<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A No. 1
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD OF _____ TO _____.
Commission File Number: 0-15859
Rich Coast Inc.
(Name of small business issuer in its charter)
Nevada 91-1835978
State or other jurisdiction of (I.R.S. Employer
Incorporation or organization Identification No.)
10200 Ford Road, Dearborn, Michigan 48126
(Address of principal executive offices)
Issuer's telephone number: 313-582-8866
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, $.001 Par Value
-----------------------------
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes[x] No[ ]
Check here if there is no disclosure filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $2,267,452
At July 26, 1999 there were 6,316,318 shares of the Registrant's $.001 par value
Common Stock ("Common Stock"), the only outstanding class of voting securities,
outstanding. Based on the closing price of the Common Stock as reported by
Nasdaq on July 26, 1999, the aggregate market value of Common Stock held by
non-affiliates of the Registrant was approximately $1,389,590.
Transitional Small Business Disclosure Format (check one): Yes [ ] No[x]
<PAGE>
PART IV
Item 13. Financial Statements, Schedules and Exhibits and Reports on
Form 8-K
(a) Financial Statements, Schedules and Exhibits:
(1) Financial Statements-April 30, 1999 and the Fiscal years ended
April 30, 1997 and 1998
a) Index to Financial Statements;
b) Auditor's Report to the Shareholders;
c) Consolidated Balance Sheet;
d) Consolidated Statements of Operations;
e) Consolidated Statements of Stockholder's Equity;
f) Consolidated Statements of cash flows;
g) Notes to Consolidated Financial Statements;
(2) Schedules
Schedules are omitted as the information is not required or not
applicable, or the required information is shown in the financial
statements or notes thereto.
(3) Exhibits
The Exhibits listed in the Exhibit Index at Item 14(c) are filed of this
Annual Report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the fiscal
year covered by this report.
(c) Exhibits
3.(i) Certificate of Incorporation of Rich Coast Inc. (1)
3.(ii) Bylaws of Rich Coast Inc. (1)
10.5 1996 Employee Stock Option and Bonus Plan, as amended. (2)
10.6 1997 Stock Option and Stock Bonus Plan. (3)
21.1 List of Subsidiaries of the Registrant. Filed herewith.
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 from the Company's Registration Statement on
Form S-8, File No. 333-50763.
<PAGE>
(3) Incorporated by reference from the Company's Registration Statement on
Form S-8, File No. 333-56275.
(d) Schedules. Schedules are omitted as the information is not required or not
applicable, or the required information is shown in the financial statements or
notes thereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-KSB/A No. 1
to be signed on its behalf by the undersigned, thereunto duly authorized.
RICH COAST INC.
Date: August 25, 2000 By:/s/ James P. Fagan
----------------------------------------
James P. Fagan, President, Chief
Executive Officer and Director
Date: August 25, 2000 By:/s/ Michael M. Grujicich
----------------------------------------
Michael M. Grujicich, Chief
Financial and Accounting Officer
Date: August 25, 2000 By:/s/ Robert W. Truxell
----------------------------------------
Robert W. Truxell
Chairman of the Board of Directors
and Secretary
Date: August 25, 2000 By:/s/ George P. Nassos
----------------------------------------
George P. Nassos, Director
Date: August 25, 2000 By:/s/ Michael Fugler
----------------------------------------
Michael Fugler, Director
<PAGE>
RICH COAST, INC.
Consolidated Financial Statements
(U.S. Dollars)
April 30, 1999 and 1998
INDEX
Page
Report of Independent Chartered Accountants 1
Consolidated Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-15
<PAGE>
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF RICH COAST, INC.
We have audited the accompanying consolidated balance sheets of Rich Coast, Inc.
as of April 30, 1999 and 1998 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended April 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company as at
April 30, 1999 and 1998 and the consolidated results of its operations and cash
flows for each of the three years in the period ended April 30, 1999 in
conformity with generally accepted accounting principles in the United States.
