1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
January 31, 1997
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
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RICH COAST INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware Applied For
- ------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10200 Ford Road, Dearborn, MI 48126
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(Address of principal executive offices)
(313) 582-8866
---------------------------
(Issuer's telephone number)
RICH COAST RESOURCES LTD.
-------------------------
(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
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The number of shares outstanding of the issuer's classes of common equity, as
of January 31, 1997 is 14,901,713 shares of Common Stock.
Transitional Small Business Disclosure Format (check one): YES NO X
--- ---
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NOTICE TO READER
We have compiled the consolidated balance sheets of Rich Coast Resources Ltd.
as at January 31, 1997 and 1996 and the consolidated statements of operations
for the nine months and three months ended January 31, 1997 and 1996 and the
consolidated statement of changes in financial position for the nine months
ended January 31, 1997 and 1996 from information provided by management. We
have not audited, reviewed or otherwise attempted to verify the accuracy or
completeness of such information. Readers are cautioned that these statements
may not be appropriate for their purposes.
/s/ Smythe Ratcliffe
Chartered Accountants
Vancouver, British Columbia
March 11, 1997
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RICH COAST RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS)
(UNAUDITED - SEE NOTICE TO READER)
=============================================================================================================
JANUARY 31,
1997 1996
- -------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT
Cash $ 3,899 $ 346,800
Accounts receivable 371,459 499,558
Inventory 145,806 0
Prepaid expenses 21,715 30,419
Deposit 0 350,918
- -------------------------------------------------------------------------------------------------------------
542,879 1,227,695
DISTILLATION UNIT 2,024,706 2,024,706
INVESTMENT IN AND EXPENDITURES ON MINERAL
PROPERTIES 0 76,663
CAPITAL ASSETS 3,423,963 3,251,298
PATENT AND TECHNOLOGY, net 32,273 35,785
DUE FROM JOSSCO INC. 0 20,000
INVESTMENT IN AND EXPENDITURES ON OIL
AND PROPERTIES 0 4
- -------------------------------------------------------------------------------------------------------------
$ 6,023,821 $ 6,636,151
=============================================================================================================
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 1,696,859 $925,747
9.25% Convertible debentures (note 4) 240,000 106,088
Current portion of long-term debt 87,023 73,738
- -------------------------------------------------------------------------------------------------------------
2,023,882 1,105,573
LONG-TERM DEBT (note 7) 2,120,918 2,166,299
- -------------------------------------------------------------------------------------------------------------
4,144,800 3,271,872
- -------------------------------------------------------------------------------------------------------------
Shareholders' Equity
CAPITAL STOCK (note 6) 23,859,835 22,412,716
CAPITAL STOCK SUBSCRIBED 0 104,679
ADJUSTMENT TO ASSETS ON ACQUISITION
OF PARTNERSHIP 0 (2,494,801)
FINANCING COSTS 0 (309,282)
DEFICIT (21,980,814) (16,349,033)
- -------------------------------------------------------------------------------------------------------------
1,879,021 3,364,279
- -------------------------------------------------------------------------------------------------------------
$ 6,023,821 $ 6,636,151
=============================================================================================================
See notes to consolidated financial statements.
