<PAGE>
As filed with the Securities and Exchange Commission on ________,
2000
Registration Statement No. 333-63289
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 5 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)
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<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>
6011 Wyoming Avenue Robert W. Truxell
Dearborn, Michigan 48126 6011 Wyoming Avenue
(313) 582 -8866 Dearborn, Michigan 48126
(Address and telephone number of (313) 582-8866
principal executive offices and address (Name, address and telephone
of principal place of business) number of agent for
service)
With a Copy to:
Theresa M. Mehringer, Esq.
Smith McCullough, P.C.
4643 South Ulster Street, Suite 900
Denver, Colorado 80237
(303) 221-6000
Approximate date of proposed sale to the public:
As soon as practicable following the date on which the Registration Statement
becomes effective.
If any of the Securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<PAGE>
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CALCULATION OF REGISTRATION FEE
============================================================================================================
Title of each Amount to Proposed maximum Proposed maximum Amount of
class of be registered offering price per aggregate offering registration
securities to be share/(2)/ price/(2)/ fee/(2)/
registered /(1)/
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 900,000 Shares $0.78125 $ 703,125 $ 185
issuable upon
exercise of
Warrants
------------------------------------------------------------------------------------------------------------
Common Stock 2,506,938 Shares/(3)/ $0.78125 $1,958,545 $ 517
issuable upon
conversion of
debentures
------------------------------------------------------------------------------------------------------------
Common Stock 3,300,000 Shares $0.78125 $2,578,125 $ 680
------------------------------------------------------------------------------------------------------------
Total 6,706,938 Shares/(4)/ $0.78125 $5,239,795 $1,382
------------------------------------------------------------------------------------------------------------
</TABLE>
______________________
(1) For a description of the various securities referred to herein and the
transactions in which they were issued, See "Description of Securities -
Securities Registered Hereby."
(2) Proposed maximum offering price and registration fee is based on the
average of the bid and asked prices as reported by NASDAQ on September 9,
1998 (a date within five business days prior to the initial filing hereof).
$1,786 of the registration fee was paid as a part of the registrant's
initial filing and amendment No. 3.
(3) Includes the registration for resale of shares of Common Stock issuable
upon conversion of the remaining $1,375,500 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
--------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
RICH COAST INC.
6,706,938 Shares of Common Stock to be issued to and offered by Selling
Shareholders
An aggregate of 6,706,938 shares (the "Shares") of $.001 par value Common
Stock (the "Common Stock") of Rich Coast Inc. ("Rich Coast" or the "Company")
may be offered by certain shareholders (the "Selling Shareholders") from time to
time in the public market. The shares of Common Stock offered hereby include
the resale of 2,506,938 shares of Common Stock issuable upon conversion of the
remaining $1,375,500 in principal amount of 8% Convertible Debentures. The
issuance of these 2,506,938 shares would represent approximately 18.5% of total
outstanding shares if they were issued on July 19, 2000. These Debentures are
convertible into Shares of Common Stock at the conversion price for each Share
of Common Stock equal to the lesser of (i) $2.50, or (ii) 75% of the five day
average closing bid price of the Common Stock for the five trading days
immediately preceding the conversion date of the Debentures. If all $1,375,500
principal amount of Debentures was converted on July 19, 2000, then the
aggregate shares issued upon conversion would total 7,277,778 of which the
2,506,938 shares registered hereby would constitute only 34.4%. Except in the
case of mandatory conversion of the Debentures, no holder of Debentures is
entitled to convert an amount of Debentures that would result in beneficial
ownership of more than 4.9% of the Company's outstanding common stock.
All proceeds received from the sale of the Shares offered by the Selling
Shareholders will accrue to the benefit of the Selling Shareholders and not to
the Company. 3,300,000 of the Shares which may be offered by the Selling
Shareholders are outstanding on the date of this Prospectus, and the remaining
3,406,938 Shares may be issued by the Company after the date of this Prospectus
upon exercise of outstanding warrants (the "Warrants") or conversion of
outstanding debentures (the "Debentures") held by Selling Shareholders. All of
the Shares may be resold in the public market by the Selling Shareholders. The
Company will receive the exercise price paid upon exercise of Warrants for
issuance of those shares; however, any difference between that price and the
price at which the shares are sold in the market by the Selling Shareholders
will accrue to the benefit of the Selling Shareholders. Sales of any of these
previously restricted Shares into the public market could impact the market
adversely so long as this Offering continues. See "Risk Factors."
The Common Stock is traded on the Over-The-Counter Bulletin Board under the
symbol "KRHC.OB." On August 24, 2000, the closing bid price of the Common Stock
as reported on the Over-The-Counter Bulletin Board was $0.125.
i
<PAGE>
The securities offered hereby are speculative and involve a high degree of
risk. See "Risk Factors" on pages three through six 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 the SEC filing fee, printing costs, Edgar costs, legal
fees and accounting fees.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Price Per Total Number Aggregate Offering Proceeds to Selling
Share of Shares Price Shareholder
----- ---------- ----- -----------
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares to be Outstanding
Offered by Selling $0.125/(2)/ 6,706,938/(3)/ $838,367 $838,367
Shareholders /(1)/
---------------------------------------------------------------------------------------------------------
</TABLE>
________________
(1) These Shares will be offered by the Selling Shareholders. Some shares are
currently held by Selling Shareholders, and some shares will be held by
Selling Shareholders after exercise of outstanding Warrants and conversion
of Debentures. See "Description of Securities."
(2) The Price per Share represents the closing bid price as reported on the
Over-the-Counter Bulletin Board on August 24, 2000. These Shares will be
offered from time to time by the Selling Shareholders at market prices.
Underwriting discounts or commissions may be paid by the Selling
Shareholders. See "Plan of Distribution."
(3) The shares offered hereby include the resale of 3,300,000 shares
outstanding; 900,000 shares issuable upon exercise of Warrants; and
2,506,938 shares issuable upon conversion of the remaining $1,375,500
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 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Prospectus dated ________________, 2000
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Forward-Looking Statements............................................................. 1
Prospectus Summary..................................................................... 1
Risk Factors........................................................................... 3
Use Of Proceeds........................................................................ 6
Selling Shareholders................................................................... 7
Plan of Distribution................................................................... 8
Legal Proceedings...................................................................... 10
Dividend Policy........................................................................ 10
Management............................................................................. 11
Security Ownership of Certain Beneficial Owners and Management......................... 12
Description of Securities.............................................................. 14
SEC Position on Indemnification........................................................ 15
Certain Relationships and Related Transactions......................................... 16
Description of Business................................................................ 16
Management's Discussion and Analysis of Financial Condition and Results of Operations.. 19
Description of Property................................................................ 24
Market for the Registrant's Common Stock and Related Stockholder Matters............... 25
Executive Compensation................................................................. 26
Legal Matters.......................................................................... 30
Experts................................................................................ 30
Changes in Accountants................................................................. 30
Additional Information................................................................. 31
Index to Consolidated Financial Statements for Rich Coast.............................. F-1
</TABLE>
<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." Forward-looking statements, including those
regarding the potential revenues from the commercialization of the biological
treatment system, the continuing increase in revenues and the business prospects
of Rich Coast Inc., 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. In addition to the risks cited above specific to the biological
treatment system, these factors include adverse economic conditions, entry of
new and stronger competitors, inadequate capital and the inability to obtain
funding from third parties, unexpected costs and failure to capitalize upon the
access to new clientele. These factors are discussed in this Prospectus under
the heading "Risk Factors" and in the "Management's Discussion and Analysis"
section. The Company disclaims any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after the date of
this Prospectus or to publicly update any forward-looking statements to reflect
subsequent events or circumstances.
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 6011 Wyoming Avenue Dearborn, Michigan 48126, telephone (313) 582-8866.
The Offering
------------
Pursuant to this Prospectus, the Selling Shareholders may from time to time
offer all or any portion of an aggregate of 6,706,938 Shares of Common Stock on
the OTC Bulletin Board through underwriters, dealers or brokers or in
independently negotiated transactions. This amount includes 2,506,938 shares to
be issued upon conversion of the remaining $1,375,500 principal amount of
8%
<PAGE>
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 Shareholders
and resold by them pursuant to this Prospectus. See "Description of Securities."
These 3,406,938 Shares of Common Stock underlie outstanding warrants and
convertible debentures exercisable or convertible at varying prices.
The Company may receive the cash proceeds from the exercise of outstanding
Warrants and will benefit through reduction of indebtedness by conversion of
outstanding debentures; however, the prices at which the Company is obligated to
issue the Shares upon conversion of Debentures are below the market price. In
addition holders of Warrants may be able to exercise the Warrants through a
cashless exercise procedure, which would result in no cash proceeds to the
Company.
After this Offering there will be approximately 14,446,827 shares of Common
Stock outstanding. The Company's Common Stock is traded on the OTC-Bulletin
Board under the symbol "KRHC.OB."
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."
2
<PAGE>
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 April 30, 2000 Rich Coast had an accumulated deficit of $28,698,332.
The Company incurred net losses of $3,134,090 and $2,572,496 for the fiscal
years ended April 30, 2000 and 1999, 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.
At April 30, 2000, the Company has approximately $3,647,000 of debt
outstanding under various loans, debentures and other note agreements, including
$2,000,000 due under the Company's 10% Senior Secured Note due July 10, 2004
(the "10% Senior Note), $1,375,500 outstanding in 8% Convertible Debentures due
June 2003, and $75,525 outstanding under a land contract that was repaid in
August 2000. The Company is not in compliance with certain covenants of the 10%
Senior Note and the 8% Convertible Debentures. The holder of the 10% Senior Note
has the right to declare the note to be in default, which would cause the
outstanding balance of the note to become due immediately. The Company and the
holders of the 8% Convertible Debentures have entered into a standstill
agreement, whereby the debenture holders have agreed not to take any action with
respect to exercising their conversion rights or declaring the 8% Convertible
Debentures to be in default through November 2000. The standstill agreement
requires the Company to make payments on the 8% Convertible Debentures of
$25,000 in August 2000 (payment has been made) and $25,000 in September 2000,
and timely registration of shares underlying the possible conversion of the 8%
Convertible Debentures. If the Company does not meet the requirements of the
standstill agreement, the holders of the 8% Convertible Debentures could cause
the outstanding balance of the debentures to become due immediately.
3
<PAGE>
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. The Company's
ability to meet the requirements of the standstill agreement related to the 8%
Convertible Debentures, cure the violations under the covenants of the 10%
Senior Note and the 8% Convertible Debentures, and 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.
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.
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 4,650,000 shares for issuance upon exercise of
outstanding options under plans and warrants, and 16,061,111 shares for issuance
upon conversion of the Debentures, and has registered 3,406,938 shares for
public sale by the holders. Shares are issuable upon exercise of warrants and
options at prices as low as $0.125 per Share. The 2,506,938 shares issuable upon
conversion of the Debentures would represent 18.5% of the shares outstanding on
July 19, 2000. There is no floor on the conversion price of the Debentures since
the conversion price will be 75% of the average bid price of the Company's
Common Stock for the five trading days immediately preceding the conversion. Any
sale into the public market of Shares purchased privately at prices below the
current market price could be expected to have a depressive effect on the market
price of the Company's Common Stock. See "Description of Securities."
Issuance of Additional Shares Upon Conversion of Debentures if Market Price
Declines/Dilution.
