
to trial. No provision for loss has been recorded in the
accounts.
(b) In December 1997 a complaint was filed against the Company, in
which the plaintiff claims, among other things, breach of
contract relating to an alleged loan made to the Company in
1994. The Company settled the suit by granting 250,000 shares
of common stock and $50,000 subsequent to April 30, 1999.
13. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The year 2000 issue arises because many computer systems use two digits
rather than four to identify a year. Date sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using the year 2000 dates is processed. In addition,
similar problems may arise in some systems which use certain dates in
1999 to represent something other than a date. The effects of the year
2000 issue may be experienced before, on, or after January 1, 2000 and,
if not addressed, the impact on operations and financial reporting may
range from minor errors to significant systems failure which could
affect an entities ability to conduct normal business operations. While
the company has a plan to address the year 2000 issue, it is not
possible to be certain that all aspects of the issue affecting the
company, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
F-20
<PAGE>
<TABLE>
______________________________________________________________________________________________________________________________
<S> <C>
RICH COAST, INC.
We have not authorized any dealer,
salesperson or other person to give any
information or represent anything not
contained in this prospectus. You must not
rely on any unauthorized information. This
prospectus does not offer to sell or
buy any shares in any jurisdiction where it
is unlawful. The information in this
prospectus is current as of its date. _____________ SHARES OF COMMON STOCK
_____________
PROSPECTUS
_____________
Dealer Prospectus Delivery Obligation:
Until ______________, all dealers that
effect transactions in these securities, whether
or not participating in this offering, may be
required to deliver a prospectus. This is in
addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and
with respect to their unsold allotments or
subscriptions. _____________, 2000
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
-----------------------------------------
The Company's Articles of Incorporation provide that the Company shall
indemnify any officer, employee, agent or director against liabilities
(including the obligation to pay a judgment, settlement, penalty, fine or
expense), incurred in a proceeding (including any civil, criminal or
investigative proceeding) to which the person was a party by reason of such
status. Such indemnity may be provided if the person's actions resulting in the
liabilities: (i) were taken in good faith; (ii) were reasonably believed to have
been in the Company's best interest with respect to actions taken in the
person's official capacity; (iii) were reasonably believed not to be opposed to
the Company's best interest with respect to other actions; and (iv) with respect
to any criminal action, the director had no reasonable grounds to believe the
actions were unlawful. Unless the person is successful upon the merits in such
an action, indemnification may generally be awarded only after a determination
of independent members of the Board of Directors or a committee thereof, by
independent legal counsel or by vote of the shareholders that the applicable
standard of conduct was met by the director to be indemnified.
A director, employee, agent, or officer who is wholly successful, on the
merits or otherwise, in defense of any proceeding to which he or she was a
party, is entitled to receive indemnification against reasonable expenses,
including attorneys' fees, incurred in connection with the proceeding. In
addition, a corporation may indemnify or advance expenses to an officer,
employee or agent who is not a director to a greater extent than permitted for
indemnification of directors, if consistent with law and if provided for by its
articles of incorporation, bylaws, resolution of its shareholders or directors
or in a contract.
Item 25. Other Expenses of Issuance and Distribution.
-------------------------------------------
Expenses payable by the Company in connection with the issuance and
distribution of the securities being registered hereby are as follows. Selling
shareholders will be required to pay transfer tax and fees, if any, upon sale of
their shares.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee............. $ 1,786.00
NASD Filing Fee.................. $ 0
Accounting Fees and Expenses..... $ 5,000.00*
Legal Fees and Expenses.......... $33,000.00*
Blue Sky Fees and Expenses....... $ 0
Broker Commission................ $ 0
Printing, Freight and Engraving.. $ 0
Miscellaneous.................... $ 2,000.00*
Total....................... $41,786.00
==========
</TABLE>
_______________
* Estimates only
II-1
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
---------------------------------------
The following is information as to all securities of the Company sold by
the Company within the past three years which were not registered under the
Securities Act of 1933 (the "Act").
On June 11, 1997 the Company issued 100,000 shares for forbearance from
exercising certain rights and remedies by the holder of a 10% Senior Secured
Note in the principal amount of $2,000,000. The shares were issued in reliance
on Section 4(2) of the Act and Rule 506 promulgated thereunder because it was an
offer to only one purchaser who was an accredited investor.
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 Act.
From late 1997 to early 1998 the Company issued an aggregate principal
amount of $697,000 of 10% 18 month convertible promissory notes in a private
placement to accredited investors only in reliance on Section 4(2) of the Act
and Rule 506 promulgated thereunder.
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.
