<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A No. 4
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED APRIL 30, 1998
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD OF _________ TO
_________.
Commission File Number: 0-15859
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Rich Coast Inc.
---------------
(Name of small business issuer in its charter)
Nevada 91-1835978
------------------------------ ---------------------
State or other jurisdiction of (I.R. S. Employer
incorporation or organization Identification No.)
10200 Ford Road, Dearborn, Michigan 48126
------------------------------------------
(Address of principal executive offices)
Issuer's telephone number: 313-582-8866
Securities registered under Section 12(b) of the Act: None
----
Securities registered under Section 12(g) of the Act:
Common Stock, $.001 Par Value
-----------------------------
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [x] No [ ]
Check here if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $2,547,083.
At July 14, 1998 there were 4,876,645 shares of the Registrant's $.001 par value
Common Stock ("Common Stock"), the only outstanding class of voting securities,
outstanding. Based on the closing price of the Common Stock as reported by
Nasdaq on July 14, 1998, the aggregate market value of Common Stock held by non-
affiliates of the Registrant was approximately $7,070,305.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [x]
<PAGE>
PART IV
-------
Item 13. Financial Statements, Schedules and Exhibits and Reports on Form 8-K
(a) Financial Statements, Schedules and Exhibits:
---------------------------------------------
(1) Financial Statements - April 30, 1997 and the fiscal years ended April
----------------------------------------------------------------------
30, 1996 and 1997
-----------------
a) Index to Financial Statements;
b) Auditor's Report to the Shareholders;
c) Comments by Auditors for U.S. Readers on Canada-U.S. Reporting
Conflict;
d) Consolidated Balance Sheets;
e) Consolidated Statements of Operations;
f) Consolidated Statements of Deficit;
g) Consolidated Statements of Changes in Financial Position;
h) Notes to Consolidated Financial Statements.
(2) 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.
(3) Exhibits
--------
The Exhibits listed in the Exhibit Index at Item 14(c) are filed as part of
this Annual Report.
(b) Reports on Form 8-K No reports on Form 8-K were filed during the last
-------------------
quarter of the fiscal year covered by this report.
(c) Exhibits
--------
3.(i) Certificate of Incorporation of Rich Coast Inc. (1)
3.(ii) Bylaws of Rich Coast Inc. (1)
10.1 Terminaling Agreement - Mobil Oil Corporation. (P)
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)
-21-
<PAGE>
10.5 1996 Employee Stock Option and Bonus Plan, as amended. (4)
10.6 1997 Stock Option and Stock Bonus Plan. (5)
21.1 List of Subsidiaries of the Registrant.*
27.1 Financial Data Schedule.
(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.
(P) Filed in paper format on August 13, 1996 under cover of Form SE.
(*) Filed previously.
(d) 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.
-22-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-KSB/A No. 4 to
be signed on its behalf by the undersigned, thereunto duly authorized.
RICH COAST INC.
Date: August 25, 2000 By: /s/ James P. Fagan
---------------------------------------
James P. Fagan, President, Chief
Executive Officer and Director
Date: August 25, 2000 By: /s/ Michael M. Grujicich
---------------------------------------
Michael M. Grujicich, Chief
Financial and Accounting Officer
Date: August 25, 2000 By: /s/ Robert W. Truxell
---------------------------------------
Robert W. Truxell, Chairman of the Board
of Directors and Secretary
Date: August 25, 2000 By: /s/ George P. Nassos
---------------------------------------
George P. Nassos, Director
Date: August 25, 2000 By: /s/ Michael R. Fugler
---------------------------------------
Michael R. Fugler, Director
-23-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Consolidated Financial Statements
(U.S. Dollars)
April 30, 1998 and 1997
INDEX
-----
Page
----
Report of Independent Chartered Accountants 25
Consolidated Financial Statements
Consolidated Balance Sheets 26
Consolidated Statements of Operations 27
Consolidated Statements of Stockholders' Equity 28
Consolidated Statements of Cash Flows 29
Notes to Consolidated Financial Statements 30-40
-24-
<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.
(formerly Rich Coast Resources Ltd.) as of April 30, 1998 and 1997 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended April 30, 1998. 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, 1998 and 1997 and the consolidated results of its operations and cash
flows for each of the three years in the period ended April 30, 1998 in
conformity with generally accepted accounting principles in the United States.
