<PAGE>
As filed with the Securities and Exchange Commission on January 13, 2000
Registration Statement No. 333-63289
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3 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.)
</TABLE>
<TABLE>
<S> <C>
10200 Ford Road Robert W. Truxell
Dearborn, Michigan 48126 10200 Ford Road
(313) 582-8866 Dearborn, Michigan 48126
(Address and telephone (313) 582-8866
number of principal (Name, address and telephone
executive offices and number of
address of principal place agent for service)
of business)
</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. [_]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
====================================================================================================================
Title of each class of Amount to Proposed maximum Proposed maximum Amount of
securities to be be registered offering price per aggregate offering registration
registered /(1)/ share/(2)/ price/(2)/ fee/(2)/
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock issuable 960,000 Shares $0.78125 $ 750,000 $ 253
upon exercise of
Warrants
- --------------------------------------------------------------------------------------------------------------------
Common Stock issuable 2,506,938 $0.78125 $1,958,545 $ 662
upon conversion of Shares/(3)/
debentures
- --------------------------------------------------------------------------------------------------------------------
Common Stock 3,300,000 Shares $0.78125 $2,578,125 $ 871
- --------------------------------------------------------------------------------------------------------------------
Total 6,766,938 $0.78125 $5,286,670 $1,786
Shares/(4)/
- --------------------------------------------------------------------------------------------------------------------
</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). $821 of the registration fee was paid as a part of the
registrant's initial filing.
(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 January __, 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.
6,766,938 Shares of Common Stock to be issued to and offered by Selling
Shareholders
An aggregate of 6,766,938 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 December 31, 1999. 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. 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. None of the Shares which may be offered by the Selling
Shareholders are outstanding on the date of this Prospectus, but 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. These 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 December 8, 1999, the closing sale price of the Common Stock
as reported on the Over-The-Counter Bulletin Board was $0.11.
i
<PAGE>
The Securities offered hereby are speculative and involve a high degree of
risk. See "Risk Factors" on pages four through seven 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.
The date of this Prospectus is _________, 2000.
ii
<PAGE>
<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
Shareholders /(1)/ $0.125/(2)/ 6,766,938/(3)/ $845,867.25 $845,867.25
- ------------------------------------------------------------------------------------------------------
</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 January 3, 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; 960,000 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
iii
<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...................................................................... 9
Dividend Policy........................................................................ 10
Management............................................................................. 10
Security Ownership of Certain Beneficial Owners and Management......................... 11
Description of Securities.............................................................. 13
SEC Position on Indemnification........................................................ 14
Certain Relationships and Related Transactions......................................... 15
Description of Business................................................................ 15
Management's Discussion and Analysis of Financial Condition and Results of Operations.. 17
Description of Property................................................................ 21
Market for the Registrant's Common Stock and Related Stockholder Matters............... 23
Executive Compensation................................................................. 24
Legal Matters.......................................................................... 27
Experts................................................................................ 27
Changes in Accountants................................................................. 27
Additional Information................................................................. 27
Index to Consolidated Financial Statements for Rich Coast.............................. F-1
</TABLE>
iv
<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 6,766,938 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 3,466,938 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, as of the date of this
Prospectus, 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 13,381,827 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 October 31, 1999 Rich Coast had an accumulated deficit of
$23,520,165. The Company reported net losses of $694,696 for the six months
ended October 31, 1999, and incurred net losses of $2,592,496 and $1,373,921 for
the fiscal years ended April 30, 1999 and 1998,
2
<PAGE>
respectively. There is no assurance that the Company can generate net income,
increase revenues or successfully expand its operations in the future.
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 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 3,466,938 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 December 31, 1999. 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."
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 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.
4
<PAGE>
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.
Year 2000 Issues.
The Company has assessed its year 2000 readiness for its non-information
technology systems, and believes that these systems will not be significantly
affected by the Year 2000. The Company's business system consists of hand
written manifests that truck drivers bring in with each load of incoming waste.
Those hand written manifests are used to manually prepare invoices and are then
entered in to the Company's computer. The manifest hard copy is filed in
accordance with Michigan's Department of Environmental Quality regulations.
Outside services are employed for administration of payroll, taxes and
insurance. Although the Company has been advised that its computer system will
not be affected by Year 2000, the Company's contingency plan provides that if
its computer is inoperative, the Company would accumulate manifest copies until
an operative computer is available. Then, accumulated manifest would be entered
to maintain an easily accessible file and to facilitate future data analyses.
Although the Company's operations are not dependent on computer software or
automated systems that operate with reference to the date, many of the Company's
customers are Tier I waste disposal companies that remove waste from large waste
generators. If Year 2000 issues would cause a shutdown or delays in operations
of the waste generators, who in turn have contracts with the Tier I disposal
companies, then the Company would likely experience reduced operations (and
revenues) consistent with the slow down in waste delivered to the Company.
Because the Company is dependent on the waste generators and, in turn, delivery
of the waste by the Tier I disposal companies, a substantial reduction in waste
generated would have a material adverse impact on the Company's business,
results of operation, and financial condition. The Company has no contingency
plans should such a substantial slowdown occur.
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
5
<PAGE>
prices of the Warrants are $0.60 per share and $2.50 per share. However, if all
of the Warrants were exercised with cash at the exercise prices of $0.60 and
$2.50 per share, then proceeds of the Offering to the Company would total an
aggregate of $690,000 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 $650,000. Any net proceeds to the Company from the exercise
of outstanding warrants will be used for working capital.
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
Sovereign Partners, LP 835,935 835,935 0
Dominion Capital Fund Ltd. 1,337,149 1,337,149 0
Domain Investments Ltd. 60,000 60,000 0
Frippoma S.A. 2,550,000 2,550,000 0
S.B. Fletcher Consulting, Inc. 300,000 300,000/(5)/ 0
Strauss Holding Limited 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.
6
<PAGE>
/(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.
/(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.
Relationships and Transactions with Certain Selling Shareholders
- ----------------------------------------------------------------
Domain Investments Ltd. acted as placement agent for the Company in
connection with issuance of the Debentures and pursuant to which Domain received
warrants to purchase 60,000 Shares of Common Stock, which Shares are registered
hereby. 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 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
7
<PAGE>
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."
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
8
<PAGE>
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.
LEGAL PROCEEDINGS
Neither the Company nor any of its officers and directors is currently a
party to any material legal proceeding.
9
<PAGE>
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.
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. 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;
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
</TABLE>
10
<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 December 17,
1999 by each Director and each Executive Officer named in the Summary
Compensation Table, and by all Directors and Executive Officers as a group.
Name of Beneficial Owner/name of
Director/Identity of Group Shares Beneficially Owned Percent of Class
-------------------------- ------------------------- ----------------
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)/ 2.0%
Director
Michael Grujicich, 0 0
Treasurer
All directors and executive 2,970,924/(4)/ 23.9%
officers as a group (four persons)
__________________
(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.
(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.
(3) Includes currently exercisable options to purchase 100,000 shares at $0.125
per share.
(4) Includes securities reflected in footnotes 1-3.
11
<PAGE>
To the knowledge of the Directors and Senior Officers of the Company, as of
December 1, 1999, 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:
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
---------------- -------------------- ----------------
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
______________
(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 $1.00 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.
(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.
(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, there are no arrangements or agreements which could in
the future result in a change of control of the Company.
12
<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 December 31, 1999 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.
13
<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.
14
<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.
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).
The Company's principal operations are conducted through its wholly owned
subsidiary, Rich Coast Resources, Inc. ("RCRI"), a Michigan corporation.
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"). 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. 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 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 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
15
<PAGE>
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 chemically enhanced air sparged
hydrocyclone 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 started in early October.
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 by calendar year end.
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.
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 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
16
<PAGE>
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.
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.
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.
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.
Results of Operation
- --------------------
Six Months Ended October 31, 1999 Compared to Six Months Ended October 31, 1998
Revenues for the six month period ended October 31, 1999 increased
$178,992, or 16%, from $1,319,020 to $1,140,028 for the six month period ended
October 31, 1998. The increase resulted from slightly increased prices and
diversion of business from the area's largest waste disposal company which was
shut down in October 1999 for violation of environmental regulations. That shut
down was still in effect as of December 1, 1999. Rich Coast expects to retain a
substantial portion of the diverted business. Rich Coast's owned and operated
waste treatment system installed at Murco, Inc., a slaughterhouse operation in
Plainwell, Michigan that is owned by Packerland Packing, operated successfully
when placed in the production process in early October 1999. This Rich Coast
system was temporarily shut down later in the month to improve its efficiency by
modifying some upstream waste treatment systems owned by Murco. Modifications
will be paid for by Murco and are expected to be completed to allow the Rich
Coast system to resume operation
17
<PAGE>
by Spring 2000. Rich Coast continues to refocus its business on installation of
proprietary Rich Cost waste treatment systems at slaughterhouse and pulp-paper
company locations and away from processing at Rich Coast facilities.