On January 26, 1998, February 20, 1998 and April 23, 1998 the Company
issued an aggregate of 111,768 shares as accrued interest for the calendar
quarters ended September 30, 1997, December 31, 1997 and March 31, 1998 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 and Rule 506
promulgated thereunder 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 interest payments was made at
the time the 10% Notes were purchased.
On February 28, 1998 (100,000 shares), March 2, 1998 (110,000 shares),
April 1, 1998 (50,000 shares) and April 17, 1998 (50,000 shares) options were
exercised at $0.25 per share (February and March exercises) and $0.18 per share
(April exercises), and an aggregate of 310,000 shares were issued, all in
reliance on Section 4(2) of the Act.
On April 9, 1998 (100,000 shares), April 15, 1998 (100,000 shares) and
April 16, 1998 (130,000 shares) warrants were exercised at $0.25 per share and
an aggregate of 330,000 share were issued, all in reliance on Section 4(2) of
the Act.
In June 1998 the Company issued 8% Convertible Debentures (aggregate
principal amount $1,500,000) to accredited investors only in a private placement
in reliance on Section 4(2) of the Act and Rule 506 promulgated thereunder. The
Company also issued a finder's fee in connection with this
II-2
<PAGE>
transaction in the form of warrants to purchase 60,000 shares of the Company's
common stock, exercisable at $2.50 per share.
On July 1, 1998 the Company issued an aggregate of 8,098 shares as accrued
interest for the calendar quarter ended June 1998, on the Company's outstanding
10% 18-Month Convertible Promissory Notes. The shares were issued in reliance on
Section 4(2) of the Act and Rule 506 promulgated thereunder 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.
On October 1, 1998 the Company issued an aggregate of 25,251 shares as
accrued interest for the calendar quarter ended September 1998, on the Company's
outstanding 10% 18-Month Convertible Promissory Notes. The shares were issued in
reliance on Section 4(2) of the Act and Rule 506 promulgated thereunder 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.
In December 1998 the Company issued an aggregate of 1,087,798 shares for
accrued interest and conversion of principal on the Company's outstanding
10% 18-Month Convertible Promissory Notes. The shares were issued in reliance on
Section 4(2) of the Act and Rule 506 promulgated thereunder 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.
In September 1999 an aggregate of 298,571 shares of common stock were
issued to holders of 8% Convertible Debentures for partial conversion of
principal and accrued interest. These shares were issued in reliance on Rule 506
and Section 4(2) of the Act.
In November 1999 the Company issued 300,000 shares to a consultant for his
services rendered over the past year in mediating discussions with holders of
the Company's 8% Convertible Debentures.
In November and December 1999 the Company issued an aggregate of 3,000,000
shares to accredited investors for aggregate investment of $600,000 (or $0.20
per share) in a private placement under Section 4(2) and Rule 506 of the Act.
Item 27. Exhibits.
--------
The following is a list of all exhibits filed as part of this Registration
Statement:
Exhibit No. Description and Method of Filing
----------- -------------------------------
3.1.1 Articles of Incorporation. Previously filed.
3.1.2 Articles of Amendment. Previously filed.
II-3
<PAGE>
Exhibit No. Description and Method of Filing
----------- -------------------------------
3.2 Bylaws. Previously filed.
5.1 Opinion of Smith McCullough, P.C. on legality.*
10.1 Contract for Sale of Ford Road property. Previously
filed.
10.2 Employment Contract between the Company and Robert W.
Truxell (Exhibit 1 to the Agreement of Merger dated
October 31, 1995). (2)
10.3 Employment Contract between the Company and James P.
Fagan (Exhibit 2 to the Agreement of Merger dated
October 31, 1995). (2)
10.4 1995 Incentive Compensation Plan. (3)
10.5 1996 Employee Stock Option and Bonus Plan, as
amended. (4)
10.6 1997 Stock Option and Stock Bonus Plan. (5)
10.7 1999 Stock Option Plan. Previously filed.
21.1 Subsidiaries of the Registrant. Previously Filed.
23.1 Consent of Smythe Ratcliffe, Chartered Accountants.
Previously filed.
23.2 Consent of Smith McCullough, P.C. (included in
Exhibit 5.1).*
24.1 Power of Attorney. Included as part of signature page.
27.1 Financial Data Schedule. Filed herewith.
27.2 Financial Data Schedule. Filed herewith.
_________________________
(1) Incorporated by reference from Registration Statement on Form S-4, File No.
333-6099, effective August 7, 1996.
(2) Incorporated by reference to the Company's Form 8-K dated November 16,
1995.
(3) Incorporated by reference from the Company's Registration Statement on Form
S-8, File No. 333-41443.