"Smythe Ratcliffe"
Chartered Accountants
Vancouver, Canada
August 12, 1999
Except for note 1, which
is as of August 9, 2000.
<PAGE>
RICH COAST, INC.
Consolidated Balance Sheets
April 30
(U.S. Dollars)
<TABLE>
<CAPTION>
===================================================================================================================
1999 1998
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets (note 7)
Current
Cash $ 0 $ 53,043
Accounts receivable 491,418 460,558
Insurance claim receivable (note 3) 0 435,290
Shares subscription receivable 0 25,000
Inventory 0 108,265
-------------------------------------------------------------------------------------------------------------------
491,418 1,082,156
Distillation Unit (note 5) 2,024,706 2,024,706
Property and Equipment, at cost (net) (notes 4 and 7) 3,354,493 2,990,373
Patent and Technology, net 21,914 25,681
Deferred Finance Charges and Deposits 226,320 120,732
-------------------------------------------------------------------------------------------------------------------
$ 6,118,851 $ 6,243,648
===================================================================================================================
Liabilities
Current
Bank overdraft $ 5,682 $ 0
Accounts payable and accrued liabilities (note 6) 849,960 838,966
Accrued oil and waste treatment costs 257,635 450,444
Current portion of long-term debt (note 7) 100,733 595,309
-------------------------------------------------------------------------------------------------------------------
1,214,010 1,884,719
Long-Term Debt (note 7) 3,670,339 2,016,510
</TABLE>
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
4,884,349 3,901,229
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Stockholders' Equity (note 8)
Common stock, $0.001 par value;
100,000,000 shares authorized, 6,066,318 and 4,718,894 6,066 4,719
shares issued and outstanding at April 30, 1999 and 1998,
respectively (note 1)
Additional paid-in capital (note 1) 26,792,678 25,329,446
Accumulated deficit (note 1) (25,564,242) (22,991,746)
-------------------------------------------------------------------------------------------------------------------
1,234,502 2,342,419
-------------------------------------------------------------------------------------------------------------------
$ 6,118,851 $ 6,243,648
===================================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
RICH COAST, INC.
Consolidated Statements of Operations
Years Ended April 30
(U.S. Dollars)
<TABLE>
<CAPTION>
==============================================================================================================
1999 1998 1997
<S> <C> <C> <C>
Sales $ 2,267,452 $ 2,547,083 $ 1,897,155
Expenses
Cost of Sales 1,378,367 1,080,557 967,062
Salaries and wages 1,045,669 982,918 713,605
Audit, accounting and legal 264,366 130,626 213,911
Consulting and management fees 199,953 152,223 816,953
Travel 129,201 125,030 79,939
Advertising 120,905 5,853 12,356
Office and general 120,769 59,122 31,857
Property taxes 100,078 85,760 72,612
Utilities 93,300 121,168 129,463
Insurance 81,750 103,805 83,364
Telephone and facsimile 67,784 40,693 29,489
Equipment and storage leases 45,871 83,820 111,437
Bad debts 44,801 8,375 11,984
Shareholder relations 2,692 149,406 41,630
Repairs and maintenance 0 62,603 40,983
Listing, transfer agent and filing fees 0 24,573 27,176
Factoring costs 0 24,304 19,634
Rent and secretarial 0 7,353 4,300
Financing 0 0 26,772
Depreciation 318,661 256,398 359,168
----------------------------------------------------------------------------------------------------------------
4,014,167 3,504,587 3,793,695
----------------------------------------------------------------------------------------------------------------
Loss Before Other Items 1,746,715 957,504 1,896,540
Other Items
Interest - beneficial conversion feature (note 2(k)) 764,766 198,626 0
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Interest expense 216,217 303,648 213,912
Amortization of deferred financing costs 77,239 17,646 22,060
Lawsuit settlement (note 12) 50,000 0 0
Loss on equipment disposal 3,147 0 147,752
Accrued oil and waste treatment cost reversal (285,588) 0 0
Insurance proceeds in excess of current expenditures (note 3) 0 (103,503) 0
----------------------------------------------------------------------------------------------------------------
$ 825,781 $ 416,417 $ 383,724
Loss Before Extraordinary Item $ 2,572,496 $ 1,373,921 $ 2,280,264
Extraordinary Item
Forgiveness of past service
Compensation liability 0 0 (351,935)
Net Loss $ 2,572,496 $ 1,373,921 $ 1,928,329
Loss Before Extraordinary Item per share $ 0.49 $ 0.32 $ 0.61
Extraordinary Item per share $ 0.00 $ 0.00 $ (0.09)
Weighted Average Number of Shares Outstanding 5,208,693 4,318,038 3,758,788
===============================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
RICH COAST, INC.