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.
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 by March 5, 2000. The Ford Road operations
will continue at its current pace until closing on the property, at which time
all operations will be transferred to the Wyoming Road facility.
Cost of sales decreased $24,030, or 4%, from $627,921 during the six month
period ended October 31, 1998 to $603,891 for the six month period ended October
31, 1999. This decrease is due to reduced landfill and transportation costs. The
changes in sales and cost of sales resulted in an increase in gross profit of
$203,022, or 40%, from $512,107 for the six months ended October 31, 1998 to
$715,129 for the corresponding period in 1999. Gross profit as a percent of
sales increased from 45% in 1998 to 54% in 1999.
Interest expense consists of the amortization of beneficial conversion
features of convertible debt instruments and other interest. The beneficial
conversion features relate to the 10% convertible promissory notes (converted to
common stock during the year ended April 30, 1999) and the 8% convertible
debentures ($1,445,500 outstanding principal at October 31, 1999) 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
$655,307 for the six month period ended October 31, 1998 to $0 for the six month
period ended October 31, 1999. Other interest expense decreased $56,715, or 30%,
from $193,304 in 1998 to $136,589 in 1999. This decrease was due to interest
paid on convertible debt ($697,000 principal outstanding) during the six month
period ended October 31, 1998. These debentures converted to common stock in
December 1998, so no similar interest expense was necessary in 1999.
Salaries and wages increased $55,336, or 12%, from $471,251 during the six
months ended October 31, 1998 to $526,587 during the six months ended October
31, 1999. This increase was due to a larger number of employees.
During the six months ended October 31, 1999, 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 $128,815, or 78%, from
$164,228 during the six months ended October 31, 1998 to $35,413 during the six
months ended October 31, 1999. This decrease was due to replacement of
consultants with salaried employees.
18
<PAGE>
Audit, accounting and legal expenses decreased $49,792, or 43%, from
$114,523 during the six months ended October 31, 1998 to $64,731 during the six
months ended October 31, 1999. This decrease was due to reduced legal expenses.
Travel expenses decreased $58,598, or 64%, from $91,537 during the six
months ended October 31, 1998 to $32,939 during the six months ended October 31,
1999. This decrease was due to a stringent cost reduction production.
During the six months ended October 31, 1999, the Company incurred $16,905
of pipeline relocation cost due to the pipeline's interference with a county
project.
Property taxes increased $34,577, or 57%, from $61,100 during the six
months ended October 31, 1998 to $95,677 during the six months ended October 31,
1999. This increase was due to a one time settlement of property tax penalty
and interest charges.
Advertising and shareholder relations expenses decreased $95,609, or 98%,
from $97,147 during the six months ended October 31, 1998 to $1,538 during the
six months ended October 31, 1999. This decrease was due to termination of
contracts with new business developments and a corresponding decrease in warrant
expenses.
Depreciation expense increased $75,690, or 55%, from $137,465 during the
six months ended October 31, 1998 to $213,155 during the six months ended
October 31, 1999. This decrease was due to purchase and installation of a new
aeration waste treatment system at the Company's Wyoming Avenue terminal
facility.
During the six months ended October 31, 1998, 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 and waste treatment
cost reversal related to savings from an improved waste oil treatment process.
Net loss for the six months ended October 31, 1999 was $864,435 compared to
a net loss of $1,269,541 for the six months ended October 31, 1998, a decrease
of $405,106, or 32%. Loss per share decreased $0.13, or 48%, from $0.27 per
share for the six month period ended October 31, 1998 to $0.14 per share for the
same period in 1999. Loss per share was also impacted by an increase in the
weighted average number of shares of 1,545,370 shares arising from 250,000
shares issued in the settlement of a lawsuit and 298,571 shares issued upon
conversion of debt to equity.
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
19
<PAGE>
away from small waste treatment, storage and disposal facilities such as the two
facilities owned and operated by Rich Coast, Inc.
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. 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.
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.
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. 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.
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 to a
change in the accounting estimate used for bad debts.
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.
Amortization of Deferred Financing Costs increased $59,593 or 338%, from
$17,646 to $77,239 for the fiscal years ended April 30, 1998 and 1999,
respectively. This increase is mostly due to the conversion of the earliest
convertible debenture ($697,000) and the addition of the latest convertible
debenture ($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.
20
<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 plant. 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.
Until the transition in business is completed, the Company expects to
continue to incur net losses and to require financing of operating cash needs.
In order to finance cash needs for operations and capital expenditures, the
Company will rely on equity financing. In addition to the Company's reliance on
additional equity financing, 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 additional equity
financing, is expected to offset losses until profitability is attained.
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.
21
<PAGE>
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 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.
22
<PAGE>
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 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 December 17, 1999, was
$0.125/share.
Holders
- -------
As of December 31, 1999, there were approximately 1,346 holders of the
Company's Common Stock, and the number of shares issued and outstanding was
9,914,889.
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.
23
<PAGE>
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 $100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
FISCAL YEAR COMPENSATION LONG TERM COMPENSATION
Awards Payouts
------ -------
Restricted
Shares
Securities/(1)/ or All other
Name and Other Annual under Restricted LTIP Compen-
Principal Salary Bonus Compen- Option/SARs Share Payouts sation
Position Year ($) ($) sation Granted Units ($) ($)
-------- ---- --- --- ------ ------- ----- --- ---
<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 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 $150,000 per year.
24
<PAGE>
Option/Stock Appreciation Rights ("SAR") Grants during the most recently
- ------------------------------------------------------------------------
completed Fiscal Year
- ---------------------
The following table sets out the stock options granted by the Company
during the previous fiscal year to the Named Executive Officers of the Company.
The following amounts include options that were granted prior to the previous
fiscal year but were repriced during that year.
OPTION/SAR GRANTS IN PREVIOUS YEAR
INDIVIDUAL GAINS
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Market Price on
Name Granted (#) Fiscal Year Price ($/Sh) Date of Grant Expiration Date
- ---- ------------ ----------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
Robert W. Truxell 258,087 16.45% $0.80 $1.00 07/30/07
Robert W. Truxell 140,775 8.97% .80 1.00 07/30/02
Robert W. Truxell 100,000 6.37% 1.00 1.25 01/15/06
Robert W. Truxell 25,000 1.59% 1.00 1.25 05/09/06
Robert W. Truxell 48,675 3.10% .80 1.00 07/20/07
Robert W. Truxell 50,000 3.19% .72 .90 07/30/07
Robert W. Truxell 58,125 3.70% .80 1.00 07/20/07
Robert W. Truxell 75,000 4.78% .72 .90 09/08/07
James P. Fagan 129,041 8.22% 1.00 1.00 07/30/07
James P. Fagan 70,386 4.48% .80 1.00 07/30/02
James P. Fagan 100,000 6.37% 1.00 1.00 01/15/06
James P. Fagan 25,000 1.59% 1.00 1.00 05/09/06
James P. Fagan 58,125 3.70% 1.00 1.00 07/20/97
James P. Fagan 125,000 7.96% .88 .88 09/08/07
James P. Fagan 48,675 3.10% 1.00 1.00 07/20/07
</TABLE>
____________________
No stock shares or options were granted to the foregoing named executives
during this fiscal year ended 4/30/99.
25
<PAGE>
Aggregated Option/SAR Exercised in Last Financial Year and Fiscal Year-End
- --------------------------------------------------------------------------
Option/SAR Values
- -----------------
The following table sets out all Option/SAR exercised by the Named
Executive Officers during the most recently completed fiscal year and the
Option/SAR values for such persons as of the end of the most recently completed
fiscal year.
Aggregated Option/SAR Exercised in Last Fiscal Year and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of
Unexercised Unexercised
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
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.
26
<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 six months ended October 31, 1999 and 1998, 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.
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
27
<PAGE>
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.
28
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR RICH COAST INC.
<TABLE>
<CAPTION>
Page
- ----
<S> <C>
Unaudited Statements--For the six months ended October 31, 1999 and 1998...................... F-1
Report of Independent Auditors................................................................ F-5
Consolidated Balance Sheet--April 30, 1998 and 1999........................................... F-6
Consolidated Statements of Operations--For the years ended April 30, 1998 and 1999............ F-7
Consolidated Statements of Stockholders' Equity--For the years ended April 30, 1998 and 1999.. F-8
Consolidated Statements of Cash Flows--For the years ended April 30, 1998 and 1999............ F-9
Notes to Consolidated Financial Statements.................................................... F-10
</TABLE>
29
<PAGE>
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RICH COAST, INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999
(UNAUDITED-SEE NOTICE TO READER)
RICH COAST, INC.
CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999
(UNAUDITED - PREPARED BY MANAGEMENT)
(UNITED STATES DOLLARS)
INDEX
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 1
Consolidated Statements of Operations 2
Consolidated Statements of Cash Flows 3
Notes to Consolidated Financial Statements 4
<PAGE>
Rich Coast Inc.
Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(United States Dollars)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
October 31 April 30
1999 1999
- ----------------------------------------------------------------------------
<S> <C> <C>
Assets
Current
Cash $ 28,538 $ 0
Accounts Receivable, net 662,753 491,418
Prepaid expenses 1,200 0
- ----------------------------------------------------------------------------
692,491 491,418
Distillation Unit 2,024,706 2,024,706
Property and Equipment, net 2,996,140 3,354,493
Patent and Technology, net 20,031 21,914
Deferred Finance Charges and Deposits 185,089 226,320
- ----------------------------------------------------------------------------
$ 5,918,457 $ 6,118,851
============================================================================
Liabilities
Current
Bank Overdraft $ 0 $ 5,682
Accounts payable and accrued liabilities 1,470,936 849,960
Accrued oil and waste treatment costs 246,031 257,635
Current portion of long-term debt 150,585 100,733
- ----------------------------------------------------------------------------
1,867,552 1,214,010
Long-Term Debt 3,571,273 3,670,339
- ----------------------------------------------------------------------------
5,438,825 4,884,349
Stockholders' Equity
Common stock, $0.001 par value;
100,000,000 shares authorized,
6,614,889 and 6,066,318 shares issued
and outstanding at October 31, 1999
and April 30, 1999, respectively 17,414 16,865
Additional paid-in capital 24,152,122 24,043,106
Accumulated deficit (23,689,904) (22,825,469)
- ----------------------------------------------------------------------------
479,632 1,234,502
- ----------------------------------------------------------------------------
$ 5,918,457 $ 6,118,851
============================================================================
</TABLE>
See notes to consolidated financial statements
1
<PAGE>
RICH COAST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED - PREPARED BY MANAGEMENT)
(UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Three Months Six Months
Ended October 31, Ended October 31,
1999 1998 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 715,371 $ 534,537 $ 1,319,020 $ 1,140,028
Cost of Sales
(exclusive of
depreciation) 335,931 315,341 603,891 627,921
- -------------------------------------------------------------------------------
Gross Profit 379,440 219,196 715,129 512,107
Expenses
Interest-beneficial
conversion feature 0 77,654 0 655,307
Salaries and wages 245,699 234,236 526,587 471,251
Interest 81,899 88,612 136,589 193,304
Lawsuit Settlement 100,000 0 150,000 0
Office and General 31,278 20,957 31,411 55,658
Consulting and
financing fee 20,380 20,258 35,413 164,228
Audit, accounting
and legal 21,264 63,829 64,731 114,523
Travel 12,077 39,319 32,939 91,537
Pipeline Staking fee 0 0 16,905 0
Property Taxes 26,250 19,137 95,677 61,100
Insurance 15,826 18,035 28,818 48,663
Utilities 19,374 19,026 46,114 37,669
Telephone and
facsimile 7,961 18,979 20,007 28,727
Advertising and
shareholder relations 1,538 92,378 1,538 97,147
Impairment loss on building 169,739 0 169,739 0
Bad Debts 8,756 0 9,941 0
Depreciation 113,834 68,487 213,155 137,465
- -------------------------------------------------------------------------------
875,875 780,907 1,579,564 2,156,579
- -------------------------------------------------------------------------------
Loss Before
Other Items (496,435) (561,711) (864,435) (1,644,472)
Gain on fire 0 89,343 0 89,343
Accrued oil and
waste treatment cost
reversal 0 285,588 0 285,588
- -------------------------------------------------------------------------------
0 374,931 0 374,931
- -------------------------------------------------------------------------------
Loss for Period $ (496,435) $ (186,780) $ (864,435) $ (1,269,541)
===============================================================================
Loss Per Share $ (0.08) $ (0.04) $ (0.14) $ (0.27)
===============================================================================
Weighted Average
Number of Shares
Outstanding 6,442,886 4,891,791 6,337,482 4,792,112
===============================================================================
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
RICH COAST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - PREPARED BY MANAGEMENT)
(UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Six Months
Ended October 31,
1999 1998
- ------------------------------------------------------------
<S> <C> <C>
Net Cash Provided by (used in)
Operating Activities $ 56,876 $ (396,705)
Investing Activities
Capital asset additions (22,656) (744,324)
Deferred finance charge 0 (184,629)
- ------------------------------------------------------------
(22,656) (928,953)
Financing Activities
Decrease in bank overdraft (5,682) 0
Issue of Capital stock for cash 0 156,729
Proceeds from Convertible
Debenture 0 1,500,000
Repayment of long-term debt 0 (83,332)
- ------------------------------------------------------------
5,682 1,573,397
- ------------------------------------------------------------
Increase (Decrease) in Cash 28,538 247,739
Cash, (Bank Overdraft)
Beginning of Period 0 53,043
- ------------------------------------------------------------
Cash, End of Period $ 28,538 $ 300,782
============================================================
</TABLE>
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
==========
33,349 shares of common stock
issued in exchange of accrued
interest $ 42,176
==========
See notes to consolidated financial statements
3
<PAGE>
RICH COAST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 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 October 31, 1999 and the consolidated results of operations and the
consolidated statement of cash flows for the three and six months ended
October 31, 1999 and October 31, 1998.
2. CAPITAL STOCK
(a) Authorized 100,000,000 common shares of $0.001 par value
(b) Issued during the period:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
NUMBER PRICE PER
OF SHARES SHARE($) AMOUNT
---------------------------------------------------------------------
<S> <C> <C> <C>
Six months ended OCTOBER 31, 1998
Shares issued
For cash - options 167,750 $ 0.86 $144,755
Interest on notes 33,349 $ 1.27 42,176
---------------------------------------------------------------------
201,099 $186,931
=====================================================================
Six months ended October 31, 1999
Shares issued
Lawsuit settlement 250,000 $ 0.20 $ 50,000
Convertible Debenture 298,571 $0.1995 59,565
(principal and
accrued interest)
----------------------------------------------------------------------
548,571 109,565
======================================================================
</TABLE>
4
<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
1
<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.
2
<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.
3
<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.
4
<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>
5
See notes to consolidated financial statements.
<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.
6
<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.
7
<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.
8
<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
=================================================================
9
<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>
10
<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
=========================================================
11
<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.
12
<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>
13
<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>
14
<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.
<PAGE>
- --------------------------------------------------------------------------------
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.
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.
RICH COAST, INC.
____________ SHARES OF COMMON STOCK
----------
PROSPECTUS
----------
______________, 2000
<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.
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
==========
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 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 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
II-2
<PAGE>
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. Filed herewith.
3.2 Bylaws. Previously filed.
5.1 Opinion of Smith McCullough, P.C. on legality.*
10.1 Contract for Sale of Ford Road property. Filed herewith.
II-3
<PAGE>
Exhibit No. Description and Method of Filing
----------- --------------------------------
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. Filed herewith.
21.1 Subsidiaries of the Registrant. Previously Filed.
23.1 Consent of Smythe Ratcliffe, Chartered Accountants. Filed
herewith.
23.2 Consent of Smith McCullough, P.C. (included in Exhibit 5.1).*
24.1 Power of Attorney. Filed herewith.
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.
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:
II-4
<PAGE>
(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 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
II-5
<PAGE>
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. 3 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 January 12, 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. 3 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 January 12, 2000
- ------------------------------ and Secretary
Robert W. Truxell
/s/ James P. Fagan President, Chief Executive Officer January 12, 2000
- ------------------------------ and Director
James P. Fagan
/s/ George P. Nassos Director January 12, 2000
- ------------------------------
George P. Nassos
/s/ Michael Grujicich Chief Financial and Accounting January 12, 2000
- ------------------------------ Officer and Treasurer
Michael Grujicich
</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. Filed herewith.
3.2 Bylaws. Previously filed.
5.1 Opinion of Smith McCullough, P.C. on legality.*
10.1 Contract for Sale of Ford Road property. Filed herewith.
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. Filed herewith.
21.1 Subsidiaries of the Registrant. Previously Filed.
23.1 Consent of Smythe Ratcliffe, Chartered Accountants. Filed
herewith.
23.2 Consent of Smith McCullough, P.C. (included in Exhibit 5.1).*
24.1 Power of Attorney. Filed herewith.
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
<PAGE>
Exhibit 3.1.2
CERTIFICATE OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION OF
RICH COAST INC.
Pursuant to the provisions of the Nevada General Corporation Law, the
undersigned corporation adopts the following Certificate of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is RICH COAST INC.
SECOND: The current number of authorized shares of the Corporation is
100,000,000, of all of which are shares of common stock ("Common Stock") having
a par value of $.001 per share.
THIRD: A meeting of the shareholders of the Corporation was held on May
26, 1999, pursuant to (S)78.390 of the General Corporation Law of Nevada, on
which date a majority of the shareholders voted to approve the authorization of
10,000,000 shares of $.001 par value of preferred stock ("Preferred Stock"). The
approval was pursuant to a favorable vote from 50.12% of the outstanding shares
of Common Stock.