(4) Incorporated by reference from the Company's Registration Statement on Form
S-8, File No. 333-50763.
(5) Incorporated by reference from the Company's Registration Statement on Form
S-8, File No. 333-56275.
*To be filed by amendment.
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.
II-4
<PAGE>
Item 28. Undertakings.
------------
The undersigned small business issuer will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
The small business issuer will provide to the underwriter at the closing
specified in the underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned small business issuer will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and
II-5
<PAGE>
contained in a form of prospectus filed by the small business issuer under Rule
424(b)(1), or (4) or 497(h) under the Securities Act as part of this
registration statement as of the time the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing this Amendment No. 4 to Form S-3 on Form SB-2 and
authorized this registration statement to be signed on its behalf by the
undersigned, in Dearborn, Michigan on March 21, 2000.
RICH COAST, INC.
/s/ James P. Fagan
----------------------------------------------
James P. Fagan, President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and/or
directors of Rich Coast Inc., by virtue of their signatures appearing below,
hereby constitute and appoint James P. Fagan and/or Robert W. Truxell, or either
of them, with full power of substitution, as attorney-in-fact in their names,
places and steads to execute any and all amendments to this Amendment No. 4 to
Form S-3 on Form SB-2 in capacities set forth opposite their names on the
signature page thereof and hereby ratify all that said attorneys-in-fact or
either of them may do by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert W. Truxell Chairman of the Board of Directors and March 21, 2000
- ----------------------
Robert W. Truxell Secretary
/s/ James P. Fagan President, Chief Executive Officer March 21, 2000
- -------------------
James P. Fagan and Director
/s/ George P. Nassos Director March 21, 2000
- --------------------
George P. Nassos
/s/ Michael R. Fugler Director March 21, 2000
- ---------------------
Michael R. Fugler
/s/ Michael Grujicich Chief Financial and Accounting March 21, 2000
- ----------------------
Michael Grujicich Officer and Treasurer
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
Exhibit No. Description and Method of Filing
---------- --------------------------------
3.1.1 Articles of Incorporation. Previously filed.
3.1.2 Articles of Amendment. Previously filed.
3.2 Bylaws. Previously filed.
5.1 Opinion of Smith McCullough, P.C. on legality.*
10.1 Contract for Sale of Ford Road property. Previously filed.
10.2 Employment Contract between the Company and Robert W. Truxell
(Exhibit 1 to the Agreement of Merger dated October 31,
1995). (2)
10.3 Employment Contract between the Company and James P. Fagan
(Exhibit 2 to the Agreement of Merger dated October 31,
1995). (2)
10.4 1995 Incentive Compensation Plan. (3)
10.5 1996 Employee Stock Option and Bonus Plan, as amended. (4)
10.6 1997 Stock Option and Stock Bonus Plan. (5)
10.7 1999 Stock Option Plan. Previously filed.
21.1 Subsidiaries of the Registrant. Previously Filed.
23.1 Consent of Smythe Ratcliffe, Chartered Accountants. Previously
filed.
23.2 Consent of Smith McCullough, P.C. (included in Exhibit 5.1).*
24.1 Power of Attorney. Included as part of signature page.
27.1 Financial Data Schedule. Filed herewith.
27.2 Financial Data Schedule. Filed herewith.
______________________
(1) Incorporated by reference from Registration Statement on Form S-4, File No.
333-6099, effective August 7, 1996.
(2) Incorporated by reference to the Company's Form 8-K dated November 16,
1995.
(3) Incorporated by reference from the Company's Registration Statement on Form
S-8, File No. 333-41443.
(4) Incorporated by reference from the Company's Registration Statement on Form
S-8, File No. 333-50763.
(5) Incorporated by reference from the Company's Registration Statement on Form
S-8, File No. 333-56275.
*To be filed by amendment.
II-8
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<PAGE>
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<S> <C>
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<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 75,043
<SECURITIES> 0
<RECEIVABLES> 608,272
<ALLOWANCES> 0
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<CURRENT-ASSETS> 699,515
<PP&E> 6,823,810
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0
0
<COMMON> 24,814,536
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,050,566)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> APR-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 491,418
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<PP&E> 6,798,354
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<CURRENT-LIABILITIES> 1,214,010
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0
0
<COMMON> 24,059,971
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,118,851
<SALES> 0
<TOTAL-REVENUES> 2,267,452
<CGS> 0
<TOTAL-COSTS> 1,378,367
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 216,217
<INCOME-PRETAX> (2,572,496)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,572,496)
<EPS-BASIC> (.49)
<EPS-DILUTED> (.49)
</TABLE>