"Smythe Ratcliffe"
Chartered Accountants
Vancouver, Canada
July 27, 1998, except for notes 2(k), (l) and 9, which are as of January 19,
1999, and note 2(f), which is as of March 17, 1999, and note 1 which is as of
August 9, 2000.
-25-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Consolidated Balance Sheets
April 30
(U.S. Dollars)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
1998 1997
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets (note 7)
Current
Cash $ 53,043 $ 12,919
Accounts receivable 460,558 288,265
Insurance claim receivable (note 3) 435,290 0
Share subscription receivable (note 8(d)) 25,000 0
Inventory 108,265 135,673
Prepaid expenses 0 4,436
----------------------------------------------------------------------------------------------------------------------
1,082,156 441,293
Distillation Unit (note 5) 2,024,706 2,024,706
Property and Equipment, at cost (net) (notes 4 and 7) 2,990,373 3,210,485
Patent and Technology, net 25,681 30,525
Deferred Finance Charges and Deposits 120,732 82,775
----------------------------------------------------------------------------------------------------------------------
$ 6,243,648 $ 5,789,784
----------------------------------------------------------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued liabilities (note 6) $ 838,966 $ 739,128
Accrued oil and waste treatment costs 450,444 303,973
Due to shareholder (note 10) 0 100,000
Current portion of long-term debt (note 7) 595,309 78,673
Current portion of obligation under capital lease 0 5,521
----------------------------------------------------------------------------------------------------------------------
1,884,719 1,227,295
Long-Term Debt (note 7) 2,016,510 2,108,996
Obligation Under Capital Lease 0 7,815
----------------------------------------------------------------------------------------------------------------------
3,901,229 3,344,106
----------------------------------------------------------------------------------------------------------------------
Stockholders' Equity (note 8):
Common stock, $0.001 par value;
100,000,000 shares authorized, 4,718,894 and 4,038,929 shares
issued and outstanding at April 30, 1998 and 1997, respectively 4,719 4,039
Additional paid-in capital (note 1) 25,329,446 24,059,464
Accumulated deficit (note 1) (22,991,746) (21,617,825)
----------------------------------------------------------------------------------------------------------------------
2,342,419 2,445,678
----------------------------------------------------------------------------------------------------------------------
$ 6,243,648 $ 5,789,784
----------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
-26-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Consolidated Statements of Operations
Years Ended April 30
(U.S. Dollars)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
1998 1997 1996
<S> <C> <C> <C>
Sales $ 2,547,083 $ 1,897,155 $1,741,352
-------------------------------------------------------------------------------------------------------------------
Expenses
Cost of Sales 1,080,557 967,062 550,035
Salaries and wages 982,918 713,605 565,670
Compensation for past services 0 0 351,935
Consulting and management fees 152,223 816,953 53,198
Shareholder relations 149,406 41,630 98,030
Audit, accounting and legal 130,626 213,911 129,108
Travel 125,030 79,939 80,343
Utilities 121,168 129,463 88,400
Insurance 103,805 83,364 65,079
Property taxes 85,760 72,612 61,017
Equipment and storage leases 83,820 111,437 90,661
Repairs and maintenance 62,603 40,983 129,036
Office and general 59,122 31,857 95,577
Telephone and facsimile 40,693 29,489 72,487
Listing, transfer agent and filing fees 24,573 27,176 40,505
Factoring costs 24,304 19,634 68,644
Bad debts 8,375 11,984 47,704
Rent and secretarial 7,353 4,300 46,578
Advertising 5,853 12,356 10,139
Financing 0 26,772 0
Depreciation 256,398 359,168 387,982
-------------------------------------------------------------------------------------------------------------------
3,504,587 3,793,695 3,032,128
-------------------------------------------------------------------------------------------------------------------
Loss Before Other Items 957,504 1,544,605 1,290,776
Other Items
Insurance proceeds in excess of current expenditures (103,503)
(note 3) 0 0
Interest expense 303,648 213,912 56,246
Interest - beneficial conversion feature (note 2(l)) 198,626 0 0
Impairment loss on goodwill 0 0 2,748,850
Loss on equipment disposal 0 147,752 2,478
Amortization of deferred financing costs 17,646 22,060 0
Gain from oil and gas operations (note 2) 0 0 (2,449)
Resource properties disposal loss (note 2) 0 0 73,868
-------------------------------------------------------------------------------------------------------------------
Loss Before Extraordinary Item 1,373,921 2,280,264 4,169,769
Extraordinary Item
Forgiveness of past service
compensation liability 0 (351,935) 0
-------------------------------------------------------------------------------------------------------------------