Consolidated Statements of Stockholders' Equity
Years Ended April 30
(U.S. Dollars)
<TABLE>
<CAPTION>
===================================================================================================================================
Common Common Additional Total
Shares Shares Paid-In Accumulated Stockholders'
Number Amount Capital Deficit Equity (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------
(note 1)
<S> <C> <C> <C> <C> <C>
Balance, April 30, 1996 3,330,974 $ 3,331 $ 22,486,969 $(19,689,496) $ 2,800,804
Issuance of common stock (note 8) 707,955 708 1,587,363 0 1,588,071
Financing cost 0 0 (14,868) 0 (14,868)
Net loss 0 0 0 (1,928,329) (1,928,329)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1997 4,038,929 4,039 24,059,464 (21,617,825) 2,445,678
Issuance of common stock (note 8) 679,965 680 806,591 0 807,271
Interest - beneficial conversion (note 2(k)) 0 0 463,391 0 463,391
Net loss 0 0 0 (1,373,921) (1,373,921)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1998 4,718,894 4,719 25,329,446 (22,991,746) 2,342,419
Issuance of common stock (note 8) 1,347,424 1,347 963,232 0 964,579
Interest - Beneficial conversion (note 2(k)) 0 0 500,000 0 500,000
Reverse stock split 0 0 0 0 0
Net loss 0 0 0 (2,572,496) (2,572,496)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1999 6,066,318 $ 6,066 $ 26,792,678 $(25,564,242) $ 1,234,502
===================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
RICH COAST, INC.
Consolidated Statements of Cash Flows
Years Ended April 30
(U.S. Dollars)
<TABLE>
<CAPTION>
=============================================================================================
1999 1998 1997
<S> <C> <C> <C>
Operating Activities
Net loss for year $(2,572,496) $(1,373,921) $(1,928,329)
Adjustments to reconcile net loss to net cash
used by operating activities
Interest - beneficial conversion feature 764,766 198,626 0
- expense 58,024 64,356 0
Salaries and wages 0 231,405 0
Depreciation and amortization 395,900 274,045 381,228
Consulting and management fees 0 155,410 608,548
Loss on equipment disposal 3,147 0 147,752
Changes in operating assets and liabilities
Accounts receivable (30,860) (172,293) 138,700
Insurance claim receivable 435,290 (435,290) 0
Subscriptions receivable 25,000 (25,000) 0
Inventory 108,265 27,408 (135,673)
Prepaid expenses 0 4,436 37,250
Accounts payable and accrued liabilities 10,994 99,839 (125,241)
Accrued oil and waste treatment costs (192,809) 146,470 201,867
Past services compensation payable 0 0 (351,935)
---------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (994,779) (804,509) (1,025,833)
---------------------------------------------------------------------------------------------
Investing Activities
Purchase of property and equipment (379,671) (163,230) (123,054)
Fire insurance proceeds for fixed assets 0 131,714 0
Proceeds on sale of equipment 0 0 2,000
---------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (379,671) (31,516) (121,054)
---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Financing Activities
Issue of common stock 209,555 256,100 964,673
Land contract repayments (104,059) (8,085) (33,776)
Shareholders' loans 0 0 (4,763)
Obligation under capital lease 0 (13,336) (1,181)
Notes payable 0 697,000 0
Payment on equipment loan (14,453) 0 0
Deferred finance charges and deposits (67,648) (55,530) 203,303
Bank overdraft 5,682 0 0
Proceeds from long-term debt 1,292,330 0 0
---------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 1,321,407 876,149 1,128,256
---------------------------------------------------------------------------------------------
Increase (Decrease) in Cash (53,043) 40,124 (18,631)
Cash, Beginning of Year 53,043 12,919 31,550
---------------------------------------------------------------------------------------------
Cash, End of Year $ 0 $ 53,043 $ 12,919
=============================================================================================
Supplemental information
Issue of common stock
For short-term shareholders advances received $ 0 $ 0 $ 531,061
For conversion of promissory notes 697,000 0 0
For services and compensation 0 386,815 608,548
For finder's fee 0 0 14,850
For interest 58,024 64,126 0
Interest paid 158,193 154,860 211,808
Purchase of equipment financed 210,000 0 0
=============================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Effective July 14, 1998 the Company reincorporated in the State of
Nevada.