FOURTH: Following the effective date of this Certificate of Amendment,
there will be 100,000,000 shares of authorized Common Stock having a par value
of $.001 per share and 10,000,000 shares of authorized preferred stock having a
par value of $.001 for a total of 110,000,000 authorized shares.
FIFTH: The addition of the class of Preferred Stock will be effective
upon the filing of this Certificate of Amendment to the Articles of
Incorporation.
________________________
I. ARTICLE II of the Articles of Incorporation of the Corporation is
hereby deleted in its entirety with the following substituted in its place:
ARTICLE II
CAPITAL
The aggregate number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 110,000,000, of which 10,000,000
shares shall be shares of preferred stock, par value of $.001 per share
("Preferred Stock"), and 100,000,000 shares shall be shares of common stock, par
value of $.001 per share ("Common Stock").
<PAGE>
Preferred Stock. The designations, preferences, limitations, restrictions,
---------------
and relative rights of the Preferred Stock, and variations in the relative
rights and preferences as between different series shall be established in
accordance with the General Corporation Law of Nevada and by the board of
directors of the Corporation ("Board of Directors").
Common Stock. The aggregate number of shares of capital stock which the
------------
corporation shall have authority to issue is 100,000,000. The par vale of each
of such shares is $0.001.
Any stock of the Corporation may be issued for money, property, services
rendered, labor done, cash advances for the Corporation, or for any other assets
of value in accordance with the action of the Board of Directors, whose judgment
as to value received in return therefor shall be conclusive and said stock when
issued shall be fully paid and nonassessable.
________________________
<PAGE>
Dated this 5/th/ day of January, 2000.
RICH COAST, INC.
By: /s/ James P. Fagan
------------------------------------
James P. Fagan, President
STATE OF MICHIGAN )
)ss
COUNTY OF ____________ )
The foregoing instrument was sworn to me this 5/th/ day of January, 2000 by
James P. Fagan, President of Rich Coast, Inc.
Witness by hand and official seal.
My commission expires:________________________
/s/ Signature
-----------------------------------------
Notary Public
By: /s/ Robert W. Truxell
-------------------------------------
Robert W. Truxell, Secretary
STATE OF MICHIGAN )
)ss
COUNTY OF ____________ )
The foregoing instrument was sworn to me this 5th day of January, 2000 by
Robert W. Truxell, Secretary of Rich Coast, Inc.
Witness by hand and official seal.
My commission expires:________________________
/s/ Signature
-----------------------------------------
Notary Public
<PAGE>
EXHIBIT 10.1
A G R E E M E N T O F S A L E
The undersigned, hereinafter designated as the Purchaser, hereby offers and
agrees to purchase land and premises situated in the City of Dearborn, County of
Wayne, State of Michigan described as follows: Full legal description to be
furnished by Seller at time of delivery of title commitment: more commonly known
as: 10200 Ford Road.
Together with all improvements and appurtenances, if any; and to pay therefore
the sum of:
FOUR HUNDRED FIFTY THOUSAND AND 00/100 ($450,000.00) DOLLARS
THIS SALE IS TO BE CONSUMMATED BY NEW MORTGAGE:
-----------------------------------------------
1. The delivery of the usual Warranty Deed conveying a marketable title,
subject to Purchaser's ability to obtain an acceptable mortgage from a financial
institution of Purchaser's choice. Additionally, delivery of a Bill of Sale and
any other conveyancing documents with respect to systems in place as of August
30, 1999, as shown in Exhibit I.
COMMITMENT FOR TITLE POLICY:
----------------------------
2. The Seller shall deliver to the Purchaser as soon as the contingency
period expires, a complete commitment for a policy of title insurance issued by
Land America-National Division, Troy, Michigan for an amount not less than the
purchase price hereunder, guaranteeing title in the condition required herein,
without standard exceptions and with such endorsements as may be required by
Purchaser's lending institution.
TIME OF CLOSING - PURCHASER'S DEFAULT:
--------------------------------------
3. If this Offer is accepted by the Seller, and if title can be conveyed
in the condition required hereunder, the Purchaser agrees to complete the sale
within thirty (30) days after waiver or completion of all contingencies. In the
event of default by the Purchaser hereunder, the Seller may, as his sole remedy,
declare a forfeiture hereunder and retain the deposit as liquidated damages.
TITLE OBJECTIONS - SELLER'S DEFAULT:
------------------------------------
4. If objection to the title is made, based upon a written opinion of
Purchaser's attorney that the title is not in the condition as required for
performance hereunder, the Seller shall have thirty (30) days from the date he
is notified in writing of the particular defects claimed, to either (1) remedy
the title; (2) obtain title insurance as required above; or (3) refund the
deposit in full termination of this Agreement if unable to remedy the tile or
obtain title insurance. If the Seller remedies the title or shall obtain such
title policy within the time specified, the Purchaser agrees to complete the
sale within ten (10) days of written notification thereof. If the Seller fails
to remedy the title or obtain such title insurance or to give the Purchaser the
above written notification within said thirty (30) days, the deposit shall be
refunded forthwith in full termination of this Agreement.
<PAGE>
POSSESSION:
-----------
5. The Seller shall deliver and the Purchaser shall accept possession of
said property at the time of closing, subject to the right of tenants as
follows: No tenants unless mutually agreed to by Seller.
OWNER OCCUPIED:
---------------
6. If the Seller occupies the property or any part thereof, it shall be
vacated on or before date of closing unless mutually agreed upon by Purchaser
and Seller, and deliver the premises in the condition required herein, with
Seller to properly remove and dispose of all equipment, stocks, scrap, debris,
etc.
ENCUMBRANCE REMOVAL:
--------------------
7. Any existing encumbrances upon the premises which the Seller is
required to remove under this Offer may be paid and discharged with the purchase
money at the time of the consummation of the sale, or if the Purchaser elects,
assumed with abatement of the purchase price.
TAXES; PRORATED ITEMS:
----------------------
8. All taxes and assessments which have become a lien upon the land at
the date of this agreement shall be paid by the Seller except current taxes, if
any, shall be prorated and adjusted as of the date of closing. Taxes shall be
prorated on a due-date basis.
BROKER'S AUTHORIZATION:
-----------------------
9. The undersigned broker is hereby authorized to present this Offer to
the Seller and retain the deposit under the provisions of the statutes of the
State of Michigan. The deposit money in the amount of Ten Thousand and 00/100
($10,000.00) Dollars, and shall be credited upon the purchase price if the sale
is completed.
ACCEPTANCE TIME:
----------------
10. In consideration of the Broker's assistance to the Purchaser in the
preparation of this Offer and of his presentation thereof for the Seller's
acceptance, the Purchaser agrees that this Offer is irrevocable for five (5)
days from the date hereof, and if it is not accepted by the Seller within that
time, the deposit shall be returned forthwith to the Purchaser.
CLOSING PLACE:
--------------
11. The closing of this sale shall take place at the office of the
undersigned broker, or at a mutually acceptable location.
2
<PAGE>
NOTICES:
--------
12. All notices, deliveries or tenders given or made in connection
herewith shall be deemed completed and legally sufficient, if mailed or
delivered to the respective party for whom the same is intended at his address
herein set forth.
13. Payment of the purchase money shall be made at closing in cash or
certified check.
14. The pronouns and relative words herein used are written in the
masculine and singular only. If more than one join in the execution hereof as
Seller or Purchaser, or either be of the feminine sex or a corporation, such
words shall be read as if written in plural, feminine or neuter, respectively.
The covenants herein shall bind the heirs, personal representative,
administrators, executors, assigns and successors of the respective parties.
ADDITIONAL CONDITIONS:
----------------------
15. Purchaser shall have one hundred eighty (180) days after receipt of
fully accepted Offer (the "contingency period") to inspect and obtain the
following items, at Purchaser's sole and absolute discretion:
a. An acceptable mortgage commitment from a financial institution of
Purchaser's choice.
b. Purchaser's physical inspection and satisfaction in its sole
discretion of all aspects of the Property.
c. Purchaser's satisfaction with the results of an Environmental
investigation of the Property. Seller will reimburse Purchaser
for fifty percent (50%) of the cost to obtain a Baseline
Environmental Assessment (BEA) approved by the MDEQ and
satisfying Purchaser's "due care" obligations. The BEA contract
and the consulting firm must be approved by both parties to this
agreement.
d. Purchaser's satisfaction that the governing municipalities will
allow the property to be used for Purchaser's intended use.
e. Purchaser accepts the building and property "as is," except that
Seller agrees to:
i) Property backfill and install satisfactory concrete surface
over pit;
ii) Power wash and otherwise clean all floors, walls, blacktop
and pads to standards recommended by the environmental
consultant providing the BEA;
3
<PAGE>
iii) Repair office air conditioning systems; and
iv) Remove all tanks, equipment, tools, furniture, scrap and
debris, etc. from the premises except for the Clever-Brooks
Boiler, in conformance with applicable environmental
regulations, and except for items listed in Exhibit I.
f. Purchaser's receipt of all necessary Certificates of Occupancy
for its intended use.