Net Loss for Year $ 1,373,921 $ 1,928,329 $4,169,769
-------------------------------------------------------------------------------------------------------------------
Loss Before Extraordinary Item Per Share $ 0.32 $ 0.61 $ 1.69
Extraordinary Item Per Share $ 0.00 $ (0.09) $ 0.00
-------------------------------------------------------------------------------------------------------------------
Net Loss per Share $ 0.32 $ 0.52 $ 1.69
-------------------------------------------------------------------------------------------------------------------
Weighted Average Number of Shares Outstanding 4,318,038 3,758,788 2,460,854
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-27-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Consolidated Statements of Stockholders' Equity
Years Ended April 30
(U.S. Dollars)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Common Common Additional Accumulated Total
Shares Shares Paid-In Deficit Stockholders'
Number Amount Capital (note 1) Equity (Deficit)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance April 30, 1995 1,937,306 $ 1,937 $18,535,641 $(15,519,727) $ 3,017,851
Issuance of common
stock (note 8) 1,393,668 1,394 4,403,151 0 4,404,545
Share issue costs 0 0 (451,823) 0 (451,823)
Net Loss 0 0 0 (4,169,769) (4,169,769)
-----------------------------------------------------------------------------------------------------
Balance, April 30, 1996 3,330,974 3,331 22,486,969 (19,689,496) 2,800,804
Issuance of common
Stock (note 8) 707,955 708 1,587,363 0 1,588,071
Financing cost 0 0 (14,868) 0 (14,868)
Net loss 0 0 0 (1,928,329) (1,928,329)
-----------------------------------------------------------------------------------------------------
Balance, April 30, 1997 4,038,929 4,039 24,059,464 (21,617,825) 2,445,678
Issuance of common
Stock (note 8) 679,965 680 806,591 0 807,271
Interest - beneficial
conversion (note 2(l)) 0 0 463,391 0 463,391
Net loss 0 0 0 (1,373,921) (1,373,921)
-----------------------------------------------------------------------------------------------------
Balance, April 30, 1998 4,718,894 $ 4,719 $25,329,446 $(22,991,746) $ 2,342,419
-----------------------------------------------------------------------------------------------------
</TABLE>
-28-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Consolidated Statements of Cash Flows
Year Ended April 30
(U.S. Dollars)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
1998 1997 1996
--------------------------------------------------------------------------------------------------------
Operating Activities
<S> <C> <C> <C>
Net loss for year $(1,373,921) $(1,928,329) $(4,169,769)
Adjustments to reconcile net loss to net cash
Used by operating activities
Interest - beneficial conversion feature 198,626 0 0
Interest - expense 64,356 0 0
Depreciation and amortization 274,045 381,228 387,982
Resource properties disposal loss 0 0 73,902
Impairment loss on goodwill 0 0 2,748,850
Loss on equipment disposal 0 147,752 0
Issue Common Stock for services and compensation 386,815 608,548 246,034
Changes in Operating Assets and Liabilities
Accounts receivable (172,293) 138,700 (281,430)
Insurance claim receivable (435,290) 0 0
Subscriptions receivable (25,000) 0
Inventory 27,408 (135,673) 0
Prepaid expenses 4,436 37,250 (40,049)
Accounts payable and accrued liabilities 99,839 (125,241) (54,372)
Accrued oil and waste treatment costs 146,470 201,867 102,106
Past services compensation payable 0 (351,935) 351,935
--------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (804,509) (1,025,833) (634,811)
--------------------------------------------------------------------------------------------------------
Investing Activities
Purchase of property and equipment (163,230) (123,054) (2,160,338)
Investment in and expenditures on mineral properties 0 0 (2,480)
Distillation unit costs incurred 0 0 (16,156)
Fire insurance proceeds re fixed assets 131,714 0 0
Proceeds on sale of oil and gas properties 0 0 4,933
Proceeds on sale of equipment 0 2,000 7,253
--------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (31,516) (121,054) (2,166,788)
--------------------------------------------------------------------------------------------------------
Financing Activities
Issue of common stock 256,100 433,612 1,315,251
Land contract repayments (8,085) (33,776) 0
Shareholders' loans 0 526,298 0
Obligation under capital lease (13,336) (1,181) (4,245)
Notes payable 697,000 0 2,000,000
Finders' fees and share issue costs 0 0 (494,134)
Deferred finance charges and other (55,530) 203,303 0
--------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 876,149 1,128,256 2,816,872
--------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash 40,124 (18,631) 15,273
Cash, Beginning of Year 12,919 31,550 16,277
--------------------------------------------------------------------------------------------------------
Cash, End of Year $ 53,043 $ 12,919 $ 31,550