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
1. ORGANIZATION AND BASIS OF PRESENTATION
Pursuant to an Agreement of Merger, effective October 31, 1995 and
executed on November 16, 1995. Rich Coast, Inc. ("the Company")
acquired Integrated Waste Systems, Inc., a Michigan corporation ("IWS")
and The Powers Fagan Group, Inc., a Michigan corporation
("Powers/Fagan") through the issuance of 3,383,200 shares of its common
shares. At April 30, 1995 and prior to the merger, the Company held a
controlling interest (approximately 55%) in Waste Reduction Systems
("the Partnership"). IWS and Powers/Fagan together held the remaining
(approximately 45%) interest in the Partnership. Neither IWS nor
Powers/Fagan had any assets, liabilities or operations other than their
interest in the Partnership.
The purchase of the minority interest was valued using the fair value
of the common stock issued at the date of the transaction of
$2,748,850. Management believes that the fair value of the assets
acquired was nil. The excess of the purchase price over the fair value
of the assets acquired (nil) was accounted for as goodwill of
$2,748,850. Because the underlying partnership had recurring losses,
management believes that the goodwill had no continuing value and,
therefore, the goodwill was charged to operations as an impairment loss
for the year ended April 30, 1996.
Prior to the acquisition of its interest in the Partnership and the
acquisition of IWS and Powers/Fagan, the Company was engaged in mineral
exploration and had accumulated a deficit of $13,210,746. The Company
now operates a non-hazardous waste treatment facility in Dearborn,
Michigan specializing in recycling of waste oils.
These consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States and all
amounts are in U.S. dollars.
During the 1997 fiscal year the Company was discontinued in British
Columbia and continued in the State of Delaware under the General
Corporate Law of that jurisdiction under the name Rich Coast, Inc.
<PAGE>
Effective July 14, 1998 the Company reincorporated in the State of
Nevada.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
These financial statements include the accounts of Rich Coast,
Inc. (a Delaware Corporation which became a Nevada Corporation
effective July 14, 1998) and its wholly-owned subsidiaries
Rich Coast Oil, Inc., Waste Reduction Systems, Inc., Rich
Coast Pipeline, Inc., and Rich Coast Resources Inc. all being
Michigan corporations. All intercompany balances and
transactions have been eliminated.
(b) Inventory
Inventories are stated at the lower of cost or market. Cost is
determined on a first in, first out (FIFO) basis.
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Distillation unit, property and equipment
The distillation unit and the property and equipment are
recorded at cost. These assets are depreciated over their
estimated useful lives as follows:
Buildings - Straight line basis
Machinery and equipment - Double declining balance basis
Bulk storage tanks - 1.5 Declining balance basis
Furniture and fixtures - Double declining basis
Computer - Double declining basis
Property and equipment also includes a distillation unit and a
pipeline 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
Costs related to long-term financing are being amortized over
the terms of the related debt on a straight-line basis, which
is not materially different from the effective interest
method.