The Company had a negative net tangible book value of $1,163,170 or ($0.12)
per share of the Company's Common Stock on April 30, 2000. Net tangible book
value per share is determined by dividing the tangible net worth of the Company
(tangible assets less total liabilities) by the total number of outstanding
shares of Common Stock. As the market price of the shares of Common Stock
declines, more shares will be issued upon conversion since the conversion price
is equal to the lesser of (i) $2.50, or (ii) 75% of the five day average closing
bid price of the Common Stock for the
4
<PAGE>
five trading days immediately preceding the conversion date of the Debentures.
If all $1,375,500 principal amount of Debentures was converted on July 19, 2000,
when 75% of the five day average closing bid price was $0.189 per share, then
the aggregate shares issued upon conversion would total 7,277,778, of which the
2,506,938 shares registered hereby would constitute only 34.4%. Since the
conversion price of the Debentures and the exercise price of the Warrants is
currently in excess of the net tangible book value per share of the Company's
Common Stock, such conversion or exercise would not be dilutive to existing
shareholders. However, in the event that the Company's net tangible book value
per share exceeds the conversion price of the Debentures or the exercise price
of the Warrants on the date of conversion or exercise, such conversion or
exercise would have a dilutive effect.
Rich Coast does not expect to pay dividends.
The Company has not paid dividends since inception on its common stock, and
it does not contemplate paying dividends in the foreseeable future on its common
stock in order to use all of its earnings, if any, to finance expansion of its
operations.
Lack of trading market may make it difficult to sell Rich Coast's common stock.
The only trading in Rich Coast's common stock is conducted on the OTC
Bulletin Board. As a result, an investor may find it more difficult to dispose
of, or to obtain accurate quotations as to the market value of, the common
stock. In addition, the Company's common stock is defined as a "penny stock" by
rules adopted by the Commission. In such event, brokers and dealers effecting
transactions in the common stock with or for the account of a customer must
obtain the written 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.
5
<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.
Rich Coast's quotations for on-site business do not result in signed contracts.
When brokers, trucking companies and small manufacturing concerns have non-
hazardous wastes to dispose of, samples of the waste are delivered to Rich Coast
and quotations are provided by Rich Coast. If Rich Coast's bid is accepted, the
customer simply calls in to schedule deliveries. Rich Coast is at some risk
without a signed contract and, therefore, must insure that customers with
delinquent payables are put on cash on delivery basis before their indebtedness
builds to a problem level.
Most of the business conducted by Rich Coast is based on oral agreements.
Most of the waste treatment business conducted by the Company is based on
oral agreements for the price of each load, rather than written contracts.
These oral agreements are more difficult to enforce than written contracts.
USE OF PROCEEDS
The Company will not receive any proceeds from sales of Shares by the
Selling Shareholders. The Company may receive cash proceeds from the exercise,
if any, of outstanding Warrants. However, certain holders of the Warrants have
the option to exercise the Warrants through a cashless exercise program, which
would result in no cash proceeds to the Company. As of the date of this
Prospectus, based on recent market prices for the Company's Common Stock,
management believes that it is unlikely that all of the Warrants will be
exercised since the exercise price of the Warrants is $0.60 per share. However,
if all of the Warrants were exercised with cash at the exercise price of $0.60
per share, then proceeds of the Offering to the Company would total an aggregate
of $540,000 in cash. After deduction of expenses of this Offering payable by the
Company, estimated to total $40,000, net cash proceeds are estimated to total
$500,000. Any net proceeds to the Company from the exercise of outstanding
warrants will be used for working capital.
6
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth information known to the Company regarding
the beneficial ownership of Shares of the Company's Common Stock as adjusted to
reflect the sale of the shares offered hereby by each Selling Shareholder. The
information set forth below is based upon information concerning beneficial
ownership provided to the Company by each Selling Shareholder. Except as
otherwise indicated below, each of the persons named in the table has sole
voting and investment power with respect to the shares set forth opposite such
person's name.
<TABLE>
<CAPTION>
Number of Shares
Owned Prior to Number of Shares Number of Shares Owned
Name Offering/(1)//(2)/ Offered Hereby/(1)/ After Offering/(1)//(3)/
---- ------------------ --------------------- ------------------------
<S> <C> <C> <C>
Alan Moore 925,000 900,000/(4)/ 25,000
Canadian Advantage Limited 333,854 333,854 0
Partnership/(6)/
Sovereign Partners, LP/(7)/ 835,935 835,935 0
Dominion Capital Fund Ltd./(8)/ 1,337,149 1,337,149 0
Frippoma S.A./(9)/ 2,550,000 2,550,000 0
S.B. Fletcher Consulting, 300,000 300,000/(5)/ 0
Inc./(10)/
Strauss Holding Limited/(11)/ 450,000 450,000 0
</TABLE>
_________________
/(1)/ The number of Shares underlying the Warrants or Debentures are those
Shares registered for sale upon exercise or conversion of the Warrants or
Debentures held by Selling Shareholders. The number of shares of Common
Stock indicated to be issuable in connection with conversion of the
Debentures and offered for resale hereby is an estimate determined in
accordance with a formula based on the market prices of the Common Stock,
as described in this Prospectus, and is subject to adjustment and could
be materially less or more than such estimated amount depending upon the
market price of the Common Stock at the time the Debentures are
converted.
/(2)/ Assumes that the Warrants are exercised and the Debentures are converted
and all Shares are sold by the Selling Shareholders.
/(3)/ Beneficial ownership is calculated in accordance with Rule 13d-3 (d) of
the Securities Exchange Act of 1934, as amended. Under Rule 13d-3 (d),
shares not outstanding that are subject to options, warrants, rights or
conversion privileges exercisable within 60 days are deemed outstanding
for the purpose of calculating the number and percentage owned by such
person of the class, but not deemed outstanding for the purpose of
calculating the percentage owned of the class by any other person.
/(4)/ Includes Shares subject to a lock-up agreement with the holders of the
Debentures whereby Mr. Moore has agreed that without prior consent he
will not sell any Shares for six months from the registration statement
registering these shares for resale.
/(5)/ Includes Shares subject to a bleed out agreement with the Company whereby
S.B. Fletcher will limit its weekly sales based on the bid price of the
common stock.
/(6)/ Mark Valentine and Ian McKinnon, both residents of Canada, are the
control persons of this offshore limited partnership in their positions
as directors of this limited partnership.
7
<PAGE>
/(7)/ Southridge Capital Management, LLC, a Delaware limited liability company,
is the general partner for this Delaware limited partnership. Stephen
Hicks and Daniel Pickett control the limited partnership in their
positions as the officers of the general partner.
/(8)/ David Simms, a resident of British Virgin Islands, controls the fund in
his position of sole director of the offshore fund.
/(9)/ This off shore entity is controlled by (and beneficially owned by) Paolo
Floriani and Floriana Cantarelli, both of Lugano, Switzerland.
/(10)/ This entity is beneficially owned and controlled by David Karson of New
York.
/(11)/ This off share entity is beneficially owned and controlled by Paolo Del
Bue of Lugano, Switzerland.
Relationships and Transactions with Certain Selling Shareholders
----------------------------------------------------------------
S.B. Fletcher Consulting, Inc. acted as a consultant for the Company over
the last year and received its 300,000 shares offered hereby as compensation for
consulting services. Except as described above, none of the Selling Shareholders
has had any position, office or other material relationship with the Company
during the past three years.
PLAN OF DISTRIBUTION
Sale of Securities by Selling Shareholders
------------------------------------------
The Selling Shareholders have advised the Company that prior to the date of
this Prospectus they have not made any agreements or arrangements with any
underwriters, brokers or dealers regarding the resale of the Shares. The Company
has been advised by the Selling Shareholders that the Shares may at any time or
from time to time be offered for sale either directly by the Selling
Shareholders or by their transferees or other successors in interest. Such sales
may be made in the over-the-counter market or in privately negotiated
transactions.
The Selling Shareholders have exercised their right to require the Company
to register the Shares which the Selling Shareholders purchased from the Company
in private transactions. The Selling Shareholders were granted certain
registration rights pursuant to which the Company has agreed to maintain a
current registration statement to permit public sale of the Shares for a period
of at least nine months from the date of this Prospectus or until the Shares
have been sold, whichever first occurs. The Company will pay all of the expenses
incident to the offering and sale of the Shares to the public by the Selling
Shareholders other than commissions and discounts of underwriters, dealers or
agents, if any. Expenses to be paid by the Company include legal and accounting
fees in connection with the preparation of the Registration Statement of which
this Prospectus is a part, legal fees in connection with the qualification of
the sale of the Shares under the laws of certain states, registration and filing
fees, printing expenses, and other expenses. The Company will not receive any
proceeds from the sale of the Shares by the Selling Shareholders. However, the
Company will receive the exercise price of the Warrants if and when the Warrants
are exercised, unless the cashless exercise feature is used by the Selling
Shareholders.
8
<PAGE>
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 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,
9
<PAGE>
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.
DIVIDEND POLICY
The Company has never declared or paid any dividends or distributions on
its Common Stock. The Company anticipates that for the foreseeable future all
earnings will be retained for use in the Company's business and no cash
dividends will be paid to stockholders. Any payment of cash dividends in the
future on the Common Stock will be dependent upon the Company's financial
condition, results of operations, current and anticipated cash requirements,
plans for expansion, as well as other factors that the Board of Directors deems
relevant.
10
<PAGE>
MANAGEMENT
Executive officers of the Company are elected by the Board of Directors,
and serve for a term of one year and until their successors have been elected
and qualified or until their earlier resignation or removal by the Board of
Directors, except as otherwise provided in the employment agreements with
Messrs. Truxell and Fagan. There are no family relationships among any of the
directors and executive officers of the Company.
The following table sets forth names and ages of all executive officers and
directors of the Company:
<TABLE>
<CAPTION>
Name, Age and
Municipality Residence Office Principal Occupation
---------------------- ------ --------------------
<S> <C> <C>
Robert W. Truxell Chairman of the Board and Chairman and Chief Executive Officer of
Bloomfield Hills, MI Director since January 1996; Integrated Waste Systems, 1992-1995;
Age: 75 Secretary since December President of Microcel, Inc., 1990-1992;
1997; CEO January 1996 to Vice-President of General Dynamics,
January 1997. 1983-1990
James P. Fagan President and Director since President and Chief Operating Officer
Dearborn, Michigan January 1996; Chief of Waste Reduction Systems 1992-1995;
Age: 49 Executive Officer since Vice-President of The Powers Fagan
January 1997 Group, Inc. 1990-1996
George P. Nassos Director since August 1997 Director of environmental management
Glenview, IL program and adjunct professor for
Age: 60 Stuart School of Business; 1996 -
present - President - Fiber Energy,
Inc., an environmental consulting
company; 1992-1995, Director of Fiber
Fuels division for Cemtech LP;
1981-1992 employed by Chemical Waste
Management, Inc.
Michael M. Grujicich Chief Financial Officer and Director Sales Canada - WRS 1993-1996,
Dearborn, MI Treasurer since August 1996 Director MRPII, General Dynamics Land
Age: 54 Systems Division 1983-1993, Divisional
Controller - Rockwell International
1981-1983
Michael R. Fugler Director since December 1999 Self-employed Attorney at Law since
New York, New York 1972, with a current practice emphasis
Age: 51 in Securities, Corporate Finance and
International Law; officer and
shareholder of Millennium Financial
Group, Inc. from 1996 to present.