--------------------------------------------------------------------------------------------------------
Supplemental information
Issue of common stock
For settlement of debt $ 100,230 $ 531,061 $ 104,487
For partnership interest $ 0 $ 0 $ 2,484,724
For finder's fee $ 0 $ 14,850 $ 0
Interest paid $ 154,860 $ 211,808 $ 41,684
Income taxes paid $ 0 $ 0 $ 0
--------------------------------------------------------------------------------------------------------
</TABLE>
-29-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(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 stock. 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.
The purchase of the minority interest was valued using the fair value
of the common stock issued at the date of the transaction of $2,748,850.
Management believes that the fair value of the assets acquired was nil.
The excess of the purchase price over the fair value of the assets
acquired (nil) was accounted for as goodwill of $2,748,850. Because the
underlying partnership had recurring losses, management believes that
the goodwill had no continuing value and, therefore, the goodwill was
charged to operations as an impairment loss for the year ended April 30,
1996. Previously issued financial statements during the year ended
April 30, 1996 erroneously recorded the transaction with a nil value
being attributed to the stock issued. Correction of this error has
resulted in an increase in net loss of $2,748,850 and an increase in
loss per share of $1.13 for the year ended April 30, 1996.
Prior to the purchase of the minority interest, the Company, pursuant to
the partnership agreement, had been including its majority interest
in the partnership losses and also absorbing the losses of the
partnership interests held by the minority interest.
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.
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<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(U.S. Dollars)
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
These financial statements include the accounts of Rich Coast, Inc.
(a Delaware Corporation, 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.
(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 shortfall, the loss will be recognized as a
current charge to operations.
(d) Resource properties
During the 1996 fiscal year the Company disposed of its remaining
mineral and oil and gas properties concurrent with the merger
referred to in note 1 above.
(e) 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.
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<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(U.S. Dollars)
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(f) 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 US 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.
(g) 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.
(h) 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.
(i) 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.
(j) Financial instruments
The carrying value of cash, accounts receivable, accounts payable,
insurance claim receivable and accrued liabilities approximate
their fair value because of the short maturity of these financial
instruments. Advances on factored accounts receivable are recorded
as deductions from the related receivable amounts. 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.
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<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(U.S. Dollars)
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(k) 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.
(l) Long-term debt
The beneficial conversion features relating to the 10% 18-month
promissory notes and the subsequent issue of 8% debentures 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 conforms 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).
-33-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(U.S. Dollars)
================================================================================
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) 1998 1997
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land -- $ 250,041 $ 250,041
Buildings 39 1,388,117 1,370,903
Machinery and equipment 7 1,586,789 1,558,465
Bulk storage tanks 15 636,534 636,534
Pipeline 15 296,187 296,187
Furniture, fixtures, computers, etc 5 to 7 51,274 86,309
-------------------------------------------------------------------------------------------------------------------------
Total at cost 4,208,942 4,198,439
Accumulated depreciation 1,218,569 987,954
-------------------------------------------------------------------------------------------------------------------------
$2,990,373 $3,210,485
-------------------------------------------------------------------------------------------------------------------------
</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 1998 fiscal year. Depreciation charges based on historical
cost have been recorded.
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.