(e) Reporting currency
Financial statements for reporting periods up to and including
the year ended April 30, 1996 were originally presented in
Canadian dollars because that was the reporting currency. As
discussed in note 1, the Company became a U.S. corporation
during the 1997 fiscal year. Effective May 1, 1996 financial
statements are presented in United States dollars, the
functional currency for recording the operations and
activities of the Company.
(f) Net loss per share
Net loss per share computations are based on the weighted
average number of common shares outstanding during the year.
The effect of exercising share warrants and options is not
reflected as the result would be anti-dilutive.
<PAGE>
(g) Income taxes
The Company uses the asset and liability approach in its
method of accounting for income taxes which requires the
recognition of deferred tax liabilities and assets for
expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and
liabilities. A valuation allowance against deferred tax assets
is recorded if, based upon weighted available evidence, it is
more likely than not that some or all of the deferred tax
assets will not be realized.
(h) Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates and would impact future results of operations
and cash flows.
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(i) Financial instruments
The carrying value of cash, accounts receivable, insurance
claim receivable and accounts payable and accrued liabilities
approximate their fair value because of the short maturity of
these financial instruments. In the opinion of management, the
carrying amounts of these financial instruments approximate
their fair value because of the short maturity of these
financial instruments. Long term debt approximates its fair
value because interest payments over the term of the debt
approximated market rates at inception of the debt.
(j) Stock based compensation
The Company applies APB Opinion No. 25 and related
interpretations in accounting for its stock option plans and,
accordingly, no compensation cost has been recognized because
stock options granted under the plans were at exercise prices
which were equal to market value at date of grant.
Compensation expense is recorded when options are granted to
management at discounts to market.
(k) Long-term debt
The beneficial conversion features relating to the 10% 18
month promissory notes and the 8% debenture are accounted for
as an interest charge and are amortized over the period from
the date of issue through the date the debt is first
convertible. This policy conforms to the accounting for
these transactions set forth in EITF Topic D-60 and EITF
Issue 98-5
<PAGE>
(l) Reverse Split
Effective June 19, 1998, there was a one-for-four reverse split
of the authorized common stock. As a result, shares and per
share amounts are reported on a post-split basis.
(m) 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 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.
3. INSURANCE CLAIM
In December 1997 the Company incurred damage to its premises at 10200
Ford Road, Dearborn as a result of a fire. The accounts at April 30,
1998 reflect the amounts subsequently received from the insurers and
the expenditures incurred for repairs (note 6).
4. PROPERTY AND EQUIPMENT
The Company's offices, plant, processing equipment and bulk storage
terminal located in Dearborn, Michigan are comprised of the following:
<TABLE>
<CAPTION>
===================================================================================
Estimated Useful
Lives (Years) 1999 1998
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Land $250,041 $250,041
Buildings 39 1,364,002 1,388,117
Machinery and equipment 7 2,163,585 1,586,789
Bulk storage tanks 15 649,664 636,534
Pipeline 15 296,187 296,187
Furniture, fixtures, computers, etc 5 to 7 50,169 51,274
-----------------------------------------------------------------------------------
Total at cost 4,773,648 4,208,942
Accumulated depreciation 1,419,155 1,218,569
-----------------------------------------------------------------------------------
$3,354,493 $2,990,373
===================================================================================
</TABLE>
The Company's premises at 10200 Ford Road in Dearborn, Michigan are
currently listed for sale. The property is occupied under the terms of
<PAGE>
a land contract (note 7). The premises were occupied and used
throughout 1999 and 1998 fiscal year. Depreciation charges based on
historical cost have been recorded.
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
5. DISTILLATION UNIT
The Company has a mineral distillation unit acquired at an original
cost of $2,000,000 from GAP Energy, Inc. The mineral distillation unit
was originally purchased for use on the proposed joint venture project
with GAP Minerals, Inc. in the development of the Gongora Property in
Costa Rica. The price of sulphur dropped making the development of the
project uneconomical, however; the Company had intended to proceed with
the project once world prices improve to the point the project becomes
profitable. In view of this, the Company searched for an alternate use
of the unit and found that it could possibly be used for soil
remediation for such things as oil pits polluted with hydrocarbons.