</TABLE>
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
To the knowledge of the Management of the Company the following tables set
forth the beneficial ownership of the Company's Common Stock as of July 13, 2000
by each Director and each Executive Officer named in the Summary Compensation
Table, and by all Directors and Executive Officers as a group.
<TABLE>
<CAPTION>
Name of Beneficial Owner/Name of
Director/Identity of Group Shares Beneficially Owned Percent of Class
-------------------------- ------------------------- ----------------
<S> <C> <C>
Robert W. Truxell 1,026,462/(1)/ 8.75%
Chairman/Director
James P. Fagan 633,327/(2)/ 5.46%
President/CEO/Director
George P. Nassos 148,513/(3)/ 1.3%
Director
Michael R. Fugler 100,000/(4)/ 0.9%
Director
Michael Grujicich, 0 0
Treasurer
All directors and executive officers 1,908,302/(5)/ 15.3%
as a group (five persons)
</TABLE>
_____________
(1) Includes: (i) 345,800 shares held jointly; (ii) currently exercisable
options and warrants to purchase 50,000 shares at $0.125 per share; (iii)
currently exercisable options to purchase 505,662 shares at $0.125 per
share; (iv) currently exercisable options to purchase 125,000 common shares
at $0.125 per share. Does not include an option to acquire 12.5%
(inclusive of current holdings) of the fully diluted ownership of the
Company, exercisable at $0.30 per share, which vests upon the Company
attaining six consecutive months with EBITDA in excess of $600,000.
(2) Includes: (i) 77,100 shares held by James P. Fagan; (ii) currently
exercisable options and warrants to purchase 70,386 shares at $0.125 per
share; (iii) 125,000 shares at $0.125 per share; and (iv) 360,841 shares at
$0.125 per share. Does not include an option to acquire 12.5% (inclusive
of current holdings) of the fully diluted ownership of the Company,
exercisable at $0.30 per share, which vests upon the Company attaining six
consecutive months with EBITDA in excess of $600,000.
(3) Includes currently exercisable options to purchase 100,000 shares at $0.125
per share.
(4) Includes currently exercisable options to acquire 100,000 shares at $0.125
per share.
(5) Includes securities reflected in footnotes 1-4.
12
<PAGE>
To the knowledge of the Directors and Senior Officers of the Company, as of
July 13, 2000, there are no persons and/or companies who or which beneficially
own, directly or indirectly, shares carrying more than 5% of the voting rights
attached to all outstanding shares of the Company, other than:
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner Beneficial Ownership Percent of Class
---------------- -------------------- ----------------
<S> <C> <C>
Frippoma S.A. 2,550,000/(1)/ 23.1%
Via Cattori 3, 6902 Paradiso
Switzerland
Robert W. and Linda C. Truxell 1,026,462/(2)/ 8.75%
10200 Ford Road
Dearborn, MI 48126
James P. Fagan 633,327/(3)/ 5.46%
4415 Comanche
Okemos, MI 48864
Alan Moore 925,000/(4)/ 7.73%
9441 LBJ Freeway
Suite 500
Dallas, TX 75243
</TABLE>
____________________
(1) Consists of shares directly owned.
(2) 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. Does not include an option to acquire 12.5%
(inclusive of current holdings) of the fully diluted ownership of the
Company, exercisable at $0.30 per share, which vests upon the Company
attaining six consecutive months with EBITDA in excess of $600,000.
(3) Includes: (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. Does not include an option to acquire 12.5% (inclusive
of current holdings) of the fully diluted ownership of the Company,
exercisable at $0.30 per share, which vests upon the Company attaining six
consecutive months with EBITDA in excess of $600,000.
(4) Consists of 25,000 shares directly owned, and 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.
13
<PAGE>
Other than: (i) the possible conversion into the Company's Common Stock of
the remaining $1,375,500 principal amount of convertible debentures issued by
the Company in June 1998; and (ii) the option held by Messrs. Truxell and Fagan
to acquire 12.5% each (inclusive of current holdings) of the fully diluted
ownership of the Company (which vests upon the Company attaining six consecutive
months with EBITDA in excess of $600,000), there are no arrangements or
agreements which could in the future result in a change of control of the
Company.
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 July 19, 2000 there were 11,039,889 shares of Common Stock
issued and outstanding that are held of record by approximately 2,915
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
14
<PAGE>
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.
Dividends
See the discussion under the heading "Dividend Policy" above in this
prospectus.
Anti-Takeover Provisions
The Company's Articles of Incorporation and Bylaws (the "Incorporation
Documents") contain provisions that may make it more difficult for a third party
to acquire, or may discourage acquisition bids for, the Company. The Board of
Directors of the Company is authorized, without action of its shareholders, to
issue authorized but unissued Common Stock and Preferred Stock. The existence
of undesignated Preferred Stock and authorized but unissued Common Stock enables
the Company to discourage or to make it more difficult to obtain control of the
Company by means of a merger, tender offer, proxy contest or otherwise.
SEC POSITION ON INDEMNIFICATION
Pursuant to the provisions of the Nevada General Corporation Law, the
Company has adopted provisions in its Articles of Incorporation which provide
that directors of the Company shall not be personally liable to the Company or
its stockholders for damages for breach of fiduciary duty as a director or
officer, except for liability for: (i) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of the law; or (ii) the
payment of distributions in violation of Nevada Revised Statutes 78.300.
The Company's Articles of Incorporation state that the Company shall
indemnify, to the fullest extent permitted by applicable law, any person, and
the estate and personal representative of any such person, against all liability
and expense (including attorneys' fees) incurred by reason of the fact that he
is or was a director, officer, employee or agent of the Company or, while
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or enterprise. The
Company also shall indemnify any person who is serving or has served the Company
as director, officer, employee, fiduciary, or agent, and that person's estate
and personal representative, to the extent and in the manner provided in any
bylaw, resolution of the shareholders or directors, contract, or otherwise, so
long as such provision is legally permissible.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable.
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1999 the Company, Robert Truxell and James Fagan entered into
an agreement regarding compensation with the holders of the Debentures and
Millennium Financial Group, Inc. whereby, among other things, Messrs. Truxell
and Fagan agreed to substantially reduced salaries for a period of time and each
was granted an option to acquire 12.5% (inclusive of his current holdings) of
the fully diluted ownership of the Company, exercisable at $0.30 per share,
which vests upon the Company attaining six consecutive months with EBITDA in
excess of $600,000. This option was approved by the Company's then Board of
Directors in April 1999, and again in November 1999.
DESCRIPTION OF BUSINESS
General Development of Business
-------------------------------
Rich Coast Inc. (the "Company" and/or "Rich Coast") is a non-hazardous
waste treatment and disposal facility. Its primary operations have been
receiving recyclable liquid waste transported to Rich Coast by trucking
companies, and separating the waste into liquid waste streams and pumpable waste
streams containing a mixture of liquids and solids. Rich Coast's executive
office is located at 6011 Wyoming Avenue, Dearborn, MI. 48126. All of Rich
Coast's operations are located in Dearborn, Michigan at 6011 Wyoming Avenue.
The Company was initially incorporated in the Province of British Columbia
and through 1996 operated under the name of Rich Coast Resources Ltd. In
February 1997 the Company was reincorporated in Delaware under the name Rich
Coast Inc. Effective July 14,1998, the Company reincorporated in the State of
Nevada (from Delaware).
On January 16, 1996, the Company acquired a new plant and processing
facility located in Dearborn, Michigan from Mobil Oil Corporation (the "Wyoming
Terminal Facility"). This acquisition increased the Company's storage capacity
by more than nine million gallons of tank capacity which allows the Company to
pursue much larger contracts. The Company also acquired a 17-mile product
pipeline from the facility to the Detroit River, which gives the Company access
to the St. Lawrence Seaway and the Great Lakes Waterway System. At the time the
pipeline was acquired, management expected to be able to use the waterway access
to ship and receive products by water vessel and thereby increase the Company's
customer base. The Company's original plan was to consider using the Pipeline
for the transportation of waste or the transportation of treated waste.
However, the Company has determined that it is currently more efficient to use
conventional transportation methods for waste. Therefore, during late 1999, the
Company began considering selling or otherwise disposing of the Pipeline.
Management has had preliminary discussions with companies and individuals within
the telecommunication industries and based on these discussions and analysis,
management considers that the Pipeline has an alternative use as a right-of-way
for telecommunication cable or similar use. To fund acquisition of both the
16
<PAGE>
terminal and pipeline, 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. Purchase prices for the terminal and pipeline were
$1,579,000 and $296,000 respectively.
In June 1999, Thornton Donaldson and Geoffrey Hornby resigned as directors
of the Company. In December 1999, Michael Fugler was appointed to the Board of
Directors.
Rich Coast operates a 250 gallon per minute waste stream separation system
at the Wyoming Avenue terminal 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 a cattle slaughterhouse. The
production installation test proved that marketable grease could be efficiently
recovered using Rich Coast's process equipment. A 100% treatment system is
planned for installation in August, with full-scale operation commencing in
September 2000. Resultant operating savings and recovered waste product
revenues from the slaughterhouse operation will be shared with Rich Coast.
Subsequent and similar installations are planned at two other
slaughterhouse locations by calendar year end. Results are expected to be very
profitable for both the customer and Rich Coast, but most significant to the
future of Rich Coast is that the Company can go worldwide with installations
without having to depend on trucking companies and brokers to bring business
into the Company's facility.
A pulp-paper demonstration has also been completed successfully with the
result that an engineering contract for a production system at Rock-Tenn's Plant
in Otsego, Michigan has been received and fulfilled. A production contract is
now being negotiated for the pulp-paper plant.
Currently, the Company's waste treatment business is generated through
"blanket" contracts between the large automotive companies and Tier I suppliers
(the largest waste disposal companies). These contracts consisted of pricing to
handle a large variety of waste streams. Rich Coast submits pricing for
specific waste streams included in the "blanket" contracts. Written contracts
are seldom awarded by the Tier I companies to Tier II companies such as Rich
Coast. Rather, Rich Coast conducts most of its business under oral contracts.
Ford Road Facility
------------------
The Company's Ford Road facility, purchased June 2, 1993 and placed in
operation on July 9, 1993 was approaching its capacity limits in 1999. After
acquisition of Rich Coast's
17
<PAGE>
Wyoming Avenue site on January 15, 1996 and facilitation of that site, the Ford
Road property was no longer necessary to meet capacity requirements and was
offered for sale.
The Company received its first offer for purchase of its Ford Road facility
on October 20, 1998; however, the purchaser was unable to obtain financing. A
second offer from a different purchaser, de Monte Fabricators, Ltd., was signed
on September 9, 1999 for the same price, $450,000, as the October 1998 offer.
The sale closed on August 11, 2000. The carrying value for the Company's Ford
Road facility was higher than the accepted sale price and resulted in an
impairment loss of $169,739, which was recorded during the quarter ended October
31, 1999. In anticipation of the closing of the sale, all Ford Road operations
have been consolidated at the Company's Wyoming Avenue site, and this
consolidation will allow savings to be realized in the Company's overhead.
Relocation and consolidation of operations has generated increased capability
through the installation of two new and larger truck dumping pits.
Wyoming Avenue Site
-------------------
When the Wyoming Avenue 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
Avenue 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.
