UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB/A No. 3 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to ___________. COMMISSION FILE NUMBER: 0-15859 ------- RICH COAST INC. --------------- (Exact name of small business issuer as specified in its charter) Nevada 91-1835978 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10200 Ford Road, Dearborn, MI 48126 ----------------------------------- (Address of principal executive offices) (313) 582-8866 -------------- (Issuer's telephone number) (Former name, former address and former fiscal year, if changed since last report) Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ______ --- The number of shares outstanding of the issuer's classes of common equity, as of July 31, 1998 is 4,886,618 shares of Common Stock. Transitional Small Business Disclosure Format (check one): YES ___ NO X --- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- The following information should be read in conjunction with the unaudited consolidated financial statements included herein which are prepared in accordance with generally accepted accounting principles ("GAAP") in the United States for interim financial information. Business volume continues to increase at a steady rate while capacity is being added for oil recycling and sludge processing at the Company's seventeen acre Wyoming Avenue site. The Company has received an acceptable offer to purchase the Company's Ford Road site, and consolidation of all operations at the Wyoming site is expected by fiscal year end. Results of Operations - --------------------- Relocation and consolidation of operations also include expansion of capability by installation of a 250 gallon per minute primary wastewater treatment system (the air sparged hydrocyclone system, or "ASH") which provides a unique new method for separation of liquid waste streams and pumpable waste streams containing a mixture of liquids and solids. The Company also entered into an exclusive agreement with ZPM, Inc. whereby ZPM and the Company will share expenses and profits equally from business teams assigned to pursue specific high potential applications for the ASH process in the paper and pulp industry, meat processing industry, and landfill/leachate treatment and disposal. The agreement provides that the Company and ZPM will establish these joint application development teams by each assigning two members to create four member teams. The teams will be responsible for coordinating development efforts of Rich Coast and ZPM including but not limited to: (1) market research; (2) identification and development of the parameters of particular applications; (3) preparation of proposals to customers; (4) development of sales terms and conditions; and (5) oversight of testing criteria and compliance of each application. Contracts for expansion and improvement of oil processing and pit sludge operations were awarded by the Company in late July amounting to $358,430. Utilization of these new facilities is planned by fiscal year end and will allow sale of the Company's Ford Road site without any interruption of business plus will greatly increase capacity and efficiency. Net sale proceeds from the sale of the Ford Road site will be used for working capital requirements to pursue off-site and operating contracts for additional ASH installations. Changes in Financial Condition - ------------------------------ First quarter revenues of $605,491 exceeded the previous quarter by 14.4% and the first quarter of last fiscal year by 7.7%. A first quarter net loss of $1,082,762 was incurred, amounting to $0.23 per share. Of this amount, $577,654 of the loss was attributable to a one-time charge for interest on the beneficial conversion feature for the Company's outstanding convertible securities. The Company's performance continues to reflect a slow recovery of the business and momentum it lost due to the fire which shut down the Ford Road operations during the last fiscal year. Losses are expected to continue through the current fiscal year's second quarter even 8 though revenues will increase. By the end of fiscal 1999 the Company expects to attain monthly break-even status. Rich Coast is currently competing for several very significant long-term contracts and if even one of the larger contracts were awarded to Rich Coast, anticipated break-even in the third fiscal quarter would come sooner. These potential new waste streams consist of oily water and phenol waters, both of which are ideal to process through the Company's recently installed ASH system. Until new waste stream business is received for ASH processing, the unit will be used to process waste liquids now in inventory prior to processing through Rich Coast's biological treatment systems. With pre-treatment of the inventory using the ASH system, daily capacity has been increased from 50,000 gallons per day to well over 250,000 gallons and inventory space is being opened up for anticipated new business. Rich Coast currently has three long term debt obligations including the installment land contract on the Ford Road building. A principal balance of approximately $120,000 exists on the Ford Road facility. The Company has received an offer for the facility that will result in net proceeds to the Company of $250,000. However, the closing for the sale of that property is contingent on the purchaser obtaining a federal loan guarantee and completion of an environmental risk assessment. The closing on the sale of this facility is tentatively set for January 20, 1999. The second long term obligation is a $2,000,000 Senior Secured Note due January 10, 2001 which was used to purchase the Company's 17 acre Wyoming Terminal Facility. Interest only payments are being made through 1999 with full loan amortization to occur in the calendar year 2000. This obligation is secured by the Wyoming Terminal Facility. The third long term obligation is in the form of an aggregate of $1,500,000 8% Convertible Debentures, convertible over five years at the option of the holder into shares of Common Stock of Rich Coast. These Convertible Debentures are secured by a second position on the Company's assets, including the Wyoming Terminal Facility. The Debentures are convertible into Shares of Common Stock at the conversion price for each Share of Common Stock equal to the lesser of (i) $2.50, or (ii) 75% of the five day average closing bid price of the Common Stock for the five trading days immediately preceding the conversion date of the Debentures. Except in the case of mandatory conversion of the Debentures, no holder of Debentures is entitled to convert an amount of Debentures that would result in beneficial ownership of more than 4.9% of the Company's outstanding common stock. Forward-Looking Statements - -------------------------- The following cautionary statements are made pursuant to the Private Securities Litigation Reform Act of 1995 in order for Rich Coast to avail itself of the "safe harbor" provisions of that Act. Discussions and information in this document which are not historical facts should be considered forward-looking statements. With regard to forward-looking statements, including those regarding the potential revenues from the commercialization of the ASH treatment system, the continuing increase in revenues, and the business prospects or any other aspect of Rich Coast, be advised that actual results and business performance may differ materially from that projected or estimated in such forward-looking statements. Rich Coast has attempted to identify 9 in this document certain of the factors that it currently believes may cause actual future experience and results to differ from its current expectations. In addition to the risks cited above specific to the ASH treatment system, differences may be caused by a variety of factors, including but not limited to, adverse economic conditions, entry of new and stronger competitors, inadequate capital and the inability to obtain funding from third parties, the rejection of the Company's insurance claim relating to the fire, unexpected costs, and failure to capitalize upon access to new clientele. 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned thereunto duly authorized. RICH COAST INC. Date: December 29, 1999 by: /s/ James P. Fagan ---------------------------------------- James P. Fagan, President Date: December 29, 1999 by: /s/ Michael M. Grujicich ---------------------------------------- Michael M. Grujicich, Chief Financial and Accounting Officer 11