Testing was conducted on the unit to confirm this use. Preliminary
results indicate the system is capable of removing soil contaminants to
a level acceptable to the Environmental Protection Agency of the United
States.
The investment in the distillation unit comprises a significant portion
of the Company's assets. Realization of the Company's investment in the
distillation unit is dependent upon the successful development of the
unit for soil remediation purposes, the attainment of successful
production from the unit or from the proceeds of the unit's disposal.
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
=================================================================
1999 1998
-----------------------------------------------------------------
<S> <C> <C>
Trade payables $670,712 $516,482
Lawsuit settlement (note 12) 50,000 0
Accrued salaries and wages 81,951 50,325
Accrued property taxes 40,089 55,296
Payroll taxes 7,208 11,676
Building repair (fire damage) (note 3) 0 200,187
Accrued interest 0 5,000
-----------------------------------------------------------------
$849,960 $838,966
=================================================================
</TABLE>
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
<TABLE>
<CAPTION>
================================================================================================================================
7. LONG-TERM DEBT
=====================================================================================================================
1999 1998
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10% 18 month convertible promissory notes - series 1997, interest $ 0 $ 697,000
payable quarterly. Holders elected at the time of purchase to receive
interest in shares of the Company's common stock values at a price per
share equal to the average closing bid price as quoted on NASDAQ over
the 20 trading days preceding the close of the calendar quarter. The
notes may be converted at the option of the holder at maturity into
shares of common stock at a price per share equal to 50% of the quoted
NASDAQ bid price at the conversion date.
Unamortized interest charge relating to beneficial conversion feature
(note 2(k)) 0 (264,765)
---------------------------------------------------------------------------------------------------------------------
0 432,235
10% senior secured note, due October 1, 2001 interest payable monthly 2,000,000 2,000,000
(see below for security)
8% convertible debenture due June 11, 2003 secured by a security 1,500,000 0
agreement over land and building. The debenture and accrued interest
thereon may be converted at the option of the holder at any time into
common stock at a price per share equal to the lesser of the closing
bid price of the shares at the date of issuance of the debenture or 75%
of the five day average closing bid price for the five trading days
immediately preceding the conversion date.
8% loan due August 1, 2003 repayable in monthly blended installments of 195,547 0
$4,259 secured by a security agreement over machinery and equipment
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Land contract payable in monthly installments of $4,753 each including 75,525 179,584
principal and interest at 8% unless the Company falls behind in its
payments at which time the interest rate increases to 12% and monthly
installments increase to $5,384 until the payments are back to
schedule (the Company's arrears payments were corrected by a payment of
$84,371 on June 1, 1998). After the land contract is paid in full, the
Company may lease the property for a 7 year term which will cause the
land to be titled to the Company for $1, either after satisfactory
clean up by others or after 91 years.
---------------------------------------------------------------------------------------------------------------------
3,771,072 2,611,819
Less: Current portion 100,733 595,309
---------------------------------------------------------------------------------------------------------------------
$3,670,339 $2,016,510
=====================================================================================================================
</TABLE>
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
7. LONG TERM DEBT (Continued)
The senior secured note payable is secured by a $2,000,000 mortgage
granted by the Company over the real property at 6011 and 6051 Wyoming,
Dearborn, Michigan and a charge on all other assets of the Company. The
loan agreement contains covenants relating to financial requirements,
expenditures, etc. for the Company. The holder may convert the loan
into common shares at $0.50 per share in the event of default by the
Company.
At the time the loan arrangements were made, the note holder was issued
warrants to purchase 3,600,000 shares of the Company (note 9).
The land contract payable relates to premises occupied at 10200 Ford
Road, Dearborn, Michigan which is currently listed for sale.