Liquid waste disposal operations have been transferred from the Company's
Ford Road facility to its Wyoming Avenue site. Non-hazardous wastes in the
form of sludges, oil wastes, drum and pallet loads, waste waters and leachates
are now treated at the Wyoming Avenue site for disposal to the Detroit sewage
system, the Browning-Ferris Industries landfill at Arbor Hills, Michigan or as a
recycled oil product. Adequate space exists at the Wyoming Avenue site for
additional processing equipment to meet capacity demands expected over the next
several years.
Rich Coast's 17 acre Wyoming Avenue site has had 58 borings analyzed by the
State of Michigan and has received a "covenant not to be sued" by the State of
Michigan. This environmental status is extremely attractive to all major
automotive industry suppliers in the area, inasmuch as they avoid liability for
any pollution that existed at the time borings were made. Rich Coast has
successfully passed customer audits that allow the Company to compete for the
oily wastes coming out of the auto industry. The biological treatment system is
an excellent complementary system to the waste oil treatment in that the oily
water separated during the treatment process can go directly to the biological
treatment system and then to the sewer with assurances that even the more
stringent discharge regulations now being considered by the EPA can be met.
18
<PAGE>
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. The pipeline has defects in its exterior coatings that need
to be repaired, at a cost estimated at $150,000. Before the pipeline will be
repaired and utilized, the Company will require long term contracts with several
large volume users to justify the expense and to justify barge shipments
throughout the Great Lakes Region and the St. Lawrence Seaway. Currently, the
pipeline is not operational.
Research and Development
------------------------
In the past two fiscal years the Company estimates it has not made any
expenditures on Research and Development, but it has made investments in
development of waste treatment processes. Development work related to
separation of various liquid phases and light solids has been done on an air-
sparged hydrocyclone system. Separation of phenols, fats, oils, greases and
other impurities from water based waste streams has been developed and
incorporated in a commercial-size installation at the Wyoming Avenue site.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the
consolidated financial statements included herein, which were prepared in
accordance with generally accepted accounting principles ("GAAP") in the United
States.
The Company entered into a new growth stage when Rich Coast Resources,
Ltd., Integrated Waste Systems and the Powers Fagan Group merged with an
effective financial start date of October 31, 1995. At that time the main
business focus became treatment of non-hazardous wastes. All remaining mining,
gas and oil related businesses were disposed of in fiscal year 1997 without any
gain or loss to the Company.
As a result of acquiring the Wyoming Avenue terminal facility from Mobil
Oil Corporation, and redomiciling of the Company from British Columbia, Canada
to Delaware, U.S.A., the Company reorganized into the parent company, Rich Coast
Inc. and four subsidiary corporations identified as:
Rich Coast Resources, Inc.
Rich Coast Oil, Inc.
Waste Reduction Systems, Inc.
Rich Coast Pipeline, Inc.
On June 19, 1998, the Company reverse split its Common Stock one-for-four.
Effective July 14, 1998 the Company incorporated in the State of Nevada.
19
<PAGE>
On February 17, 1999, the Company's shares were de-listed from the NASDAQ
Small Cap Market. The Company's common stock is now trading on the Over-the-
Counter (OTC) Bulletin Board.
Results of Operations
---------------------
Revenues increased $640,296 or 28.2% from $2,267,452 to $2,907,748 for the
twelve months ended April 30, 1999 and 2000, respectively. The revenue increase
resulted from price increases, new customers and retention of a majority of the
business that was diverted from City Environmental, a major competitor in
Detroit, Michigan, when that company was temporarily shut down during the months
of October, November and December 1999. City Environmental operations resumed
in January 2000 without any significant impact on Rich Coast's business. Rich
Coast retained about 75% of diverted business. Rich Coast's lower prices and
the opportunity for Rich Coast to demonstrate its service capabilities have
helped retain this business. Net loss for this latest fiscal year ended April
30, 2000 was $3,134,090 compared to the previous fiscal year loss of $2,572,496.
Included in the $3,134,090 loss are depreciation and impairment losses of
$1,954,674 which are non-cash events.
Cost of sales decreased by $139,365, or 10%, from $1,378,367 to $1,239,002.
The decrease resulted from a reduction in landfill and transportation costs.
General and administrative expense increased by $223,417, or 10%, from
$2,188,888 to $2,412,305. The increase resulted primarily from increased
property taxes of approximately $75,000, increased depreciation of approximately
$82,000, a lost deposit relating to a renovation contract that was terminated of
approximately $88,0000, increased repairs and maintenance, utilities and
pipeline staking fees of approximately $42,000, and increased bad debt of
approximately $22,000; offset by a decrease in legal and accounting fees of
approximately $109,000.
Sales and marketing decreased $256,962, or 57% from $450,059 during the
fiscal year ended April 30, 1999 to $193,097 during the fiscal year ended April
30, 2000. This decrease was due to termination of contracts with new business
developments.
Rich Coast's asset values were thoroughly reviewed for its fiscal year
ended April 30, 2000 in consideration of management's decision to focus on off-
site customer locations for installations of recently developed proprietary
processes. During the year ended April 30, 1999, the Company incurred $50,000
of expense related to the Comer lawsuit and a total impairment loss of
$1,564,595 was recorded during the year. The impairment loss relates to the
Company's distillation unit, Ford Road facility and ZPM equipment. As a result
its distillation unit, located at Rich Coast's terminal in Dearborn, Michigan
was written down from $2,024,706 to $800,000 during the third quarter of its
fiscal year ending April 30, 2000. The unit is being stored pending a study of
potential future uses, one of which is production of activated charcoal.
Reapplication of this distillation unit, originally designed for refinement of
sulfur ore, to soil remediation did not
20
<PAGE>
prove to be economically feasible. It is thought that certain portions of the
distillation unit can be used to produce activated charcoal and that portion of
the system has been valued at $800,000.
Additionally, asset value was reduced by $169,739 due to Rich Coast's sale
of its Ford Road facility for less than its book value. This impairment loss
was reported in the second quarter of this fiscal year ended April 30, 2000. In
the fourth quarter of this latest fiscal year, the Company also wrote off the
special aeration unit purchased from ZPM due to its limited ability to accept
even modest variations in waste streams and the system's unacceptably high noise
level. The Company realized an impairment loss of $170,150 on this equipment.
Lawsuit settlement expense increased by $100,000, or 200%, from $50,000 to
$150,000. The increase resulted from the settlements of law suits with Mobil Oil
Corp., for a cash payment of $100,000, and with Comer Holdings for a cash
payment of $50,000 and the issuance of 250,000 shares of common stock, with a
market value of $50,000. During the fiscal year ended April 30, 1999, the
Company accrued $50,000 of expense related to the Comer lawsuit.
Interest expense, beneficial conversion feature, decreased by $764,666, or
100%, from $764,666 to $0. The beneficial conversion features related to the
10% convertible promissory notes (converted to common stock during the year
ended April 30, 1999) and the 8% convertible debentures ($1,375,500 outstanding
principal at April 30, 2000) were fully amortized to interest expense during the
year ended April 30, 1999. Other interest expense increased $189,383 or 65%
from $293,456 in 1999 to $482,839 in 2000. This increase was primarily due to
the interest accrued on the 8% convertible debenture, which was not outstanding
for the entire year ended April 30, 1999, and the increase from 8% to 12% on the
Company's approximately $76,000 land contract payable.
During the fiscal year ended April 30, 1999, the Company made various
modifications to improve efficiencies in its waste treatment process. The
Company recorded a change in its estimated accrued oil and waste treatment cost,
resulting in a gain of $285,588.
Net loss for the fiscal year ended April 30, 2000 was $3,134,090 compared
to a net loss of $2,572,496 for the fiscal year ended April 30, 1999, an
increase of $561,594 or 22%. Loss per share decreased $0.09, or 18%, from $0.49
per share for the fiscal year ended April 30, 1999 to $0.40 per share for the
same period in 2000. Loss per share was also impacted by an increase in the
weighted average number of shares of 2,714,140.
Recently Issued Accounting Pronouncements
-----------------------------------------
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
as amended, is effective for financial statements for all fiscal quarters of all
fiscal years beginning after June 15, 2000. SFAS No. 133 standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity recognize those items
as assets or liabilities in the statement of financial position and measure them
at fair value. SFAS No. 133 also addresses the accounting for certain hedging
activities. The Company
21
<PAGE>
currently does not have any derivative instruments nor is it engaged in hedging
activities, thus the Company does not believe implementation of SFAS No. 133
will have a material impact on its financial statement presentation or
disclosures.
Liquidity and Capital Resources
-------------------------------
The Company's financial statements for the year ended April 30, 2000 have
been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of
business. For the year ended April 30, 2000, the Company reported a net loss of
$3,134,090 and has a stockholders' deficit of $1,145,023. At April 30, 2000, a
significant portion of the Company's debt is currently due and the Company has a
working capital deficit of $4,665,200. The Company has also experienced
difficulty and uncertainty in meeting its liquidity needs. The Independent
Auditors' Report on the Company's financial statements as of and for the year
ended April 30, 2000 included a "going concern" explanatory paragraph which
means that the Auditors expressed substantial doubt about the Company's ability
to continue as a going concern. Management's plans to address these concerns
include:
(a) Waste processing at customers' sites
Management has developed plans to consider shifting from processing waste
treatment at the Company's facilities to processing waste directly at
customer sites, which management believes may result in increased profit
margins. The Company has entered into a contract with a slaughterhouse to
implement customer site waste treatment during the summer or fall of 2000.
Upon evaluation of this initial contract, management will determine the
extent to which the Company will pursue customer site waste treatment
versus using its current facilities.
(b) Sale of Ford Road facility and consolidation of operating sites
The Company sold its Ford Road facility for $450,000, which produced a
positive cash flow of $217,743 after payment of debt that was secured by
the facility and certain other obligations. The Company intends to use the
proceeds to repay the $75,525 land contract and for other working capital
purposes. Management consolidated its waste processing operations at its
Wyoming Terminal facility and expects to gain cost efficiencies and savings
through this process.
(c) Financing agreement
The Company has a signed agreement with an investment banker that will
provide up to $2,000,000 of either equity or debt financing upon the
Company meeting certain operating conditions, some of which pertain to the
results of the Company's initial customer site waste processing. Through
April 30, 2000, $600,000 of equity financing has been provided in exchange
for the issuance of 3,000,000 shares of common stock. An additional
$400,000 has
22
<PAGE>
been scheduled for delivery during 2000 ($225,000 of which was received in
June 2000 in exchange for the issuance of 1,125,00 shares of common stock).
(d) Other plans
Management is pursuing negotiations with current debt holders to modify the
terms of the agreements, including possible extension of due dates.
Management is also evaluating the potential sale of other Company assets,
including the Company's pipeline.
The financial statements do not include any adjustments relating to the
recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the Company be unsuccessful in
implementing these plans, or otherwise unable to continue as a going concern.
Prospects for Rich Coast's fiscal year beginning May 1, 2000 are
significantly better than at any previous time in the Company's history because
of its emphasis on more profitable off-site installations of proprietary Rich
Coast systems, its first long-term contract with a cattle slaughterhouse
company, and reduced overhead resulting from the sale of its Ford Road facility.
Improved profitability from off-site operations should result from
efficiencies realized by processing a consistent waste stream on a continuous
basis, and by eliminating the transportation and associated loading and
unloading costs when waste materials must be delivered to treatment and disposal
sites. Also of major significance is Rich Coast's proprietary system for
aeration and flocculation of waste streams, so that marketable products are
recovered while cleaning up the waste stream sufficiently to meet environmental
standards. This avoids costly waste stream disposal surcharges and, in some
cases, allows recycling of the waste water.