If Purchaser is unable to satisfy himself of the contingencies, at Purchaser's
sole discretion outlined in Subparagraphs (a) thru (f) inclusive, he shall
notify Seller in writing within the time limits set forth and this Purchase
Agreement shall be terminated and no longer in effect, all deposit monies shall
be refunded to the Purchaser forthwith, and the parties hereto shall have no
further obligation or liabilities to the other.
16. Seller represents and warrants that there are no pending or existing
lawsuits other than disclosed in Section 27 of this Agreement and is not aware
of any lawsuits or litigation covering the subject property and further holds
Purchaser harmless from the same.
17. Seller to supply, at his sole cost and expense, an ALTA survey of the
subject property showing all easements and structures of the subject property,
as certified to Purchaser, its lending institution and the title company. Said
survey to be delivered to purchaser no later than forty-five (45) days prior to
closing.
"SUPERFUND" ACT:
----------------
18. To the best of Seller's knowledge, no adverse environmental conditions
exist except with respect to items delineated in the Environmental Consulting &
Technology, Inc. environmental report issued as of May 3, 1993. Seller agrees
to indemnify and hold Purchaser harmless of, from and against any and all loss,
liabilities, costs, damage or expense, including reasonable attorney's fees,
resulting from a breach of any warranty or misrepresentation under this Section
18, which indemnity shall survive the closing of this Agreement.
It is further understood and agreed that Signature Associates has made no
representation as to any hazardous and/or toxic waste issues, and both parties
hereby release Signature Associates from any liability.
REPRESENTATION:
---------------
19. Seller warrants and represents that it has the authority to accept
this Agreement of Sale and that it now holds the title to the property to be
conveyed.
ADDITIONAL DOCUMENTS:
---------------------
4
<PAGE>
20. Each party agrees to execute any additional documents reasonably
requested by the other to carry out the intent of this Agreement.
HOLD HARMLESS AND INDEMNIFICATION:
----------------------------------
21. The Purchaser agrees to indemnify and hold Seller harmless from any
claims, suits, damages, costs, losses and any expense resulting from and out of
Purchaser's or its officers, directors, agents and/or employees occupancy,
possession, use and ownership of the property herein during the time the
Purchase Agreement is in existence. The Seller agrees to indemnify and hold
Purchaser harmless from any claims, suits, damages, costs, losses and any
expenses resulting from and arising from and out of the negligence of its
officers, directors, agents and/or employees during the time the Purchase
Agreement is in existence due to negligence of its officers, directors, agents
and/or employees.
SURVIVAL OF REPRESENTATION AND WARRANTIES:
------------------------------------------
22. The representations and warranties as set forth in this Agreement
shall be continuing and survive the Closing.
DATE OF THIS AGREEMENT:
-----------------------
23. For purposes of the transaction contemplated by this Agreement, the
"Date of this Agreement" is the date of acknowledgment of the signature of the
last party to sign this Agreement.
HEADINGS:
---------
24. The headings of this Agreement are for purposes of reference only and
shall not limit or define the meaning of the provisions of this Agreement.
SATURDAYS, SUNDAYS AND HOLIDAYS:
--------------------------------
25. Whenever in this Agreement it is provided that notice must be given or
an act performed or payment made on a certain date, and if such date falls on a
Saturday, Sunday or holiday, the date of the notice of performance or payment
shall be the next following business day.
WAIVER:
-------
26. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions, whether or not similar,
nor shall any waiver be a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
5
<PAGE>
NO ADVERSE INFORMATION:
-----------------------
27. Seller shall provide summaries of judicial proceedings to Purchaser
within ten (10) days of the date of the Purchase Agreement and Seller shall pay
all sums due and obtain all appropriate discharges at/or prior to closing.
EMINENT DOMAIN:
---------------
28. If before closing all or any part of the real estate is taken by
eminent domain, Purchaser may terminate this Agreement. If Purchaser terminates,
neither Seller nor Purchaser shall have any further obligation to the other and
the earnest money deposit will be promptly returned to Purchaser. If Purchaser
does not terminate, this Agreement will remain in effect and Seller will assign
to Purchaser all of Seller's rights to received any awards that may be made for
such taking.
COOPERATION:
------------
29. The parties hereto agree to cooperate with each other in every
reasonable way in carrying out the transaction contemplated hereby, in obtaining
and delivering all required closing documents.
RISK:
-----
30. All risk of loss or damage to the property shall be upon Seller until
closing is made therefore.
ACCESS:
-------
31. Seller represents and warrants that there exists access to the
Premises for vehicular and pedestrian ingress and egress from public roads and
there does not exist any fact or condition which would result in the termination
or impairment of that access.
32. This offer to Purchase has been prepared for submission to your
attorneys for approval. No representation or recommendation is made by Signature
Associates as to the legal sufficiency, legal effect or tax consequences of this
Offer to Purchase or the transaction relating thereto; the parties shall rely
solely upon the advice of their own legal counsel as to the legal and tax
consequences of this Offer to Purchase. All Purchasers of real estate should
have their title examined by an attorney.
33. The Purchaser and Seller agree that the Broker and/or Real Estate
Agent has fully disclosed any knowledge that he has or should have concerning
possible toxic and hazardous material or substance on or about the subject
property, and the purchaser acknowledges that he has made a competent inspection
of the property or that he has been given the opportunity to make a competent
inspection, and the Purchaser and Seller do hereby release the Broker and/or
Real Estate Agent from any liability concerning toxic and hazardous material or
substance on
6
<PAGE>
said subject property. The Purchaser and Seller, each hereby expressly waive any
claim whatsoever against the Broker and/or Real Estate Agent before or after the
closing of this transaction arising out of or in connection with any of the
foregoing.
IN THE PRESENCE OF: PURCHASER: DEMONTE FABRICATING, LTD.
________________________ By: /s/ Walter P. DeMonte
-------------------------
Walter P. DeMonte
________________________ Its: President
-------------------------
Date: 9/7/99 Address: 4975 8 Concession Road, RR# Maidstone, Ontario, N0R 1K0,
------ --------------------------------------------------------
Canada
- ------
BROKER'S ACKNOWLEDGMENT OF DEPOSIT:
-----------------------------------
Received from the above named Purchaser the deposit money above mentioned which
will be returned forthwith if the foregoing Offer is not accepted within the
time above set forth.
Signature Associates, Inc., One Towne Square, Suite 1209, Southfield, Michigan
48076 (248) 948-9000
By: /s/ Brad M. Viergever
---------------------
Brad M. Viergever
Its: Associate Broker
----------------
7
<PAGE>
ACCEPTANCE OF OFFER:
--------------------
TO THE ABOVE NAMED PURCHASER AND BROKER
The foregoing Offer is hereby accepted and the Seller agrees to sell said
premises upon the terms stated.
The Seller hereby agrees to pay the Broker for services rendered and for value
received a commission of six (6%) percent of the sale price, which shall be due
and payable upon the consummation of the sale. If the sale is unconsummated, as
a result of Seller's or Purchaser's failure, inability or refusal to perform the
conditions of this Offer, and the deposit is forfeited to the Seller under the
terms of said offer, the Seller agrees that one-half of such deposit (but not in
excess of the amount of the full commission) shall be paid to or retained by the
Broker in full payment for services rendered.
By the execution of this instrument, the Seller acknowledges the receipt of a
copy of this Agreement.
IN THE PRESENCE OF: SELLER:
By: /s/ Robert W. Truxell
__________________________ -------------------------
Robert W. Truxell
__________________________ Its: Chairman
-------------------------
Date: 9/8/99 Address: 10200 Ford Road, Dearborn, Michigan 48126
------- --------------------------------------------
PURCHASER'S RECEIPT OF ACCEPTED OFFER:
--------------------------------------
The Purchaser hereby acknowledges the receipt of the Seller's signed acceptance
of the foregoing Offer to Purchase.
PURCHASER: DEMONTE FABRICATING, LTD.
Date: 9/13/99 By: /s/ Walter P. DeMonte
-------- ------------------------------------
Walter P. DeMonte
8
<PAGE>
EXHIBIT 10.7
RICH COAST INC.