The amount of long-term obligations outstanding at April 30, 1999
mature as follows:
=========================================================
2000 $ 100,733
2001 58,384
2002 2,043,729
2003 47,359
2004 1,520,867
---------------------------------------------------------
$3,771,072
=========================================================
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
8. STOCKHOLDERS' EQUITY
(a) Activity of the common stock account for the years 1997, 1998 and
1999 is as follows:
<TABLE>
<CAPTION>
============================================================================================
Additional
Number Par Paid-In
of Shares Value Capital
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fiscal 1997
Shares issued
For financing fees 12,500 $ 13 $ 14,837
For settlement of debt 276,118 276 530,785
For cash - private placements 118,750 119 354,356
For cash - exercise of stock options 20,437 20 79,117
For services 280,150 280 608,268
--------------------------------------------------------------------------------------------
707,955 708 1,587,363
--------------------------------------------------------------------------------------------
Fiscal 1998
Shares issued
For services and compensation 230,473 230 386,585
For cash - private placements 107,500 108 107,392
For cash - exercise of stock options 88,750 89 78,511
For cash - exercise of warrants 70,000 70 69,930
For settlement of loan payable to a
shareholder 130,299 130 100,100
For interest 52,943 53 64,073
--------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
679,965 680 806,591
--------------------------------------------------------------------------------------------
Fiscal 1999
Shares issued
For cash - exercise of stock options 259,626 260 209,295
Conversion of promissory note (note 7) 1,040,299 1,040 695,960
For interest 47,499 47 57,977
--------------------------------------------------------------------------------------------
1,347,424 $ 1,347 $ 963,232
============================================================================================
</TABLE>
On May 26, 1999, the shareholders approved the creation of 10,000,000
shares of preferred stock of $0.001 par value.
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
8. STOCKHOLDERS' EQUITY (Continued)
(b) Subsequent to April 30, 1999, the Company issued 250,000 shares
related to settlement of litigation (note 12).
(c) The share subscription receivable was collected July 28, 1998.
9. STOCK OPTIONS AND WARRANTS
Options
Pursuant to the Company's 1995 Incentive Compensation Plan as
subsequently amended in 1996 ("the 1995 Plan"), the 1996 Employee Stock
Option and Stock Bonus Plan ("the 1996 Plan"), and the 1997 Stock
Option and Bonus Plan ("the 1997 Plan") the Company may issue stock
options and stock bonuses for shares in the capital stock of the
Company to provide incentives to officers, directors, key employees and
other persons who contribute to the success of the Company. The
exercise price of the Incentive Options (employees of the Company or
its subsidiaries) is no less than the fair market value of the stock at
the date of the grant and for non-qualified options (non employees) the
exercise price is no less than 80% of the fair market value (defined as
the most recent closing sale price reported by NASDAQ) on the date of
the grant.