While Rich Coast concentrates on growing its off-site business the Company
will continue to improve its waste treatment business at its Dearborn, Michigan
facility. The revenue growth rate of 28.2% for the fiscal year ended April 30,
2000 is a growth rate expected to be exceeded as a result of: (i) on-site
operations being consolidated at the Company's Wyoming Avenue terminal in
Dearborn, Michigan in July 2000; and (ii) operations at cattle slaughterhouse
facilities.
Improvements planned for the Wyoming Avenue terminal include new and more
efficient dumping pits, which will also increase capacity. These pits will be
housed in a pre-fabricated steel structure, which will be approximately 18,000
square feet in size and designed to accommodate supplemental pit waste
processing equipment designed to reduce costs and further increase capacity. If
business cash flow continues to improve from its slaughterhouse operations
contract and consolidated operations at Wyoming Avenue, the planned improvements
can be funded without additional equity financing. However, as customer demands
or cash flow dictate, then any additional available equity financing will be
used as required.
During the year ended April 30, 2000, net cash used in operating activities
was approximately $484,000. Net cash used in operating activities during the
year ended April 30, 1999 was approximately $995,000. The primary reason for the
decrease was due to the increase in sales and decrease in cost of sales as
described in "Results of Operations" above. Net cash used in operating
activities during the year ended April 30, 2000 includes the net loss for the
year of approximately $3,134,000 reduced by non-cash expenses of approximately
$2,165,000 and by a net increase in accounts payable and accrued expenses of
approximately $540,000.
Cash flows used in investing activities was approximately $23,000 during
the year ended April 30, 2000 compared to $655,000 during the year ended April
30, 1999. During 1999, Rich Coast used cash of approximately $275,000 for
finance charges related to the obtaining funding under the 8% convertible
debentures and used cash of approximately $380,000 for capital expenditures.
During 2000, no cash was expended for financing charges as Rich Coast did not
obtain any additional debt financing during the year and approximately $38,000
of cash was used for capital expenditures.
No major capital expenditures were made by Rich Coast during the fourth
quarter. There were no outstanding commitments for capital expenditures at
April 30, 2000.
Cash flows provided by financing activities was approximately $524,000
during the year ended April 30, 2000 compared to $1,597,000 during the year
ended April 30, 1999. During 1999, the Company obtained funding of $1,500,000
under the 8% convertible debentures, received $210,000 upon the exercise of
stock options and repaid approximately $119,000 of long-term debt. During 2000,
the Company sold 3,000,000 shares of common stock exchange for cash of $600,000
and repaid approximately $70,000 of long-term debt.
23
<PAGE>
DESCRIPTION OF PROPERTY
Ford Road Facility
------------------
The total site area at the Ford Road location comprised approximately 3.5
acres and included a 23,000 square foot steel and brick building in which the
treatment plant was located. On August 11, 2000, the Company closed the sale of
the property to de Monte Fabricators, Ltd. All operations at the Ford Road
location were moved to the Company's Wyoming Avenue terminal site.
Wyoming Avenue Site
-------------------
Rich Coast borrowed $2,000,000 and acquired Mobil's 17 acres in Dearborn,
Michigan 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.
Rich Coast, Inc. Pipeline
-------------------------
The Rich Coast, Inc. pipeline runs 17 miles from the Company's Wyoming
Avenue site to Mobil's Woodhaven Terminal Facility. The pipeline is currently
not operational. The Company cannot utilize the pipeline until it is repaired.
This property is subject to a security interest granted to the holders of the 8%
Convertible Debentures.
24
<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.OB." 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.
OTC Market
<TABLE>
<CAPTION>
Calendar Quarter High Bid Price(1) Low Bid Price(1)
---------------- ------------------------ ------------------------
<S> <C> <C> <C>
2000 April 1 - June 30 $ 0.40 $ 0.16
January 1 - March 31 0.53 0.125
1999 October 1 - December 31 0.32 0.10
July 1- October 31 0.33 0.09
April 1-June 30 0.50 0.21
January 1-March 31 1.50 0.37
1998 October 1-December 31 2.00 0.62
July 1-September 30 1.85 0.50
April 1-June 30 4.12 1.25
January 1-March 31 4.12 1.37
</TABLE>
---------
The closing bid price of the OTC Common Stock on August 24, 2000 was $0.125
per share./(1)/
Holders
-------
As of July 19, 2000, there were approximately 2,915 holders of the
Company's Common Stock, and the number of shares issued and outstanding was
11,039,889.
------------------------
(1) Bid prices were provided by "Yahoo.com Stock Quotes" via the internet.
Quotations reflect inter-dealer prices, without mark-up, mark-down or
commission, and may not represent actual transactions.
25
<PAGE>
Dividends
---------
During the two most recent fiscal years, the Company has not declared or
paid any cash or other dividends on its Common Stock. The Company does not
expect to pay any dividends in the near future. The Company is prohibited from
paying dividends on its Common Stock while certain long-term indebtedness
remains outstanding.
EXECUTIVE COMPENSATION
Compensation and other Benefits of Executive Officers
-----------------------------------------------------
The following table sets out the compensation received for the fiscal years
end April 30, 1998, 1999, and 2000 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 $100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
FISCAL YEAR COMPENSATION LONG TERM COMPENSATION
Awards Payouts
------ -------
Restricted
Shares
Securities/(1)/ or All other
Name and Other Annual under Resricted LTIP Compen-
Principal Salary Bonus Compen- Option/SARs Share Payouts sation
Position Year ($) ($) sation Granted Units ($) ($)
-------- ---- --- --- ------ ------- ----- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert W. 2000 120,284 0 0 0 0 0 0
Truxell/ 1999 114,233 0 0 755,662 0 0 0
Chairman 1998 117,851 0 0 0 0 0 0
James P. 2000 144,627 0 0 0 0 0 0
Fagan 1999 230,000 0 0 556,227 0 0 0
CEO and 1998 144,316 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
--------------------------
As part of the Agreement of Merger dated 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
26
<PAGE>
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.
As part of the Agreement of Merger dated 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.
Pursuant to Mr. Truxell's Employment Contract, during fiscal 1996 the Board
of Directors of the Company authorized the issuance of 360,399 common shares
under the Company's 1995 Incentive Compensation Plan (the "1995 Plan"), subject
to certain conditions, to Robert W. Truxell and his wife, Linda C. Truxell, for
past services rendered by Mr. and Mrs. Truxell on behalf of Waste Reduction
Systems, Inc. prior to the Company's merger with WRS effective October 31, 1995.
Subsequent to April 30, 1996, the Board of Directors authorized the
issuance of 180,200 common shares under the 1995 Plan to James P. Fagan as
compensation for his services in connection with the Company's acquisition of
the Mobil Facility from Mobil Oil Corporation. Since the shares for both Mr.
Fagan and the Truxells were never issued, on July 30, 1997 the Board rescinded
the grant of shares. Instead, options to acquire 258,087 shares were granted to
the Truxells, exercisable at $.80 per share for ten years under the 1997 Stock
Option and Stock Bonus Plan. In addition, the Truxells received five year
warrants exercisable at $0.125 to purchase 140,775 shares. Mr. Fagan received
options to acquire 129,041 shares exercisable for ten years at $1.00 per share,
plus a five year warrant exercisable at $0.125 per share to purchase 70,386
shares.
Option/Stock Appreciation Rights ("SAR") Grants during the most recently
------------------------------------------------------------------------
completed Fiscal Year
---------------------
The following table sets out the stock options granted by the Company
during the previous fiscal year to the Named Executive Officers of the Company.
The following amounts include options that were granted prior to the previous
fiscal year but were repriced during that year.
27
<PAGE>
OPTION/SAR GRANTS IN PREVIOUS YEAR
INDIVIDUAL GAINS
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Market Price on
Name Granted (#) Fiscal Year Price ($/Sh) Date of Grant Expiration Date
---- ---------- ----------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
Robert W. Truxell 258,087 16.45% $0.125 $1.00 01/17/10
Robert W. Truxell 140,775 8.97% 0.125 1.00 07/30/02
Robert W. Truxell 100,000 6.37% 0.125 1.25 01/17/10
Robert W. Truxell 25,000 1.59% 0.125 1.25 01/17/10
Robert W. Truxell 48,675 3.10% 0.125 1.00 01/17/10
Robert W. Truxell 50,000 3.19% 0.125 .90 01/17/10
Robert W. Truxell 58,125 3.70% 0.125 1.00 01/17/10
James P. Fagan 129,041 8.22% 0.125 1.00 01/17/10
James P. Fagan 70,386 4.48% 0.125 1.00 07/30/02
James P. Fagan 100,000 6.37% 0.125 1.00 01/15/06
James P. Fagan 25,000 1.59% 0.125 1.00 05/09/06
James P. Fagan 58,125 3.70% 0.125 1.00 01/17/10
James P. Fagan 125,000 7.96% 0.125 .88 01/17/10
James P. Fagan 48,675 3.10% 0.125 1.00 07/20/07
</TABLE>
------------------
No stock shares or options were granted to the foregoing named executives
during this fiscal year ended April 30, 2000. All options granted under the
1995, 1996, 1997 and 1999 stock option plans were repriced to reflect market
values on November 19, 1999.
Aggregated Option/SAR Exercised in Last Financial Year and Fiscal Year-End
--------------------------------------------------------------------------
Option/SAR Values
-----------------
The following table sets out all Option/SAR exercised by the Named
Executive Officers during the most recently completed fiscal year and the
Option/SAR values for such persons as of the end of the most recently completed
fiscal year.
28
<PAGE>
Aggregated Option/SAR Exercised in Last Fiscal Year and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of
Unexercised Unexercised
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
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
--------------------
On November 20, 1999, the Company's Board of Directors approved a reduction
to $0.125 in option exercise prices for all options under the 1995, 1996, 1997
and 1999 stock option plans to reflect market values on November 19, 1999. This
repricing 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 were paid to directors, and no bonuses were paid or awarded to
directors or officers for the fiscal year ended April 30, 2000.
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.
29
<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 audited consolidated financial statements as of and for the year ended
April 30, 2000 of Rich Coast Inc. and subsidiaries included herein and elsewhere
in this Prospectus and Registration Statement have been audited by Gelfond
Hochstadt Pangburn, P.C., independent certified public accountants, to the
extent set forth in their report (which describes an uncertainty as to the
Company's ability to continue as a going concern) appearing herein and elsewhere
in the Registration Statement. Such financial statements have been so included
in reliance upon the report of such firm given upon their authority as experts
in auditing and accounting.
The consolidated financial statements of Rich Coast Inc. for the year ended
April 30, 1999 included in this Prospectus and Registration Statement have been
audited by Smythe Ratcliffe, Chartered Accountants, 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.
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.
Prior to the Company engaging Gelfond Hochstadt Pangburn, P.C., the Company
had 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.
30
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission, a registration statement
(together with all amendments thereto, the "Registration Statement") under the
1933 Act with respect to the securities offered hereby. This prospectus, filed
as part of the Registration Statement, omits certain information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement and to the exhibits filed therewith, which may be inspected without
charge at the principal office of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of the material contained therein may be
obtained from the Commission upon payment of applicable copying charges.
Statements contained in this prospectus as to the contents of any contract or
other document referred to herein are not necessarily complete, and in each
instance reference is made to the copy of the 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.