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RICH COAST RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. DOLLARS)
(UNAUDITED - SEE NOTICE TO READER)
=========================================================================================================
THREE MONTHS NINE MONTHS
ENDED JANUARY 31, ENDED JANUARY 31,
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------
SALES $ 388,538 $ 435,742 $ 1,413,789 $1,124,062
COST OF SALES 253,714 158,092 1,015,251 364,982
- ---------------------------------------------------------------------------------------------------------
GROSS PROFIT 134,824 277,650 398,538 759,080
- ---------------------------------------------------------------------------------------------------------
EXPENSES
Factoring fee 11,112 18,481 14,075 51,848
Wages 214,702 114,624 499,484 482,693
Office and general 45,270 96,963 146,154 181,404
Telephone, facsimile and
utilities 6,529 16,959 22,978 41,639
Travel 10,419 27,063 64,453 66,045
Repairs and maintenance 7,715 27,285 29,631 63,585
Financing 96 26,091 26,837 32,105
Audit and accounting
and legal 16,360 28,480 132,168 103,257
Shareholder relations 3,656 14,292 41,653 110,108
Listing and filing fees 17 13,026 4,774 21,392
Bad debts 0 500 5,990 27,284
Consulting 49,390 10,388 657,443 26,963
Transfer agent 0 2,686 0 8,020
Property taxes 13,742 13,692 55,848 37,449
Insurance 18,867 11,713 71,076 40,089
Exchange translation (gain) loss 8,218 6,836 27,274 (29,811)
Interest, miscellaneous income
and bank charges, net 49,078 277 111,660 40,751
Depreciation 78,381 84,971 280,584 257,571
- ---------------------------------------------------------------------------------------------------------
533,552 514,327 2,192,082 1,562,392
- ---------------------------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD $ (398,728) $ (236,677) $(1,793,544) $ (803,312)
=========================================================================================================
LOSS PER SHARE $ $ $ $
=========================================================================================================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 14,834,670 9,279,580 14,560,453 8,500,605
=========================================================================================================
See notes to consolidated financial statements.
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RICH COAST RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(U.S. DOLLARS)
(UNAUDITED - SEE NOTICE TO READER)
=============================================================================================================
THREE MONTHS NINE MONTHS
ENDED JANUARY 31, ENDED JANUARY 31,
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES
Net loss for period $(398,728) $ (236,677) $(1,793,544) $ (803,312)
Item not involving cash
Depreciation 78,371 84,971 280,584 257,571
- -------------------------------------------------------------------------------------------------------------
(320,357) (151,706) (1,512,960) (545,741)
- -------------------------------------------------------------------------------------------------------------
CHANGES IN NON-CASH WORKING CAPITAL
Deposit 9,492 7,409 5,460 (347,318)
Accounts receivable 11,185 (162,818) 143,662 (261,746)
Prepaid expenses 33,257 (28,718) 19,971 (26,602)
Accounts payable and accrued
liabilities (60,450) (140,077) 332,734 (26,039)
Inventory (55,259) 0 (145,806) 0
Due to shareholder 310,233 0 65,615 106,088
- -------------------------------------------------------------------------------------------------------------
248,458 (324,204) 421,636 (555,617)
- -------------------------------------------------------------------------------------------------------------
(71,899) (475,910) (1,091,324) (1,101,358)
- -------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Adjustment to assets on merger 0 0 0 (2,494,801)
Additions to distillation unit 0 0 0 (16,001)
Expenditures on mineral properties 0 (2,488) 0 (2,488)
Purchase of capital assets (4,822) (1,662,659) (104,584) (1,675,016)
Advance to Jossco Inc. 0 0 0 (20,000)
- -------------------------------------------------------------------------------------------------------------
(4,822) (1,665,147) (104,584) (4,208,306)
- -------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Acquisition of Waste Reduction
Systems 0 2,484,724 0 0
Issue of capital stock
For cash 0 249,822 557,781 3,875,138
For settlement of debt 0 0 105,000 0
For services 70,090 156,960 508,980 0
Note payable 0 0 0 2,000,000
Capital stock subscribed 0 (2,537,268) 0 104,679
Finder's fees 0 (309,282) 0 (309,282)
Long-term debt 4,004 1,991,190 (3,504) (28,341)
Repayment of capital lease 0 0 0 (2,006)
- -------------------------------------------------------------------------------------------------------------
74,094 2,036,146 1,168,257 5,640,188
=============================================================================================================
INCREASE (DECREASE) IN CASH (2,627) (104,911) (27,651) 330,524
CASH, BEGINNING OF PERIOD 6,516 451,711 31,550 16,276
- -------------------------------------------------------------------------------------------------------------
CASH, END OF PERIOD $ 3,889 $ 346,800 $ 3,899 $ 346,800
=============================================================================================================
See notes to consolidated financial statements.