The following table summarizes the Company's stock option activity for
the years ended April 30, 1999 and 1998:
<PAGE>
<TABLE>
<CAPTION>
============================================================================================
1999 1998
--------------------------------------------------------------------------------------------
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, Beginning of Year 1,566,978 $ 0.87 503,750 $ 1.00
Granted 0 $ 0.00 1,073,228 $ 0.83
Exercised (259,626) $ 0.87 (10,000) $ 0.72
Expired 0 $ 0.00 0 $ 0.00
--------------------------------------------------------------------------------------------
Outstanding, End of Year 1,307,352 1,566,978
============================================================================================
</TABLE>
The following table summarizes information about the Company's stock
options outstanding:
<TABLE>
<CAPTION>
==========================================================================================================
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
<S> <C> <C> <C> <C> <C> <C>
April 30, 1999 $ 0.72 - $ 2.00 1,307,352 2.50 $ 0.88 1,239,852 $ 0.85
April 30, 1998 $ 0.72 - $ 2.00 1,566,978 3.50 $ 0.88 1,524,478 $ 0.85
-----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
9. STOCK OPTIONS AND WARRANTS (Continued)
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans and, accordingly, no compensation
cost has been recognized because stock options granted under the plans
were at exercise prices which were equal to market value at date of
grant. Had compensation expense been determined as provided in SFAS 123
using the Black-Sholes option-pricing model, the pro-forma effect on
the Company's net income (loss) and per share amounts would have been:
<TABLE>
<CAPTION>
==========================================================================================
1999 1998
------------------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss), as reported $(2,572,496) $(1,373,921)
Net income (loss), pro-forma $(5,736,910) $(4,339,709)
Net income (loss) per share, as reported $ 0.49 $ 0.32
Net income (loss) per share, pro-forma $ 1.10 $ 1.00
=========================================================================================
</TABLE>
The fair value of each option grant is calculated using the following
weighted average assumptions:
<TABLE>
<CAPTION>
==========================================================================================
1999 1998
------------------------------------------------------------------------------------------
<S> <C> <C>
Expected life (years) 3 3
Interest rate 6.28% 6.28%
Volatility 101.14% 101.14%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Dividend yield 0.00% 0.00%
==========================================================================================
Warrants
</TABLE>
At April 30, 1999 there were 1,298,660 share purchase warrants
outstanding.
<TABLE>
<CAPTION>
=================================================================================================
Number Pre
Exercise Price of Warrants Reverse
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
June 15, 2001 $ 1.00 37,500 150,000
November 5, 2001 $ 1.00 45,000 180,000
January 13, 2002 $ 1.00 105,000 420,000
July 30, 2002 $ 0.80 211,160 844,643
June 10, 2006 $ 1.20 900,000 3,600,000
-------------------------------------------------------------------------------------------------
1,298,660 5,194,643
=================================================================================================
</TABLE>
<PAGE>
RICH COAST, INC.
Notes to Consolidated Financial Statements
Years Ended April 30, 1999 and 1998
(U.S. Dollars)
================================================================================
10. RELATED PARTY TRANSACTIONS
(a) Management fees of $Nil were paid to directors or companies
controlled by directors for the year ended April 30, 1999
(1998 - $30,000; 1997 - $30,000)
(b) Shareholder advance of $100,000 to the Company for working
capital purposes in 1997 fiscal year was settled by the
issuance of 521,198 shares in 1998 fiscal year which included
an interest component of $4,240. The shares were issued at a
discount to market of 20%.
11. INCOME TAXES
A deferred tax asset stemming from the Company's net operating loss
carry forward, has been reduced by a valuation account to zero due to
uncertainties regarding the utilization of the deferred assets.
At April 30, 1999 the Company has available net operating loss carry
forward of approximately $8,400,000 which it may use to offset future
federal taxable income. The net operating loss carry forwards, if not
utilized, will begin to expire in 2008.
12. LITIGATION
(a) In December 1997 a complaint was filed against the Company
relating to alleged payments of $225,000 due by the Company
under a Terminaling Agreement of May 18, 1995. The outcome of
the dispute is not determinable at this time, however,
management is of the opinion the matter will be settled prior
to trial. No provision for loss has been recorded in the
accounts.
(b) In December 1997 a complaint was filed against the Company, in
which the plaintiff claims, among other things, breach of
contract relating to an alleged loan made to the Company in
1994. The Company settled the suit by granting 250,000 shares
of common stock and $50,000 subsequent to April 30, 1999.
13. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The year 2000 issue arises because many computer systems use two digits
rather than four to identify a year. Date sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using the year 2000 dates is processed. In addition,
similar problems may arise in some systems which use certain dates in
1999 to represent something other than a date. The effects of the year
2000 issue may be experienced before, on, or after January 1, 2000 and,
if not addressed, the impact on operations and financial reporting may
range from minor errors to significant systems failure which could
<PAGE>
affect an entities ability to conduct normal business operations. While
the company has a plan to address the year 2000 issue, it is not
possible to be certain that all aspects of the issue affecting the
company, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