1999 STOCK OPTION PLAN
A. 1. Purposes of and Benefits Under the Plan. This 1999 Stock Option
---------------------------------------
Plan (the "Plan") is intended to encourage stock ownership by employees,
consultants and directors of Rich Coast Inc. and its controlled, affiliated and
subsidiary entities (collectively, the "Corporation"), so that they may acquire
or increase their proprietary interest in the Corporation, and is intended to
facilitate the Corporation's efforts to (i) induce qualified persons to become
employees, officers and directors (whether or not they are employees) and
consultants to the Corporation; (ii) compensate employees, officers, directors
and consultants for services to the Corporation; and (iii) encourage such
persons to remain in the employ of or associated with the Corporation and to put
forth maximum efforts for the success of the Corporation. It is further
intended that options granted by the Committee pursuant to Section 6 of this
Plan shall constitute "incentive stock options" ("Incentive Stock Options")
within the meaning of Section 422 of the Internal Revenue Code, and the
regulations issued thereunder, and options granted by the Committee pursuant to
Section 7 of this Plan shall constitute "non-qualified stock options" ("Non-
qualified Stock Options").
2. Definitions. As used in this Plan, the following words and phrases
-----------
shall have the meanings indicated:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Committee" shall mean any Committee appointed by the Board to
administer this Plan, if one has been appointed. If no Committee has been
appointed, the term "Committee" shall mean the Board.
(c) "Common Stock" shall mean the Corporation's $.001 par value
common stock.
(d) "Disability" shall mean a Recipient's inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or that has lasted or
can be expected to last for a continuous period of not less than 12 months. If
the Recipient has a disability insurance policy, the term "Disability" shall be
as defined therein.
(e) "Fair Market Value" per share as of a particular date shall mean
the last sale price of the Corporation's Common Stock as reported on a national
securities exchange or by NASDAQ, or if the quotation for the last sale reported
is not available for the Corporation's Common Stock, the average of the closing
bid and asked prices of the Corporation's Common Stock as so reported or, if
such quotations are unavailable, the value determined by the Committee in
accordance with its discretion in making a bona fide, good faith determination
of fair market value. Fair Market Value shall be determined without regard to
any restriction other than a restriction which, by its terms, never will lapse.
In the case of Options and Bonuses granted at a time when the Corporation does
not have a registration statement in effect relating to
<PAGE>
the shares issuable hereunder, the value at which the Bonus shares are issued
may be determined by the Committee at a reasonable discount from Fair Market
Value to reflect the restricted nature of the shares to be issued and the
inability of the Recipient to sell those shares promptly.
(f) "Recipient" means any person granted an Option or awarded a Bonus
hereunder.
(g) "Internal Revenue Code" shall mean the United States Internal
Revenue Code of 1986, as amended from time to time (codified as Title 26 of the
United States Code) and any successor legislation.
3. Administration.
--------------
(a) The Plan shall be administered by the Committee. The Committee
shall have the authority in its discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically conferred under the Plan or
necessary or advisable in the administration of the Plan, including the
authority: to grant Options and Bonuses; to determine the vesting schedule and
other restrictions, if any, relating to Options and Bonuses; to determine the
purchase price of the shares of Common Stock covered by each Option (the "Option
Price"); to determine the persons to whom, and the time or times at which,
Options and Bonuses shall be granted; to determine the number of shares to be
covered by each Option or Bonus; to determine Fair Market Value per share; to
interpret the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Option
agreements (which need not be identical) entered into in connection with Options
granted under the Plan; and to make all other determinations deemed necessary or
advisable for the administration of the Plan. The Committee may delegate to one
or more of its members or to one or more agents such administrative duties as it
may deem advisable, and the Committee or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice with respect
to any responsibility the Committee or such person may have under the Plan.
(b) Options and Bonuses granted under the Plan shall be evidenced by
duly adopted resolutions of the Committee included in the minutes of the meeting
at which they are adopted or in a unanimous written consent.
(c) The Committee shall endeavor to administer the Plan and grant
Options and Bonuses hereunder in a manner that is compatible with the
obligations of persons subject to Section 16 of the U.S. Securities Exchange Act
of 1934 (the "1934 Act"), although compliance with Section 16 is the obligation
of the Recipient, not the Corporation. Neither the Committee, the Board nor the
Corporation can assume any legal responsibility for a Recipient's compliance
with his obligations under Section 16 of the 1934 Act.
(d) No member of the Committee or the Board shall be liable for any
action taken or determination made in good faith with respect to the Plan or any
Option or Bonus granted hereunder.
2
<PAGE>
4. Eligibility.
-----------
(a) Subject to certain limitations hereinafter set forth, Options and
Bonuses may be granted to employees (including officers) and consultants to and
directors (whether or not they are employees) of the Corporation or its present
or future divisions, affiliates and subsidiaries. In determining the persons to
whom Options or Bonuses shall be granted and the number of shares to be covered
by each Option or Bonus, the Committee shall take into account the duties of the
respective persons, their present and potential contributions to the success of
the Corporation, and such other factors as the Committee shall deem relevant to
accomplish the purposes of the Plan.
(b) A Recipient shall be eligible to receive more than one grant of
an Option or Bonus during the term of the Plan, on the terms and subject to the
restrictions herein set forth.
5. Stock Reserved.
--------------
(a) The stock subject to Options or Bonuses hereunder shall be shares
of Common Stock. Such shares, in whole or in part, may be authorized but
unissued shares or shares that shall have been or that may be reacquired by the
Corporation. The aggregate number of shares of Common Stock as to which Options
and Bonuses may be granted from time to time under the Plan shall not exceed
2,500,000, subject to adjustment as provided in Section 8(i) hereof.
(b) If any Option outstanding under the Plan for any reason expires
or is terminated without having been exercised in full, or if any Bonus granted
is forfeited because of vesting or other restrictions imposed at the time of
grant, the shares of Common Stock allocable to the unexercised portion of such
Option or the forfeited portion of the Bonus shall become available for
subsequent grants of Options and Bonuses under the Plan.
6. Incentive Stock Options.
-----------------------
(a) Options granted pursuant to this Section 6 are intended to
constitute Incentive Stock Options and shall be subject to the following special
terms and conditions, in addition to the general terms and conditions specified
in Section 8 hereof. Only employees of the Corporation shall be entitled to
receive Incentive Stock Options.
(b) The aggregate Fair Market Value (determined as of the date the
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which Incentive Stock Options granted under this and any other plan of the
Corporation or any parent or subsidiary of the Corporation are exercisable for
the first time by a Recipient during any calendar year may not exceed the amount
set forth in Section 422(d) of the Internal Revenue Code.
(c) Incentive Stock Options granted under this Plan are intended to
satisfy all requirements for incentive stock options under Section 422 of the
Internal Revenue Code and the Treasury Regulations promulgated thereunder and,
notwithstanding any other provision of this Plan, the Plan and all Incentive
Stock Options granted under it shall be so construed, and all
3
<PAGE>
contrary provisions shall be so limited in scope and effect and, to the extent
they cannot be so limited, they shall be void.
7. Non-qualified Stock Options. Options granted pursuant to this Section
---------------------------
7 are intended to constitute Non-qualified Stock Options and shall be subject
only to the general terms and conditions specified in Section 8 hereof.
8. Terms and Conditions of Options. Each Option granted pursuant to the
-------------------------------
Plan shall be evidenced by a written Option agreement between the Corporation
and the Recipient, which agreement shall be substantially in the form of Exhibit
-------
A hereto as modified from time to time by the Committee in its discretion, and
- -
which shall comply with and be subject to the following terms and conditions:
(a) Number of Shares. Each Option agreement shall state the number
----------------
of shares of Common Stock covered by the Option.
(b) Type of Option. Each Option Agreement shall specifically
--------------
identify the portion, if any, of the Option which constitutes an Incentive Stock
Option and the portion, if any, which constitutes a Non-qualified Stock Option.
(c) Option Price. Subject to adjustment as provided in Section 8 (i)
------------
hereof, each Option agreement shall state the Option Price, which shall be
determined by the Committee subject only to the following restrictions:
(1) Each Option Agreement shall state the Option Price, which
(except as otherwise set forth in paragraphs 8(c)(2) and (3) hereof) shall not
be less than 100% of the Fair Market Value per share on the date of grant of the
Option.
(2) Any Incentive Stock Option granted under the Plan to a
person owning more than ten percent of the total combined voting power of the
Common Stock shall be at a price of no less than 110% of the Fair Market Value
per share on the date of grant of the Incentive Stock Option.
(3) Any Non-qualified Stock Option granted under the Plan shall
be at a price no less than 80% of the Fair Market Value per share on the date of
grant of the Non-qualified Stock Option.
(4) The date on which the Committee adopts a resolution
expressly granting an Option shall be considered the day on which such option is
granted, unless a future date is specified in the resolution.
(d) Term of Option. Each Option agreement shall state the period
--------------
during and times at which the Option shall be exercisable, in accordance with
the following limitations:
(1) The date on which the Committee adopts a resolution
expressly granting an Option shall be considered the day on which such Option is
granted, unless a future
4
<PAGE>
date is specified in the resolution, although any such grant shall not be
effective until the Recipient has executed an Option agreement with respect to
such Option.
(2) The exercise period of any Option shall not exceed ten years
from the date of grant of the Option.
(3) Incentive Stock Options granted to a person owning more than
ten percent of the total combined voting power of the Common Stock of the
Corporation shall be for no more than five years.