31
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR RICH COAST INC.
April 30, 2000 and 1999
_______________________
<TABLE>
<S> <C>
Report of Independent Auditors (Gelfond Hochstadt Pangburn, P.C.) 1
Report of Prior Independent Auditors (Smythe Ratcliffe) 2
Consolidated Financial Statements
Consolidated Balance Sheet 3
Consolidated Statements of Operations 4
Consolidated Statements of Stockholders' Equity (Deficit) 5
Consolidated Statements of Cash Flows 6-7
Notes to Consolidated Financial Statements 8-16
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
Board of Directors and Stockholders
Rich Coast Inc.
Dearborn, Michigan
We have audited the accompanying consolidated balance sheet of Rich Coast Inc.
and subsidiaries as of April 30, 2000 and the consolidated related statements of
operations, stockholders' equity (deficit), and cash flows for the year then
ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rich Coast Inc. and
subsidiaries as of April 30, 2000, and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to
the financial statements, the Company has suffered a net loss of $3,134,090
during the year ended April 30, 2000, and has a stockholders' deficit and a
working capital deficit of $1,145,023 and $4,665,220, respectively, at April 30,
2000. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans with regard to these matters
are also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
GELFOND HOCHSTADT PANGBURN, P.C.
Denver, Colorado
June 30, 2000
1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF RICH COAST, INC.
We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit) and cash flows of Rich Coast, Inc. for the year
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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the consolidated results of operations and cash flows of Rich
Coast, Inc. for the year ended April 30,1999 in conformity with generally
accepted accounting principles in the United States.
"Smythe Ratcliffe"
Chartered Accountants
Vancouver, Canada
August 12, 1999
2
<PAGE>
RICH COAST INC.
Consolidated Balance Sheet
April 30, 2000
<TABLE>
<CAPTION>
Assets
------
<S> <C>
Current assets:
Cash and cash equivalents $ 17,884
Accounts receivable, net of allowance for uncollectible
accounts of $12,700 (note 4) 589,483
Prepaid expenses 16,950
------------
Total current assets 624,317
Property and equipment, net (notes 5, 6 and 8) 3,378,037
Patent and technology, net 18,147
Deferred finance charges and deposits 124,013
------------
$ 4,144,514
============
Liabilities and stockholders' deficit
-------------------------------------
Current liabilities:
Current portion of long-term debt (note 8) $ 3,646,572
Accounts payable and accrued liabilities (note 7) 1,020,975
Accrued oil and waste treatment costs 396,615
Accrued interest 225,375
------------
Total liabilities (all current) 5,289,537
------------
Commitments and contingencies (notes 3 and 11)
Stockholders' deficit (note 9):
Preferred stock, $0.001 par value; 10,000,000 shares authorized,
no shares issued
Common stock, $0.001 par value; 100,000,000 shares authorized,
9,914,889 shares issued and outstanding at April 30, 2000 9,915
Additional paid-in capital 27,543,394
Accumulated deficit (28,698,332)
------------
(1,145,023)
------------
$ 4,144,514
============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
RICH COAST INC.
Consolidated Statements of Operations
Years Ended April 30, 2000 and 1999
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
----------- -----------
Sales $ 2,907,748 $ 2,267,452
----------- -----------
Operating expenses:
Cost of sales 1,239,002 1,378,367
General and administrative expenses 2,412,305 2,188,888
Sales and marketing expenses 193,097 450,059
Impairment of property and
equipment (note 6) 1,564,595
Lawsuit settlement expense (note 11) 150,000 50,000
----------- -----------
5,558,999 4,067,314
----------- -----------
Loss from operations (2,651,251) (1,799,862)
----------- -----------
Other (income) expense:
Interest expense:
Beneficial conversion feature 764,766
Other 482,839 293,456
Accrued oil and waste
treatment cost reversal (285,588)
----------- -----------
482,839 772,634
----------- -----------
Net loss $(3,134,090) $(2,572,496)
=========== ===========
Basic and diluted net loss
per common share outstanding $ (0.40) $ (0.49)
=========== ===========
Weighted average number of common shares
outstanding 7,922,833 5,208,693
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
RICH COAST INC.
Consolidated Statements of Stockholders' Equity (Deficit)
Years Ended April 30, 2000 and 1999
<TABLE>
<CAPTION>
Common Common Additional Total
Shares Shares Paid-In Accumulated Stockholders'
Number Amount Capital Deficit Equity(Deficit)
--------- ------ ----------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Balances, May 1, 1998 4,718,894 $4,719 $25,329,446 $(22,991,746) $ 2,342,419
Issuance of common
stock for cash upon
exercise of stock options 259,626 260 209,295 209,555
Issuance of common stock
upon conversion of
promissory note 1,040,299 1,040 695,960 697,000
Issuance of common stock
for interest 47,499 47 57,977 58,024
Interest- beneficial conversion 500,000 500,000
Net loss for the year ended
April 30, 1999 (2,572,496) (2,572,496)
--------- ------ ----------- ------------ --------------
Balances, April 30, 1999 6,066,318 6,066 26,792,678 (25,564,242) 1,234,502
Issuance of common stock
in settlement of lawsuit 250,000 250 49,750 50,000
Issuance of common stock
upon conversion of
convertible debentures 298,571 299 59,266 59,565
Issuance of common stock
for cash 3,000,000 3,000 597,000 600,000
Issuance of common stock
for consulting services 300,000 300 44,700 45,000
Net loss for the year ended
April 30, 2000 (3,134,090) (3,134,090)
--------- ------ ----------- ------------ --------------
Balances, April 30, 2000 9,914,889 $9,915 $27,543,394 $(28,698,332) $(1,145,023)
========= ====== =========== ============ ==============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
RICH COAST INC.
Consolidated Statements of Cash Flows
Years Ended April 30, 2000 and 1999
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
----------- -----------
Net cash provided by (used in) operating activities:
Net loss $(3,134,090) $(2,572,496)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization of deferred finance charges 52,397 58,024
Amortization of beneficial conversion feature 764,766
Impairment loss 1,564,595
Depreciation and amortization 390,079 395,900
Common stock issued for consulting and other
expenses 95,000
Loss on deposits 88,000
Loss on equipment disposal 3,147
Allowance for doubtful accounts (25,132)
Changes in operating assets and liabilities
Accounts receivable (72,933) (30,860)
Insurance claim receivable 435,290
Subscriptions receivable 25,000
Inventory 108,265
Prepaid expenses and other assets 17,967
Accounts payable and accrued liabilities 171,015 10,994
Accrued oil and waste treatment costs 138,980 (192,809)
Accrued interest 230,440
----------- -----------
Net cash used in operating activities (483,682) (994,779)
----------- -----------
Net cash provided by (used in) investing activities:
Refund of construction deposits 14,993
Capital expenditures (37,745) (379,671)
Deferred finance charges (275,318)
----------- -----------
Net cash used in investing activities (22,752) (654,989)
----------- -----------
Net cash provided by (used in) financing activities:
(Decrease) increase in bank overdraft (5,682) 5,682
Issuance of common stock for cash 600,000 209,555
Proceeds from convertible debentures 1,500,000
Repayment of long-term debt (70,000) (118,512)
----------- -----------
Net cash provided by financing activities 524,318 1,596,725
----------- -----------
Increase (decrease) in cash and cash equivalents 17,884 (53,043)
Cash and cash equivalents, beginning 53,043
----------- -----------
Cash and cash equivalents, ending $ 17,884 $ 0
=========== ===========
</TABLE>
6
<PAGE>
RICH COAST INC.
Consolidated Statements of Cash Flows
Year Ended April 30, 2000 and 1999
2000 1999
-------- --------
Supplemental disclosure of non cash investing
and financing activities:
298,571 shares of common stock issued
for principal ($54,500) and accrued interest
($5,065) due on convertible debentures $ 59,565
========
47,499 shares of common stock
issued for accrued interest $ 58,024
========
1,040,299 shares of common stock issued
for principal due on convertible debt $697,000
========
Supplemental disclosure of cash flows information
Cash paid for interest $205,065 $221,217
======== ========
See notes to consolidated financial statements.
7
<PAGE>
RICH COAST INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 2000 and 1999
1. ORGANIZATION AND BUSINESS
The Company is incorporated in the State of Nevada and operates a non-
hazardous waste treatment facility in Dearborn, Michigan 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 customers are located primarily throughout
the Great Lakes region and operate in various industries.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
These financial statements include the accounts of Rich Coast, Inc. and its
wholly-owned subsidiaries Rich Coast Oil, Inc., Waste Reduction Systems,
Inc., Rich Coast Pipeline, Inc., and Rich Coast Resources Inc. All
intercompany balances and transactions have been eliminated.
(b) Cash and cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
(c) Property and equipment
Property and equipment are recorded at cost. These assets are depreciated
using straight-line and accelerated methods over their estimated useful
lives as follows:
Buildings 39 years
Machinery and equipment 7 years
Bulk storage tanks 15 years
Property and equipment also includes a distillation unit and a pipeline with
carrying values of approximately $800,000 and $296,000, respectively, that
have not yet been placed in service. No depreciation has been taken on this
equipment.
Management assesses the carrying value of its long-lived assets for
impairment when circumstances warrant such a review. Generally, assets to be
used in operations are considered impaired if the sum of expected
undiscounted future cash flows is less than the assets' carrying values. If
impairment is indicated, the loss is measured based on the amounts by which
the assets' carrying values exceed their fair values.
(d) Deferred finance charges and deposits
Deferred financing charges consist of long-term financing charges that are
being amortized over the 5 year term of the related debt on a straight-line
basis. Deposits consist of operating and other deposits. During the year
ended April 30, 2000, the Company recorded a loss of $88,000 related to a
lost deposit under a renovation contract that was terminated.
8
<PAGE>
RICH COAST INC.
Notes to Consolidated Financial Statements (Continued)
Years Ended April 30, 2000 and 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(e) Patent and technology
Patent and technology consist of costs incurred related to the Company's
patents and is amortized over 15 years using the straight-line method.
Accumulated amortization at April 30, 2000 was approximately $15,000.
(f) Net loss per common share
Basic net loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding during the year. Diluted net
loss per share reflects the potential dilution that could occur if dilutive
securities and other contracts to issue common stock were exercised or
converted into common stock, unless the effect is to reduce loss or increase
earnings per share. The Company has no potential common stock instruments,
including outstanding options and warrants, which would result in dilutive
loss per share during the years ended April 30, 2000 and 1999.
(g) Revenue recognition and accrued oil and waste treatment costs
The Company generally recognizes revenue at the time waste is accepted and
treated. The Company also accrues the cost of treating waste at the time the
waste is accepted for treatment. Accrued oil and waste treatment costs at
April 30, 2000 represents costs for waste that had been accepted but not yet
treated. During the year ended April 30, 1999, the Company made various
modifications to improve efficiencies in its waste treatment process. The
Company recorded a change in its estimated accrued oil and waste treatment
cost resulting in a gain of $285,588 for the year ended April 30, 1999.
(h) Income taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in the consolidated statement of operations in the period that includes the
enactment date.
(i) Financial instruments
It is not practical to estimate the fair value of the Company's 10% senior
secured note and its 8% loan as the Company is currently in default on the
underlying agreements and management cannot estimate fair values given the
Company's current financial condition. The carrying value of the Company's
8% convertible debentures approximates fair value because the debentures
bear interest at current market rates. The carrying values of the Company's
other financial instruments approximate fair values because of their short
maturities.