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RICH COAST RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
(U.S. DOLLARS)
(UNAUDITED - SEE NOTICE TO READER)
1. BASIS OF PRESENTATION
These unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in Canada for
interim financial information and conform in all material respects with
those of the United States. These financial statements are condensed,
do not include all disclosures required for annual financial
statements, and should be read in conjunction with the Company's
audited consolidated financial statements incorporated by reference in
the Company's Annual Report on Form 10-K for the year ended April 30,
1996.
In the opinion of the Company's management, these financial statements
reflect all adjustments necessary to present fairly the Company's
consolidated financial position at January 31, 1997 and 1996 and the
consolidated results of operations and the consolidated changes in
financial position for the nine months ended. The results of
operations for the nine months ended January 31, 1997 are not
necessarily indicative of the results to be expected for the entire
fiscal year.
The October 31, 1995 reorganization of the companies resulted in the
Waste Reduction Systems partnership becoming 100% owned by Rich Coast
Resources Inc., a Michigan corporation ("RCRI"). The acquisition has
been accounted for using the purchase method, and accordingly, the
financial statements have been retroactively restated to include the
financial position and results of operations and cash flows of Waste
Reduction Systems.
Prior to acquiring the partnership interest, the Company reported its
share of the net loss of the partnership as an adjustment of investment
in the partnership. As a result of the merger the Company owns 100% of
the former partnership, consequently all the assets, liabilities and
income and expense of that entity are included in the consolidated
financial statements with effect from the commencement of business
since the formation of the partnership approximates $4,988,000.
Prior to acquiring the partnership interest, the Company was engaged
in the mineral exploration business and had an accumulated deficit of
$13,210,746. The accumulated losses of the waste reduction business
since the formation of the partnership approximates $4,988,000.
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RICH COAST RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31
(U.S. DOLLARS)
(UNAUDITED - SEE NOTICE TO READER)
2. CURRENCY TRANSLATION
Financial statements for reporting periods up to and including the year
ended April 30, 1996 were presented in Canadian dollars, the currency
of the incorporation jurisdiction of the parent company. Effective May
1,1996 financial statements are presented in United States dollars
(except for certain per share issue amounts which are expressed in
Canadian (CDN) dollars) as the operations, effective control and
management are located in the United States. This change has been
given retroactive effect to May 1, 1995 for comparative purposes.
Capital stock and deficit of the Canadian parent have been restated in
United States dollars using historical rates of exchange. At May 1,
1996 and January 31, 1997 the Canadian parent's investments in the U.S.
operating entities are the only assets owned. During the period ended
January 31, 1997, the Canadian parent proceeded for domestication in
the State of Delaware.
3. LOSS PER SHARE
Loss per share is computed using the weighted average number of common
shares outstanding during each of the periods.
4. CONVERTIBLE DEBENTURE
The Company has issued two 9.25% convertible debentures for $240,000
which are convertible at the option of the lenders into common shares
at the price of $0.50 per share in respect to the $90,000 debenture and
at the price of $0.25 per share in respect to the $150,000 debenture.
Both debentures mature six months from their issue date of November 5,
1996 for the $90,000 debenture and January 13, 1997 for the $150,000
debenture.
5. RELATED PARTY TRANSACTION
Management fees of $8,820 for the nine months ended January 31, 1997
(three months ended January 31, 1997 - $6,989 (six months ended January
31, 1996 - $18,341, three months ended January 31, 1996 - $7,391), were
paid to a company controlled by a director.