(4) The Committee shall have the authority to accelerate or
extend the exercisability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. In any event, no
exercise period may be so extended to increase the term of the Option beyond ten
years from the date of the grant.
(5) The exercise period shall be subject to earlier termination
as provided in Sections 8(f) and 8(g) hereof, and, furthermore, shall be
terminated upon surrender of the Option by the holder thereof if such surrender
has been authorized in advance by the Committee.
(e) Method of Exercise and Medium and Time of Payment.
-------------------------------------------------
(1) An Option may be exercised as to any or all whole shares of
Common Stock as to which it then is exercisable, provided, however, that no
Option may be exercised as to less than 100 shares (or such number of shares as
to which the Option is then exercisable if such number of shares is less than
100).
(2) Each exercise of an Option granted hereunder, whether in
whole or in part, shall be effected by written notice to the Secretary of the
Corporation designating the number of shares as to which the Option is being
exercised, and shall be accompanied by payment in full of the Option Price for
the number of shares so designated, together with any written statements
required by, or deemed by the Corporation's counsel to be advisable pursuant to,
any applicable securities laws.
(3) The Option Price shall be paid in cash, or in shares of
Common Stock having a Fair Market Value equal to such Option Price, or in
property or in a combination of cash, shares and property and, subject to
approval of the Committee, may be effected in whole or in part with funds
received from the Corporation at the time of exercise as a compensatory cash
payment.
(4) The Committee shall have the sole and absolute discretion to
determine whether or not property other than cash or Common Stock may be used to
purchase the shares of Common Stock hereunder and, if so, to determine the value
of the property received.
5
<PAGE>
(5) The Recipient shall make provision for the withholding of
taxes as required by Section 10 hereof.
(f) Termination.
-----------
(1) Unless otherwise provided in the Option Agreement by and
between the Corporation and the Recipient, if the Recipient ceases to be an
employee, officer, director or consultant of the Corporation (other than by
reason of death, Disability or retirement), all Options theretofore granted to
such Recipient but not theretofore exercised shall terminate three months
following the date the Recipient ceased to be an employee, officer, director or
consultant of the Corporation, and shall terminate upon the date of termination
of employment or other relationship if discharged for cause.
(2) Nothing in the Plan or in any Option or Bonus granted
hereunder shall confer upon an individual any right to continue in the employ of
or other relationship with the Corporation or interfere in any way with the
right of the Corporation to terminate such employment or other relationship
between the individual and the Corporation.
(g) Death, Disability or Retirement of Recipient. Unless otherwise
--------------------------------------------
provided in the Option Agreement by and between the Corporation and the
Recipient, if a Recipient shall die while an employee, officer, director or
consultant of the Corporation, or within ninety days after the termination of
such Recipient as an employee, officer, director or consultant, other than
termination for cause, or if the Recipient's relationship with the Corporation
shall terminate by reason of Disability or retirement, all Options theretofore
granted to such Recipient (whether or not otherwise exercisable) unless earlier
terminated in accordance with their terms, may be exercised by the Recipient or
by the Recipient's estate or by a person who acquired the right to exercise such
Options by bequest or inheritance or otherwise by reason of the death or
Disability of the Recipient, at any time within one year after the date of
death, Disability or retirement of the Recipient; provided, however, that in the
case of Incentive Stock Options such one-year period shall be limited to three
months in the case of retirement.
(h) Transferability Restriction.
---------------------------
(1) Options granted under the Plan shall not be transferable
other than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code or
Title I of the Employee Retirement Income Security Act of 1974, or the rules
thereunder. Options may be exercised during the lifetime of the Recipient only
by the Recipient and thereafter only by his legal representative.
(2) Any attempted sale, pledge, assignment, hypothecation or
other transfer of an Option contrary to the provisions hereof and/or the levy of
any execution, attachment or similar process upon an Option, shall be null and
void and without force or effect and shall result in a termination of the
Option.
(3) (A) As a condition to the transfer of any shares of Common Stock
issued upon exercise of an Option granted under this Plan, the Corporation may
require an
6
<PAGE>
opinion of counsel, satisfactory to the Corporation, to the effect that such
transfer will not be in violation of the U.S. Securities Act of 1933, as amended
(the "1933 Act") or any other applicable securities laws or that such transfer
has been registered under federal and all applicable state securities laws. (B)
Further, the Corporation shall be authorized to refrain from delivering or
transferring shares of Common Stock issued under this Plan until the Committee
determines that such delivery or transfer will not violate applicable securities
laws and the Recipient has tendered to the Corporation any federal, state or
local tax owed by the Recipient as a result of exercising the Option or
disposing of any Common Stock when the Corporation has a legal liability to
satisfy such tax. (C) The Corporation shall not be liable for damages due to
delay in the delivery or issuance of any stock certificate for any reason
whatsoever, including, but not limited to, a delay caused by listing
requirements of any securities exchange or any registration requirements under
the 1933 Act, the 1934 Act, or under any other state, federal or provincial law,
rule or regulation. (D) The Corporation is under no obligation to take any
action or incur any expense in order to register or qualify the delivery or
transfer of shares of Common Stock under applicable securities laws or to
perfect any exemption from such registration or qualification. (E) Furthermore,
the Corporation will not be liable to any Recipient for failure to deliver or
transfer shares of Common Stock if such failure is based upon the provisions of
this paragraph.
(i) Effect of Certain Changes.
-------------------------
(1) If there is any change in the number of shares of
outstanding Common Stock through the declaration of stock dividends, or through
a recapitalization resulting in stock splits or combinations or exchanges of
such shares, the number of shares of Common Stock available for Options and the
number of such shares covered by outstanding Options, and the exercise price per
share of the outstanding Options, shall be proportionately adjusted by the
Committee to reflect any increase or decrease in the number of issued shares of
Common Stock; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated.
(2) In the event of the proposed dissolution or liquidation of
the Corporation, or any corporate separation or division, including, but not
limited to, split-up, split-off or spin-off, or a merger or consolidation of the
Corporation with another corporation, the Committee may provide that the holder
of each Option then exercisable shall have the right to exercise such Option (at
its then current Option Price) solely for the kind and amount of shares of stock
and other securities, property, cash or any combination thereof receivable upon
such dissolution, liquidation, corporate separation or division, or merger or
consolidation by a holder of the number of shares of Common Stock for which such
Option might have been exercised immediately prior to such dissolution,
liquidation, corporate separation or division, or merger or consolidation; or,
in the alternative the Committee may provide that each Option granted under the
Plan shall terminate as of a date fixed by the Committee; provided, however,
that not less than 30 days' written notice of the date so fixed shall be given
to each Recipient, who shall have the right, during the period of 30 days
preceding such termination, to exercise the Option as to all or any part of the
shares of Common Stock covered thereby, including shares as to which such Option
would not otherwise be exercisable.
(3) Paragraph 2 of this Section 8 (i) shall not apply to a
merger or consolidation in which the Corporation is the surviving corporation
and shares of Common Stock
7
<PAGE>
are not converted into or exchanged for stock, securities of any other
corporation, cash or any other thing of value. Notwithstanding the preceding
sentence, in case of any consolidation or merger of another corporation into the
Corporation in which the Corporation is the surviving corporation and in which
there is a reclassification or change (including a change to the right to
receive cash or other property) of the shares of Common Stock (excluding a
change in par value, or from no par value to par value, or any change as a
result of a subdivision or combination, but including any change in such shares
into two or more classes or series of shares), the Committee may provide that
the holder of each Option then exercisable shall have the right to exercise such
Option solely for the kind and amount of shares of stock and other securities
(including those of any new direct or indirect parent of the Corporation),
property, cash or any combination thereof receivable upon such reclassification,
change, consolidation or merger by the holder of the number of shares of Common
Stock for which such Option might have been exercised.
(4) In the event of a change in the Common Stock of the
Corporation as presently constituted into the same number of shares with a
different par value, the shares resulting from any such change shall be deemed
to be the Common Stock of the Corporation within the meaning of the Plan.
(5) To the extent that the foregoing adjustments relate to stock
or securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive, provided that each Incentive Stock Option granted pursuant to this
Plan shall not be adjusted in a manner that causes such option to fail to
continue to qualify as an Incentive Stock Option within the meaning of Section
422 of the Internal Revenue Code.
(6) Except as expressly provided in this Section 8(i), the
Recipient shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class, or by reason
of any dissolution, liquidation, merger, or consolidation or spin-off of assets
or stock of another corporation; and any issue by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to an Option. The
grant of an Option pursuant to the Plan shall not affect in any way the right or
power of the Corporation to make adjustments, reclassifications, reorganizations
or changes of its capital or business structures, or to merge or consolidate, or
to dissolve, liquidate, or sell or transfer all or any part of its business or
assets.
(j) No Rights as Shareholder - Non-Distributive Intent.