-34-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(U.S. Dollars)
================================================================================
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
====================================================================
1998 1997
====================================================================
Trade payables $ 516,482 $ 587,925
Building repair (fire damage) (note 3) 200,187 0
Accrued salaries and wages 50,325 70,491
Accrued property taxes 55,296 45,367
Payroll taxes 11,676 18,679
Accrued interest 5,000 16,666
--------------------------------------------------------------------
$ 838,966 $ 739,128
====================================================================
-35-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(U.S. Dollars)
================================================================================
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
====================================================================================================
1998 1997
====================================================================================================
<S> <C> <C>
10% 18 month convertible promissory notes - series $ 697,000 0
1997, interest 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. One
holder of a $30,000 note has elected to receive cash at
maturity
Unamortized interest charge relating to beneficial (264,765) 0
conversion feature (note 2(l))
----------------------------------------------------------------------------------------------------
432,235 0
10% senior secured note, due October 1, 2001 interest
payable monthly (see below for security) 2,000,000 2,000,000
Land contract payable in monthly instalments of $4,753
each including 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 $1.00, either after satisfactory clean up by
others or 91 years. 179,584 187,669
----------------------------------------------------------------------------------------------------
2,611,819 2,187,669
Less: Current portion 595,309 78,673
----------------------------------------------------------------------------------------------------
$2,016,510 $2,108,996
====================================================================================================
</TABLE>
-36-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(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, 1998 mature as
follows:
===========================================================================
1999 $ 595,309
2000 267,858
2001 13,417
2002 2,000,000
---------------------------------------------------------------------------
$2,876,584
===========================================================================
-37-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(U.S. Dollars)
================================================================================
8. STOCKHOLDERS' EQUITY
(a) Activity of the common stock account for the years 1996, 1997 and 1998
is as follows:
<TABLE>
<CAPTION>
Additional
Number of Par Paid-In
Shares Value Capital
<S> <C> <C> <C>
Fiscal 1996
Shares issued
For cash - private placements 299,736 $ 300 $ 836,344
For cash - exercise of stock options 143,787 144 478,463
For services 62,500 62 245,972
For settlement of loan payable to shareholder 41,844 42 104,445
Acquisition of subsidiaries (note 1) 845,800 846 2,737,927
1,393,667 $1,394 $4,403,151
Fiscal 1997
Shares issued
For financing fees 12,500 $ 13 $ 14,837
For settlement of debt 276,117 276 530,785
For cash - private placements 118,750 119 354,356
For cash - exercise of stock options 20,437 20 79,117
For services 280,150 280 608,268
707,954 $ 708 $1,587,363
Fiscal 1998
Shares issued
For services and compensation* 230,473 230 386,585
For cash - private placements** 107,500 108 107,392
For cash - exercise of stock options 88,750 89 78,511
For cash - exercise of warrants 70,000 70 69,930
For settlement of loan payable to a
Shareholder 130,299 130 100,100
For interest 52,942 53 64,073
679,964 $ 680 $ 806,591
</TABLE>
-38-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(U.S. Dollars)
================================================================================
8. STOCKHOLDERS' EQUITY (Continued)
* Includes 100,000 shares for cash consideration of $25,000 subscribed
and paid July 28, 1998.
** Includes $81,000 of compensation relating to options granted to
management at a discount to market.
(b) Subsequent to April 30, 1998 the Company issued 132,500 shares (pre
reverse split) (33,025 post reverse split) (note 12(b)) and 1,875 shares
post reverse split under the terms of the 1996 Employee Stock Option and
Stock Bonus Plan (note 9) for total cash of $35,000. Additionally, options
were exercised under the terms of the 1995 Incentive Compensation Plan and
the 1997 Stock Option and Stock Bonus Plan for 498,500 shares (pre reverse
split) (124,625 post reverse split) (note 12b) for cash proceeds of
$104,430.
(c) 8,099 shares (post reverse split) were issued for interest of $16,927
on notes payable for the quarter ended June 30, 1998.