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RICH COAST RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31
(U.S. DOLLARS)
(UNAUDITED - SEE NOTICE TO READER)
6. CAPITAL STOCK
(a) Authorized
100,000,000 common shares without par value
(b) Issued
===================================================================================================
NUMBER OF PRICE PER
SHARES SHARE ($) AMOUNT
- ---------------------------------------------------------------------------------------------------
(note 2)
BALANCE, APRIL 30, 1995 7,749,422 $18,537,578
Shares issued
For cash, private
placement 1,198,945 CDN $ 1.00 836,644
For cash on exercise
of stock options 466,150 CDN $ 1.22 396,810
For services 166,600 156,960
Acquisition of Waste Reduction
Reduction Systems 3,383,200 CDN $ 1.00 2,484,724
- ---------------------------------------------------------------------------------------------------
BALANCE, JANUARY 31, 1996 12,964,317 22,412,716
Shares issued
For cash on exercise of
stock options 109,000 CDN $ 1.13 81,797
For services 83,400 CDN $ 1.34 89,074
For settlement of loan
payable to shareholder 167,376 CDN $ 0.85 104,487
- ---------------------------------------------------------------------------------------------------
BALANCE, APRIL 30, 1996 13,324,093 22,688,074
Shares issued
For settlement of debt 152,470 $ 0.70 105,000
For cash, private 635,000 $ 489,650
For cash on exercise of 81,750 CDN $ 68,131
For services 708,400 $ 508,980
- ---------------------------------------------------------------------------------------------------
BALANCE, JANUARY 31, 1997 14,901,713 $23,859,835
===================================================================================================
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RICH COAST RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31
(U.S. DOLLARS)
(UNAUDITED - SEE NOTICE TO READER)
6. CAPITAL STOCK (Continued)
(c) At January 31, the following share purchase options were outstanding
==================================================================
EXERCISE NUMBER
EXPIRY DATE PRICE OF SHARES
- ------------------------------------------------------------------
October 3, 1998 CDN $ 0.84 15,000
February 1, 1997 CDN $ 1.34 40,218
March 12, 1997 CDN $ 1.27 10,031
May 10, 1997 CDN $ 1.48 184,453
October 26, 2005 CDN $ 0.60 14,450
September 8, 2005 $ 1.00 400,000
December 27, 2005 $ 0.50 800,000
January 15, 2006 $ 0.50 800,000
January 15, 2006 $ 0.75 200,000
==================================================================
(d) At January 31, 1997, share purchase warrants were outstanding for
3,600,000 shares exercisable at $0.62 per share to January 10, 2006.
(e) The Company has issued 600,000 non-transferable warrants in
connection with the issue of a debenture for $150,000 (note 4). The
warrants entitle the holder to purchase up to 600,000 common shares
at $0.25 per share at any time until January 12, 1999.
7. LONG-TERM DEBT
=========================================================================
1997 1996
- -------------------------------------------------------------------------
10% senior secured note, due
October 1, 2001, interest
payable monthly $2,000,000 $2,000,000
Land contract payable in monthly
instalments of $4,753 each including
principal and interest at 8% 194,605 224,700
Equipment loan 2,487 15,337
- -------------------------------------------------------------------------
2,197,092 2,240,037
Less: Current portion 76,174 73,738
- -------------------------------------------------------------------------
$2,120,918 $2,166,299
=========================================================================
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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 Canada for
interim financial information. There are no material differences between
Canadian GAAP and U.S. GAAP with respect to the Company's unaudited financial
statements. All figures used in this form are in U.S. dollars unless otherwise
stated.
RESULTS OF OPERATIONS
To the date of this Report, the Company's business has been speculative. Cash
flow from the Company's operations does not, at present, satisfy all
operational requirements and cash commitments. The Company has been dependent
and continues to rely upon the sale of equity and debt securities in order to
fund its development activities and operations and its ability to continue
operations is dependent on the ability of the Company to continue to obtain
financing. There is no assurance that the Company's acquisition of Waste
Reduction Systems will provide cash flows sufficient to make the Company a
successful operating enterprise. If Waste Reduction Systems does not generate
sufficient levels of cash flow from operations additional financial support
will be required. Without such funding there could be doubt as the Company's
ability to continue to operate in the normal course of business.