--------------------------------------------------
(1) Neither a Recipient of an Option nor such Recipient's legal
representative, heir, legatee or distributee, shall be deemed to be the holder
of, or to have any rights of a holder with respect to, any shares subject to
such Option until after the Option is exercised and the shares are issued.
(2) No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for
8
<PAGE>
which the record date is prior to the date such stock certificate is issued,
except as provided in Section 8(i) hereof.
(3) Upon exercise of an Option at a time when there is no
registration statement in effect under the 1933 Act relating to the shares
issuable upon exercise, shares may be issued to the Recipient only if the
Recipient represents and warrants in writing to the Corporation that the shares
purchased are being acquired for investment and not with a view to the
distribution thereof and provides the Corporation with sufficient information to
establish an exemption from the registration requirements of the 1933 Act. A
form of subscription agreement containing representations and warranties deemed
sufficient as of the date of adoption of this Plan is attached hereto as Exhibit
-------
B.
- -
(4) No shares shall be issued upon the exercise of an Option
unless and until there shall have been compliance with any then applicable
requirements of the U.S. Securities and Exchange Commission or any other
regulatory agencies having jurisdiction over the Corporation.
(k) Other Provisions. Option Agreements authorized under the Plan may
----------------
contain such other provisions, including, without limitation, (i) the imposition
of restrictions upon the exercise, and (ii) in the case of an Incentive Stock
Option, the inclusion of any condition not inconsistent with such Option
qualifying as an Incentive Stock Option, as the Committee shall deem advisable.
9. Grant of Stock Bonuses. In addition to, or in lieu of, the grant of
----------------------
an Option, the Committee may grant Bonuses.
(a) At the time of grant of a Bonus, the Committee may impose a
vesting period of up to ten years, and such other restrictions which it deems
appropriate. Unless otherwise directed by the Committee at the time of grant of
a Bonus, the Recipient shall be considered a shareholder of the Corporation as
to the Bonus shares which have vested in the grantee at any time regardless of
any forfeiture provisions which have not yet arisen.
(b) The grant of a Bonus and the issuance and delivery of shares of
Common Stock pursuant thereto shall be subject to approval by the Corporation's
counsel of all legal matters in connection therewith, including compliance with
the requirements of the 1933 Act, the 1934 Act, other applicable securities
laws, rules and regulations, and the requirements of any stock exchanges upon
which the Common Stock then may be listed. Any certificates prepared to evidence
Common Stock issued pursuant to a Bonus grant shall bear legends as the
Corporation's counsel may seem necessary or advisable. Included among the
foregoing requirements, but without limitation, any Recipient of a Bonus at a
time when a registration statement relating thereto is not effective under the
1933 Act shall execute a Subscription Agreement substantially in the form of
Exhibit B.
- ---------
10. Agreement by Recipient Regarding Withholding Taxes. Each Recipient
--------------------------------------------------
agrees that the Corporation, to the extent permitted or required by law, shall
deduct a sufficient number of shares due to the Recipient upon exercise of the
Option or the grant of a Bonus to allow the
9
<PAGE>
Corporation to pay federal, provincial, state and local taxes of any kind
required by law to be withheld upon the exercise of such Option or payment of
such Bonus from any payment of any kind otherwise due to the Recipient. The
Corporation shall not be obligated to advise any Recipient of the existence of
any tax or the amount which the Corporation will be so required to withhold.
11. Term of Plan. Options and Bonuses may be granted under this Plan from
------------
time to time within a period of ten years from the date the Plan is adopted by
the Board.
12. Amendment and Termination of the Plan.
-------------------------------------
(a) (1) Subject to the policies, rules and regulations of any lawful
authority having jurisdiction (including any exchange with which the shares of
the Corporation are listed for trading), the Board of Directors may at any time,
without further action by the shareholders, amend the Plan or any Option granted
hereunder in such respects as it may consider advisable and, without limiting
the generality of the foregoing, it may do so to ensure that Options granted
hereunder will comply with any provisions respecting stock options in the income
tax and other laws in force in any country or jurisdiction of which any Option
holders may from time to time be a resident or citizen, or it may at any time
without action by shareholders terminate the Plan.
(2) provided, however, that any amendment that would: (A)
materially increase the number of securities issuable under the Plan to persons
who are subject to Section 16(a) of the 1934 Act; or (B) grant eligibility to a
class of persons who are subject to Section 16(a) of the 1934 Act and are not
included within the terms of the Plan prior to the amendment; or (C) materially
increase the benefits accruing to persons who are subject to Section 16(a) of
the 1934 Act under the Plan; or (D) require shareholder approval under
applicable state law, the rules and regulations of any national securities
exchange on which the Corporation's securities then may be listed, the Internal
Revenue Code or any other applicable law, shall be subject to the approval of
the shareholders of the Corporation as provided in Section 13 hereof.
(3) provided further that any such increase or modification that
may result from adjustments authorized by Section 8(i) hereof or which are
required for compliance with the 1934 Act, the Internal Revenue Code, the
Employee Retirement Income Security Act of 1974, their rules or other laws or
judicial order, shall not require such approval of the shareholders.
(b) Except as provided in Section 8 hereof, no suspension,
termination, modification or amendment of the Plan may adversely affect any
Option previously granted, unless the written consent of the Recipient is
obtained.
13. Approval of Shareholders. The Plan shall take effect upon its
------------------------
adoption by the Board but shall be subject to approval at a duly called and held
meeting of stockholders in conformance with the vote required by the
Corporation's governing documents, resolution of the Board, any other applicable
law and the rules and regulations thereunder, or the rules and
10
<PAGE>
regulations of any national securities exchange upon which the Corporation's
Common Stock is listed and traded, each to the extent applicable.
14. Termination of Right of Action. Every right of action arising out of
------------------------------
or in connection with the Plan by or on behalf of the Corporation or any of its
subsidiaries, or by any shareholder of the Corporation or any of its
subsidiaries against any past, present or future member of the Board, or against
any employee, or by an employee (past, present or future) against the
Corporation or any of its subsidiaries, will, irrespective of the place where an
action may be brought and irrespective of the place of residence of any such
shareholder, director or employee, cease and be barred by the expiration of
three years from the date of the act or omission in respect of which such right
of action is alleged to have risen.
15. Tax Litigation. The Corporation shall have the right, but not the
--------------
obligation, to contest, at its expense, any tax ruling or decision,
administrative or judicial, on any issue which is related to the Plan and which
the Board believes to be important to holders of Options issued under the Plan
and to conduct any such contest or any litigation arising therefrom to a final
decision.
16. Adoption.
--------
(a) This Plan was approved by resolution of the Board of Directors of
the Corporation on November 20, 1999.
(b) If this Plan is not approved by the shareholders of the
Corporation within 12 months of the date the Plan was approved by the Board as
required by Section 422(b)(1) of the Internal Revenue Code, this Plan and any
Options granted hereunder to Recipients shall be and remain effective, but the
reference to Incentive Stock Options herein shall be deleted and all Options
granted hereunder shall be Non-qualified Stock Options pursuant to Section 7
hereof.
[End of Plan]
11
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
-----------------------------
January 12, 2000
Board of Directors
Rich Coast Inc.
10200 Ford Road
Dearborn, MI 48126
USA
Dear Sirs:
We consent to the incorporation in the Amendment Number 3 to Form S-3 on
Form SB-2 (Registration Statement No. 333-63289) of our report dated August 12,
1999 relating to the 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 the years then ended, which report
appears in the April 30, 1999 annual report on Form 10-KSB of Rich Coast, Inc.
/s/SMYTHE RATCLIFFE
Chartered Accountants
Vancouver, Canada
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
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. 3 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 January 12, 2000
- ---------------------- and Secretary
Robert W. Truxell
/s/ James P. Fagan President, Chief Executive Officer January 12, 2000
- ------------------- and Director
James P. Fagan
/s/ George P. Nassos Director January 12, 2000
- ---------------------
George P. Nassos
/s/ Michael Grujicich Chief Financial and Accounting January 12, 2000
- ---------------------- Officer and Treasurer
Michael Grujicich
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 28,538
<SECURITIES> 0
<RECEIVABLES> 662,753
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 692,491
<PP&E> 6,821,010
<DEPRECIATION> (1,800,164)
<TOTAL-ASSETS> 5,918,457
<CURRENT-LIABILITIES> 1,867,552
<BONDS> 3,571,273
0
0
<COMMON> 24,169,536
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,918,457
<SALES> 0
<TOTAL-REVENUES> 1,319,020
<CGS> 0
<TOTAL-COSTS> 603,891
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136,589
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (864,435)
<EPS-BASIC> (.14)
<EPS-DILUTED> (.14)
</TABLE>
<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
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 491,418
<PP&E> 6,798,354
<DEPRECIATION> (1,419,155)
<TOTAL-ASSETS> 6,118,851
<CURRENT-LIABILITIES> 1,214,010
<BONDS> 3,670,339
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>