(d) The share subscription receivable was collected by the Company 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, 1998 and 1997:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
1998 1997
-------------------------------------------------------------------------------------------------
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, Beginning of Year 2,015,000 $1.00 2,005,000 $1.00
Granted 4,292,913 $0.83 220,000 $1.00
Exercised (40,000) $0.72 0 $0.00
Expired 0 $0.00 (210,000) $1.00
-------------------------------------------------------------------------------------------------
Outstanding, End of Year 6,267,913 2,015,000
-------------------------------------------------------------------------------------------------
</TABLE>
-39-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(U.S. Dollars)
================================================================================
9. STOCK OPTIONS AND WARRANTS (Continued)
The following table summarizes information about the Company's stock
options outstanding:
<TABLE>
<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, 1998 $0.72 - $2.00 6,267,913 $3.50 $0.88 6,097,913 $0.85
April 30, 1997 $1.00 - $2.00 2,015,000 $3.70 $1.00 1,720,000 $1.00
-------------------------------------------------------------------------------------------------------
</TABLE>
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>
1998 1997
-------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss), as reported $(1,373,921) $(1,928,329)
Net income (loss), pro-forma (4,339,709) (2,129,279)
Net income (loss) per share, as reported $ (0.08) $ (0.13)
Net income (loss) per share, as reported
- post reverse split $ ( 0.32) $ (0.52)
Net income (loss) per share, pro-forma $ ( 0.25) $ (0.14)
Net income (loss) per share, pro-forma
- post reverse split $ (1.00) $ (0.57)
-------------------------------------------------------------------------------
</TABLE>
The fair value of each option grant is calculated using the following
weighted average assumptions:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------------------------------------------
<S> <C> <C>
Expected life (years) 3 3
Interest rate 6.28% 5.99%
Volatility 101.14% 117.82%
Dividend yield 0.00% 0.00%
-------------------------------------------------------------------------------
</TABLE>
-40-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(U.S. Dollars)
================================================================================
9. STOCK OPTIONS AND WARRANTS (Continued)
Note: For fiscal 1998 add $3,164,414 in expenses for pro-forma net income
and per share amounts. For fiscal 1997 add $200,950.
<TABLE>
<CAPTION>
========================================================================================
1997 1996 1995
Plan Plan Plan
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonus Shares
Fiscal 1996
Issued 62,500
Fiscal 1997
Issued 102,500
Fiscal 1998
Issued 12,500
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
12,500 102,500 62,500
----------------------------------------------------------------------------------------
Options - Other
Fiscal 1998
Issued (10,000)
Exercise price to
September 8, 2007 $ 0.72
----------------------------------------------------------------------------------------
</TABLE>
Warrants
At April 30, 1998 there were 5,394,643 share purchase warrants outstanding.
Exercise Number of
Expiry Date Price Warrants
------------------------------------------------------------
September 8, 1998 1.00 50,000
June 15, 2001 1.00 37,500
November 5, 2001 1.00 45,000
January 13, 2002 1.00 105,000
July 30, 2002 0.80 211,160
June 10, 2006 1.20 900,000
------------------------------------------------------------
1,348,660
============================================================
-41-
<PAGE>
RICH COAST, INC.
(Formerly Rich Coast Resources Ltd.)
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
(U.S. Dollars)
================================================================================
10. RELATED PARTY TRANSACTIONS
(a) Management fees of $30,000 were paid to directors or companies
controlled by directors for the year ended April 30, 1998 (1997 -
$30,000; 1996 - $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
$4,240.00. The shares were issued at a discount to market of 20%.
(c) Accounts payable (accrued payroll) includes $27,910 payable to two
directors and officers of the Company.
11. INCOME TAXES
A deferred tax asset stemming from the Company's net operating loss
carryforward, has been reduced by a valuation account to zero due to
uncertainties regarding the utilization of the deferred assets.
At April 30, 1998 the Company has available net operating loss
carryforward of approximately $6,400,000 which it may use to offset
future federal taxable income. The net operating loss carryforwards, if
not utilized, will begin to expire in 2007.
12. SUBSEQUENT EVENTS
(a) Subsequent to April 30, 1998 the Company completed a private
placement of $1,500,000 of 8% convertible debenture due June 15,
2003 which netted the Company $1,292,330. The debenture and accrued
interest thereon may be converted at the option of the holder at
anytime 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.
(b) The Company announced a one for four reverse split of the authorized
common stock effective June 19, 1998. All share and per share
amounts are reported on a post-split basis.
(c) Share issuances after April 30, 1998 are set out in notes 8(b) and
(c).
(d) The Company reincorporated in the State of Nevada effective July 14,
1998.
13. LITIGATION
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.
-42-