(j) 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.
9
<PAGE>
RICH COAST INC.
Notes to Consolidated Financial Statements (Continued)
Years Ended April 30, 2000 and 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) Comprehensive income
Statement of Financial Accounting Standard (SFAS) No. 130, Reporting
Comprehensive Income, requires disclosure of comprehensive income which
includes certain items not reported in the statement of income, including
unrealized gains and losses on available-for-sale securities and foreign
currency translation adjustments. During the years ended April 30, 2000 and
1999, the Company did not have any components of comprehensive income to
report.
(l) Recently issued accounting pronouncements
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
as amended, is effective for financial statements for all fiscal quarters of
all fiscal years beginning after June 15, 2000. SFAS No. 133 standardizes
the accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. SFAS No. 133 also addresses the
accounting for certain hedging activities. The Company currently does not
have any derivative instruments nor is it engaged in hedging activities,
thus the Company does not believe implementation of SFAS No. 133 will have a
material impact on its financial statement presentation or disclosures.
(m) Beneficial conversion feature:
During the years ended April 30, 1998 and 1999, the Company entered into a
10% senior secured note payable and 8% convertible debentures, respectively
(Note 7). Both instruments included conversion features that were in-the-
money at the issuance dates. These beneficial conversion features are
accounted for as an interest charge and are amortized over the period from
the dates of issuance through the dates the instruments are first
convertible. The interest charge was fully amortized as of April 30, 1999.
This policy conforms to the accounting for these transactions set forth in
Emerging Issues Task Force (EITF) Topic D-60 and EITF Issue No. 98-5.
(n) Stock-based compensation:
SFAS No. 123, Accounting for Stock-Based Compensation, defines a fair-value-
based method of accounting for stock-based employee compensation plans and
transactions in which an entity issues its equity instruments to acquire
goods or services from non-employees, and encourages but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value.
The Company has chosen to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees and related
interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to
acquire the stock.
(o) Reclassifications:
Certain amounts in the 1999 financial statements have been reclassified to
conform to the 2000 presentation.
(p) Reverse stock split:
In June 1998, the Company effected an one-for-four reverse split of its
common stock. All share and per share amounts reflect the reverse split.
10
<PAGE>
RICH COAST INC.
Notes to Consolidated Financial Statements (Continued)
Years Ended April 30, 2000 and 1999
3. GOING CONCERN, RESULTS OF OPERATIONS, AND MANAGEMENT'S PLANS
The Company's financial statements for the year ended April 30, 2000 have
been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal
course of business. For the year ended April 30, 2000, the Company reported
a net loss of $3,134,090 and at April 30, 2000 has a stockholders' deficit
of $1,145,023. At April 30, 2000, a significant portion of the Company's
debt is currently due and the Company has a working capital deficit of
$4,665,220. The Company has also experienced difficulty and uncertainty in
meeting its liquidity needs. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans to
address these concerns include:
(a) Waste processing at customers' sites
Management has developed plans to consider shifting from processing waste
treatment at the Company's facilities to processing waste directly at
customer sites which management believes may result in increased profit
margins. The Company has entered into a contract with a slaughterhouse
to implement customer site waste treatment during the summer or fall of
2000. Upon evaluation of this initial contract, management will
determine the extent to which the Company will pursue customer site waste
treatment versus using its current facilities.
(b) Sale of Ford Road facility and consolidation of operating sites
The Company has entered into a sales contract to sell its Ford Road
facility for $450,000 (Note 6). The Company intends to use the proceeds
to repay the $75,525 land contract secured by the facility and for other
working capital purposes. Upon completion of the sale, management will
also consolidate its waste processing operations to its Wyoming Terminal
facility and expects to gain cost efficiencies and savings through this
process.
(c) Financing agreement
The Company has an agreement with an investment banker that will provide
up to $2,000,000 of either equity or debt financing upon the Company
meeting certain operating conditions, some of which pertain to the
results of the Company's initial customer site waste processing. Through
April 30, 2000, $600,000 of equity financing has been provided in
exchange for the issuance of 3,000,000 shares of common stock. An
additional $400,000 has been scheduled for delivery during 2000 ($225,000
of which was received in June 2000 in exchange for the issuance of
1,125,000 shares of common stock).
(d) Other plans
Management is pursuing negotiations with current debt holders to modify
the terms of the agreements, including possible extension of due dates.
Management is also evaluating the potential sale of other Company assets,
including the Company's pipeline.
The financial statements do not include any adjustments relating to the
recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should the Company be
unsuccessful in implementing these plans, or otherwise unable to continue as
a going concern.
11
<PAGE>
RICH COAST INC.
Notes to Consolidated Financial Statements (Continued)
Years Ended April 30, 2000 and 1999
4. ACCOUNTS RECEIVABLE AND SIGNIFICANT CONCENTRATIONS
The Company grants credit to its customers, generally without collateral.
Approximately 11% of the Company's total sales for the year ended April 30,
2000, were generated from one customer. At April 30, 2000, approximately 11%
of net trade receivables was due from one customer. Bad debt expense for the
years ended April 30, 2000 and 1999 was approximately $91,000 and $45,000,
respectively. The Company's customers are concentrated in the Great Lakes
region, including Canada. During the years ended April 30, 2000 and 1999,
approximately 14% and 15%, respectively, of total sales arose in Canada.
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at April 30, 2000:
Land $ 250,041
Buildings 1,113,537
Bulk storage tanks 636,534
Pipeline 296,187
Machinery and equipment 4,451,800
----------
Total at cost 6,748,099
Accumulated depreciation and impairment reserve 3,370,062
----------
$3,378,037
==========
6. IMPAIRMENT
During the year ended April 30, 2000, the company recorded impairment losses
of $1,564,595 related to its Ford Road facility and certain property and
equipment. In September 1999, the Company entered into a contract to sell
its Ford Road facility for $450,000. The Company has written down the value
of the facility to the contract amount less anticipated closing costs,
resulting in an impairment loss of $169,739. In January 2000, the Company
obtained an appraisal of machinery and equipment including the Company's
distillation unit that has not been placed in service. The appraisal
estimates the fair value of the distillation unit at approximately $800,000,
resulting in an impairment loss of $1,224,706. In November 1999, the Company
notified the manufacturer of certain machinery and equipment known as ZPM
equipment, that the equipment did not meet certain specifications. The
Company has not received any response from the manufacturer and has
therefore written down the carrying value of the equipment to its fair
value. The fair value was determined by management based on estimates of the
market value of the equipment in its current condition. The write down
resulted in an impairment loss of $170,150.
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
At April 30, 2000, accounts payable and accrued liabilities consist of the
following:
Trade payables $ 654,268
Lawsuit settlement (note 10) 37,500
Accrued payroll and payroll taxes 28,426
Accrued property taxes 300,781
----------
$1,020,975
==========
12
<PAGE>
RICH COAST INC.
Notes to Consolidated Financial Statements (Continued)
Years Ended April 30, 2000 and 1999
<TABLE>
<CAPTION>
<S> <C>
8. LONG-TERM DEBT
At April 30, 2000, long term debt consists of:
10% senior secured note, interest payable monthly, secured by real
property and other assets. The loan agreement contains covenants
relating to financial requirements, dividend restrictions, and other
operating requirements for the Company. The holder may convert
the loan into common shares at $0.50 per share in the event of
default by with Company. The note was originally due in October
2001, however, at April 30, 2000, the Company was not in
compliance with certain of the financial covenants and the note has
been classified as a current liability. $ 2,000,000
8% convertible debentures, secured by property and equipment
and other assets. The debentures, 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. The debentures
were originally due in June 2003, however, at April 30, 2000, the
Company was not in compliance with certain covenants and the
debentures have been classified as a current liability. The
Company and the debentures holders have entered into a standstill
agreement whereby, the debenture holders have agreed not to take
any action with respect to exercising their conversion rights or
declaring the debentures to be in default through November 2000.
The standstill agreement requires the Company, among other
actions, to make payments on the debentures of $50,000 in June
2000 (completed), $25,000 in August 2000 and $25,000 in
September 2000; timely registration of shares underlying the
possible conversion of the debentures; and the Company
completing the next phase of equity funding under its financing
agreement (note 3(c)). 1,375,500
8% loan, originally due August 2003, payable in monthly
installments of approximately $4,300 secured by machinery and
equipment. At April 30, 2000, the Company was in default of
certain payments and the loan has been classified as a current
liability. 195,547
8% land contract, secured by the Ford Road facility, originally
payable in monthly installments of approximately $4,800,
including principal and interest, through February 1999. At April
30, 2000, the Company was in default of certain payments and the
debt has been classified as a current liability, the interest rate has
increased to 12%, and monthly installments have increased to approximately
$ 5,400. 75,525
--------------
$ 3,646,572
==============
</TABLE>
13
<PAGE>
RICH COAST INC.
Notes to Consolidated Financial Statements (Continued)
Years Ended April 30, 2000 and 1999
9. STOCK OPTIONS AND WARRANTS
Options:
The Company operates the 1995 Incentive Compensation Plan (the 1995 Plan),
the 1996 Employee Stock Option and Stock Bonus Plan (the 1996 Plan), the
1997 Stock Option and Bonus Plan (the 1997 Plan) and the 1999 Stock Option
Plan (the 1999 Plan). Under these plans, 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 terms of the plans provide
that the Company may grant incentive options to employees, with exercise
prices not less than the market value of the Company's common stock at date
of grant, and the Company may grant non-qualified options, with exercise
prices not less than 80% of the market value of the Company's common stock
at date of grant. The Company has reserved 4,650,000 shares of common stock
for issuances under the plans, of which 2,416,559 are available for grant at
April 30, 2000. In addition, the Company periodically issues other options
and warrants.
During the year ended April 30, 2000, the Company granted 175,000 options to
employees under the 1997 plan and 100,000 options under the 1999 Plan with
exercise prices of $0.125 per share. These options vest over four years and
expire in 2009. During the year ended April 30, 2000 the company cancelled
certain non-qualified stock options granted to two officers under the 1995
and 1996 Plans, and regranted such options as incentive stock options under
the same plans and in the same amounts as the cancelled options. The
regranted options expire in 2010. During the year ended April 30, 2000, the
Company also repriced all other outstanding stock options at $0.125 per
share. The Company did not record compensation expense related to options
granted, issued or repriced as the exercise price equaled or exceeded the
quoted market price of the Company's common stock at the dates of the grant.
All repriced and reissued options are reflected in beginning balances in the
following table:
<TABLE>
<CAPTION>
2000 1999
----- -----
Weighted
Average
Shares Exercise Price Shares Exercise Price
--------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Outstanding, beginning of year 1,836,878 $0.125 2,096,504 $0.87
Granted 275,000 $0.125
Exercised (259,626) $0.87
Expired
--------- ---------
Outstanding, end of year 2,111,878 $0.125 1,836,878 $0.87
========= ====== ========= ==============
</TABLE>
14
<PAGE>
RICH COAST INC.