The Company has completed its latest technology system for recycling oils and
start of production using the new system as a result of winning a major
competition for an oil waste stream at one of the big three automotive
companies.
The one million gallon bio treatment system located at Rich Coast's new
Dearborn facility is expected to be in production by mid year. Capacity of the
bio system is expected to exceed 50,000 gallons per day.
For the next few months Rich Coast's efforts will be concentrated on fulfilling
expectations of its new automotive customers and in accelerating production of
its bio treatment plant. After that, its priorities will be to upgrade the
quality and increase its price per gallon from recycled oil product, to
increase the Company's capacity, and then to pursue the fuel oil market.
In the nine months ended January 31, 1997, the Company had sales of $1,413,789
and a gross profit of $398,538.
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For the nine months ended January 31, 1997, the Company recorded a net lossof
$1,793,544 or $0.12 per share. These results compare with a net loss of
$803,312 for the nine months ended January 31, 1996 or $0.09 per share. The
results of operation for the nine months ended October 31, 1997 were generally
in line with management's expectations.
REVENUES
For the past several years, the Company has been in the development stage and
therefore has not generated revenues sufficient to provide an operating profit.
COST AND EXPENSES
PROFESSIONAL FEES (ACCOUNTING, LEGAL AND AUDIT). Professional fees increased
to $132,168 for the nine months ended January 31, 1997 from $103,257 for the
same period in 1996. Much of the increase was due to expenses associated with
the Company's proposed continuance to the State of Delaware. The Company
continues to follow a policy of completing much of the regulatory filings
within the Company's head office with review by appropriate outside
professionals.
SHAREHOLDER RELATIONS. These costs for the nine months ended January 31, 1997
decreased to $41,653 versus $110,108 for the same period in 1996.
TRAVEL COSTS. Travel costs were $64,453 for the period in 1997, versus $66,045
for the 1996 period.
CONSULTING FEES. Expenses in the category increased from $27,284 for the
period in 1996 to 657,443 for the nine months ended January 31, 1997. During
the current period, the Board of Directors authorized the issuance of 400,000
shares at a deemed price of $0.875 per share, for a total of $350,000, in lieu
of cash compensation for services provided to the Company by a consultant.
These services included assisting management in developing corporate strategy,
assistance in the establishment of the Company's joint venture in the waste
processing industry and negotiating the Company's acquisition of the minority
interest in Waste Reduction Systems, and assisting the Company's management in
completing a due diligence and business feasibility review of that business.
LOSS FOR THE PERIOD
The net loss for the nine month period ended January 31, 1997 amounted to
$1,793,544 versus a net loss for the nine months ended January 31, 1996 of
$803,312.
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The Company does not believe that inflation has a significant effect on its
business.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has not generated sufficient revenue to fund operations.
Since its inception, the Company has financed its exploration and development
costs and its investment in Waste Reduction Systems primarily from the sale of
equity securities through private placements and exercise of director's and
employees' options. As at January 31, 1997 the Company had $3,889 cash on
hand. Current assets totaled $542,879.
The Company does not have any material commitments or anticipated material
capital expenditures to third parties for the coming years, however, the
Company has committed to raising funds through the private sale of equity or
debt instruments in order to facilitate the expansion. The Company presently
has no firm commitments for such financing and there can be no assurance that
adequate financing will be available in a timely manner or on favorable terms
or at all.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27.4 - Financial Data Schedule
(b) Reports on Form 8-K: None. During the quarter ended January 31,
1997, the Company filed no reports on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RICH COAST INC.
Date: March 14, 1997 by: /s/ James P. Fagan James
---------------------------------
P. Fagan, President
Date: March 14, 1997 by: /s/ Michael M. Grujucich
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Michael M. Grujucich, Chief
Financial and Accounting Officer
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EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
27.4 Financial Data Schedule