Notes to Consolidated Financial Statements (Continued)
Years Ended April 30, 2000 and 1999
9. STOCK OPTIONS AND WARRANTS (continued)
The following table summarizes information about the Company's stock
options outstanding at April 30, 2000 and 1999:
<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, 2000 $ 0.125 2,112,000 8.03 $ 0.125 1,300,000 $ 0.125
April 30, 1999 $ 0.72 - $ 2.00 1,837,000 2.50 $ 0.88 1,249,000 $ 0.85
</TABLE>
Had compensation expense been determined as provided in SFAS No. 123 using
the Black-Sholes option-pricing model, the pro-forma effect on the
Company's net loss and per share amounts would have been:
2000 1999
---- ----
Net loss, as reported $(3,134,000) $(2,572,496)
Net loss, pro-forma $(3,267,000) $(5,737,000)
Net loss per share, as reported $ (0.40) $ (0.49)
Net loss per share, proforma $ (0.41) $ (1.10)
The fair value of each option grant is calculated using the following
weighted average assumptions:
2000 1999
---- ----
Expected life (years) 3 3
Interest rate 6.32% 6.28%
Volatility 146% 101%
Dividend yield 0% 0%
Warrants:
At April 30, 2000 the Company had warrants to purchase 1,216,160 shares of
common stock outstanding, as follows:
Number
Expiration Exercise Price of Warrants
------------- -------------- -----------
January 2002 $ 1.00 105,000
July 2002 $ 0.125 211,160
January 2006 $ 0.60 900,000
-----------
1,216,160
===========
15
<PAGE>
RICH COAST INC.
Notes to Consolidated Financial Statements (Continued)
Years Ended April 30, 2000 and 1999
10. INCOME TAXES
At April 30, 2000, the Company's deferred tax assets are as follows:
Operating loss carry forward $ 3,600,000
Deferred tax asset valuation allowance (3,600,000)
------------
Net deferred tax assets --
============
A deferred tax asset arising from the Company's net operating loss carry
forward, has been reduced by a valuation account to zero due to
uncertainties regarding the realization of the deferred assets.
At April 30, 2000 the Company has available a net operating loss
carryforward of approximately $9,800,000 which maybe used to offset future
federal taxable income. A portion of the carryforward may be subject to
certain limitations due to prior Company ownership changes. The net
operating loss carry forwards, if not utilized, will expire from 2008 to
2020.
11. LITIGATION
(a) In December 1997, a complaint was filed against the Company relating to
certain payments allegedly due by the Company. The Company settled the
lawsuit during the year ended April 30, 2000 for $100,000.
(b) In December 1997, a complaint was filed against the Company, in which the
plaintiff claimed, among other things, breach of contract relating to an
alleged loan made to the Company in 1994. During the year ended April 30,
1999, the Company accrued $50,000 as an estimate of the liability. The
suit was subsequently settled for $100,000 consisting of 250,000 shares of
common stock (with a market value of $50,000) and $50,000 of cash of which
$12,500 has been paid. At April 30, 2000, the Company owes the defendant
$37,500. This amount is to be paid in quarterly installments of $9,375
beginning September, 2000.
(c) The Company is involved in various other claims and legal actions arising
in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
impact either individually or in the aggregate on either results of
operations, financial position, or cash flows of the Company.
16
<PAGE>
RICH COAST, INC.
We have not authorized any dealer,
salesperson or other person to give any
information or represent anything not
contained in this prospectus. You must
not rely on any unauthorized information.
This prospectus does not offer to sell or
buy any shares in any jurisdiction where
it is unlawful. The information in this
prospectus is current as of its date. _____________ SHARES OF COMMON
STOCK
__________
PROSPECTUS
__________
Dealer Prospectus Delivery Obligation:
Until ______________, all dealers that
effect transactions in these securities,
whether or not participating in this
offering, may be required to deliver a
prospectus. This is in addition to the
dealers' obligation to deliver a
prospectus when acting as underwriters
and with respect to their unsold respect to
their unsold allotments or subscriptions. _____________, 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
=========
______________
*Estimates only.
II-1
<PAGE>
Item 26. Recent Sales of Unregistered Securities
---------------------------------------
The following is information as to all securities of the Company sold by
the Company within the past three years that were not registered under the
Securities Act of 1933 (the "Act").
On June 11, 1997, the Company issued 100,000 shares for forbearance from
exercising certain rights and remedies by the holder of a 10% Senior Secured
Note in the principal amount of $2,000,000. The shares were issued in reliance
on Section 4(2) of the Act and Rule 506 promulgated thereunder because it was an
offer to only one purchaser who was an accredited investor.
On October 15, 1997, the Company sold 521,198 of its Common Stock to
William McCullagh in cancellation of a loan from him to the Company in the
principal amount of $100,000 plus cancellation of accrued interest in the amount
of $4,239.58. The shares were issued in an off shore transaction intended to be
exempt from registration under Regulation S promulgated under the Act.
From late 1997 to early 1998, the Company issued an aggregate principal
amount of $697,000 of 10% 18 month convertible promissory notes in a private
placement to accredited investors only in reliance on Section 4(2) of the Act
and Rule 506 promulgated thereunder.
On December 5, 1997, the Company sold an additional 200,000 shares of its
Common Stock to Mr. McCullagh for $50,000 in an off shore transaction intended
to be exempt from registration under Regulation S promulgated under the
Act.
On January 26, 1998, February 20, 1998 and April 23, 1998 the Company
issued an aggregate of 111,768 shares as accrued interest for the calendar
quarters ended September 30, 1997, December 31, 1997 and March 31, 1998 on the
Company's outstanding 10% 18-Month Convertible Promissory Notes. The shares
were issued in reliance on Section 4(2) of the Securities Act and Rule 506
promulgated thereunder since the shares were issued in connection with the
private placement of the 10% Notes relying on the same exemption and the
investment decision to take shares in lieu of cash interest payments was made at
the time the 10% Notes were purchased.
On February 28, 1998 (100,000 shares), March 2, 1998 (110,000 shares),
April 1, 1998 (50,000 shares) and April 17, 1998 (50,000 shares) options were
exercised at $0.25 per share (February and March exercises) and $0.18 per share
(April exercises), and an aggregate of 310,000 shares were issued, all in
reliance on Section 4(2) of the Act.
On April 9, 1998 (100,000 shares), April 15, 1998 (100,000 shares) and
April 16, 1998 (130,000 shares) warrants were exercised at $0.25 per share and
an aggregate of 330,000 share were issued, all in reliance on Section 4(2) of
the Act.
In June 1998, the Company issued 8% Convertible Debentures (aggregate
principal amount $1,500,000) to accredited investors only in a private placement
in reliance on Section 4(2) of the Act and Rule 506 promulgated thereunder. The
Company also issued a finder's fee in connection with this
II-2
<PAGE>
transaction in the form of warrants to purchase 60,000 shares of the Company's
common stock, exercisable at $2.50 per share.
From July 1998 through 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.
On May 31, 1999, the Company issued 250,000 shares of its common stock
(with a market value of $50,000) to Comer Holdings as part of the settlement of
a lawsuit. These shares were issued in reliance on Rule 506 and Section 4(2) of
the Securities Act of 1933 (the "Act").
In September 1999, an aggregate of 298,571 shares of common stock were
issued to holders of 8% Convertible Debentures for conversion of principal
($54,000) and accrued interest ($5,065). 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 S.B. Fletcher
Consulting, Inc., a consulting entity, for services rendered over the past year,
valued at $45,000, in mediating discussions with holders of the Company's 8%
Convertible Debentures. These shares were issued in reliance on Section 4(2) of
the Act.
In November and December 1999, the Company issued an aggregate of 2,550,000
shares to Frippoma S.A. for an aggregate investment of $510,000 (or $0.20 per
share) in a private placement under Section 4(2), Rule 506 and Regulation S of
the Act.
In December 1999, the Company issued 450,000 shares to Strauss Holding
Ltd., for an investment of $90,000. These shares were issued in reliance on
Section 4(2), Rule 506 and Regulation S of the Act.
II-3
<PAGE>
In June 2000, the Company issued an aggregate of 1,125,000 shares to Banco
di Desioedella Brianza, for an investment of $225,000. These shares were issued
in reliance on Section 4(2), Rule 506 and Regulation S 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. (1)
3.1.2 Articles of Amendment. Previously filed.
3.2 Bylaws. (1)
5.1 Opinion of Smith McCullough, P.C. on legality. Filed
herewith.
10.1 Contract for Sale of Ford Road property. Previously filed.
10.2 Employment Contract between the Company and Robert W. Truxell
(Exhibit 1 to the Agreement of Merger dated October 31, 1995).
(2)
10.3 Employment Contract between the Company and James P. Fagan
(Exhibit 2 to the Agreement of Merger dated October 31, 1995).
(2)
10.4 1995 Incentive Compensation Plan. (3)
10.5 1996 Employee Stock Option and Bonus Plan, as amended. (4)
10.6 1997 Stock Option and Stock Bonus Plan. (5)
10.7 1999 Stock Option Plan. Previously filed.
21.1 Subsidiaries of the Registrant. Filed herewith.
23.1 Consent of Smythe Ratcliffe, Chartered Accountants. Previously
filed.
23.2 Consent of Smith McCullough, P.C. (included in Exhibit 5.1).
Filed herewith.
23.3 Consent of Gelfond Hochstadt Pangburn, P.C. Filed Herewith.
23.4 Consent of Smythe Ratcliffe. Filed herewith.
24.1 Power of Attorney. Included as part of signature page.
27.1 Financial Data Schedule. Filed herewith.
______________
(1) Incorporated by reference from Registration Statement on Form S-4, File No.
333-6099, effective August 7, 1996.
II-4
<PAGE>
(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.
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:
(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
II-5
<PAGE>
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 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. 5 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 August 25, 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. 5 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 August 25, 2000
--------------------- and Secretary
Robert W. Truxell
/s/ James P. Fagan President, Chief Executive Officer August 25, 2000
------------------ and Director
James P. Fagan
/s/ George P. Nassos Director August 25, 2000
--------------------
George P. Nassos
/s/ Michael R. Fugler Director August 25, 2000
---------------------
Michael R. Fugler
/s/ Michael Grujicich Chief Financial and Accounting August 25, 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. (1)
3.1.2 Articles of Amendment. Previously filed.
3.2 Bylaws. (1)
5.1 Opinion of Smith McCullough, P.C. on legality. Filed
herewith.
10.1 Contract for Sale of Ford Road property. Previously filed.
10.2 Employment Contract between the Company and Robert W.
Truxell(Exhibit 1 to the Agreement of Merger dated October 31,
1995).(2)
10.3 Employment Contract between the Company and James P. Fagan
(Exhibit 2 to the Agreement of Merger dated October 31, 1995).
(2 )
10.4 1995 Incentive Compensation Plan. (3)
10.5 1996 Employee Stock Option and Bonus Plan, as amended. (4)
10.6 1997 Stock Option and Stock Bonus Plan. (5)
10.7 1999 Stock Option Plan. Previously filed.
21.1 Subsidiaries of the Registrant. Filed herewith.
23.1 Consent of Smythe Ratcliffe, Chartered Accountants. Previously
filed.
23.2 Consent of Smith McCullough, P.C. (included in Exhibit 5.1).
Filed herewith.
23.3 Consent of Gelfond Hochstadt Pangburn, P.C. Filed Herewith.
23.4 Consent of Smythe Ratcliffe. Filed herewith.
24.1 Power of Attorney. Included as part of signature page.
27.1 Financial Data Schedule. Filed herewith.
------------------
(1) Incorporated by reference from Registration Statement on Form S-4, File No.
333-6099, effective August 7, 1996.
(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.
