U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2001
[ ] 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.)
6011 Wyoming Avenue, Dearborn, Michigan 48126
----------------------------------------------
(Address of principal executive offices)
Issuer's telephone number: 313-582-8866
(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
March 21, 2001 is 33,270,947 shares of Common Stock.
Transitional Small Business Disclosure Format (check one): Yes[_] No [X]
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RICH COAST INC.
Consolidated Financial Statements
January 31, 2001 and 2000
(Unaudited)
INDEX PAGE
- ----- ----
Consolidated Financial Statements
Consolidated Balance Sheet 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-8
2
RICH COAST INC.
Consolidated Balance Sheet
January 31, 2001
(Unaudited)
Assets
- ------
Current assets:
Accounts receivable, net of allowance for uncollectible
accounts of $17,300 $ 613,882
Prepaid expenses 16,950
------------
Total current assets 630,832
Property and equipment, net 2,152,225
Patent and technology, net 15,722
Deferred finance charges and deposits 23,109
------------
$ 2,821,888
============
Liabilities and stockholders' deficit
- -------------------------------------
Current liabilities:
Bank overdraft $ 9,420
Current portion of long-term debt 2,441,046
Accounts payable and accrued liabilities 1,309,908
Accrued oil and waste treatment costs 418,164
Accrued interest 1,662,490
------------
Total current liabilities 5,841,028
Long-term debt 100,000
------------
Total liabilities 5,941,028
Stockholders' deficit:
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,
33,270,947 issued and outstanding at January 31, 2001 33,271
Additional paid-in capital 28,885,618
Accumulated deficit (32,038,029)
------------
(3,119,140)
------------
$ 2,821,888
============
See notes to consolidated financial statements.
3
RICH COAST INC.
Consolidated Statements of Operations
Three and Nine Months Ended January 31, 2001 and 2000
(Unaudited)
Three Months Ended January 31 Nine Months Ended January 31
- --------------------------------------------------------------------------------------------------------
2001 2000 2001 2000
- --------------------------------------------------------------------------------------------------------
(Restated - Note 4) (Restated - Note 4)
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Sales $ 655,367 $ 776,674 $ 2,300,412 $ 2,095,694
----------- ---------- ----------- -----------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Operating expenses:
- --------------------------------------------------------------------------------------------------------
Cost of sales 393,222 340,418 1,058,952 944,309
- --------------------------------------------------------------------------------------------------------
General and administrative
expenses 595,977 480,794 1,758,214 1,535,678
- --------------------------------------------------------------------------------------------------------
Sales and marketing expenses 45,590 72,688 133,375 141,040
- --------------------------------------------------------------------------------------------------------
Impairment of property 0 0 0 169,739
- --------------------------------------------------------------------------------------------------------
(Gain) loss on disposal of
property and equipment (25,462) 0 49,096 0
- --------------------------------------------------------------------------------------------------------
Lawsuit settlement expense 0 0 0 150,000
----------- ---------- ----------- -----------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
1,009,327 893,900 2,999,637 2,940,766
----------- ---------- ----------- -----------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Loss from operations <353,960> <117,226> <699,225> <845,072>
----------- ---------- ----------- -----------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Other expense:
- --------------------------------------------------------------------------------------------------------
Interest expense 303,352 68,905 1,840,472 205,494
----------- ---------- ----------- -----------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Net loss $ <657,312> $ <186,131> <2,539,697> <1,050,566>
=========== ========== =========== ===========
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Basic and diluted net loss
Per common share
outstanding $ <0.04> $ <0.02> $ <0.21> $ <0.14>
=========== ========== =========== ===========
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Weighted average number of
common shares outstanding 14,722,201 9,144,780 12,101,837 7,273,248
=========== ========== =========== ===========
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
4
RICH COAST INC.
Consolidated Statements of Operations
Three and Nine Months Ended January 31, 2001 and 2000
(Unaudited)
2001 2000
(Restated -
Note 4)
--------- -----------
Net cash used in operating activities $(110,724) $(423,819)
--------- ---------
Net cash provided by (used in) investing activities:
Proceeds from sale of property and equipment 252,080 0
Capital expenditures (288,135) (25,456)
--------- ---------
Net cash used in investing activities (36,055) (25,456)
--------- ---------
Net cash provided by (used in) financing activities:
Increase (decrease) in bank overdraft 9,420 (5,682)
Issuance of common stock for cash 225,000 600,000
Proceeds from convertible notes payable 100,000 0
Repayment of long-term debt (205,525) (70,000)
--------- ---------
Net cash provided by financing activities 128,895 524,318
--------- ---------
(Decrease) increase in cash and cash equivalents (17,884) 75,043
Cash and cash equivalents, beginning 17,884 0
--------- ---------
Cash and cash equivalents, ending $ 0 $ 75,043
========= =========
See notes to consolidated financial statements.
5
RICH COAST INC.
Notes to Consolidated Financial Statements
Nine Months Ended January 31, 2001 and 2000
(Unaudited)
1. BASIS OF PRESENTATION
These unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. These financial statements are condensed and do not include all
disclosures required for annual financial statements. The organization and
business of the Company, accounting policies followed by the Company and other
information are contained in the notes to the Company's audited consolidated
financial statements filed as part of the Company's April 30, 2000 Form 10-KSB.
In the opinion of the Company's management, these financial statements
reflect all adjustments, including normal recurring adjustments, considered
necessary to present fairly the Company's consolidated financial position at
January 31, 2001 and the consolidated results of operations for the three and
nine months ended January 31, 2001 and 2000 and the consolidated statements of
cash flows for the nine months ended January 31, 2001 and 2000.
2. CAPITAL STOCK
(a) Authorized 100,000,000 common shares of $0.001 par value and 10,000,000
preferred shares of $0.001 par value.
(b) Issued during the period:
Number of Price
Shares Per Share Amount
---------- --------- ----------
Nine months ended January 31, 2000
Shares issued:
Lawsuit settlement 250,000 $ 0.20 $ 50,000
Convertible debenture (principal and
accrued interest) 298,571 $ 0.1995 59,565
For cash 3,000,000 $ 0.20 600,000
Consulting services 300,000 $ 0.15 45,000
---------- --------- ----------
3,848,571 $ 754,565
========== ==========
Nine months ended January 31, 2001
Shares issued:
For cash 1,125,000 $ 0.20 $ 225,000
In exchange for renegotiated
payment terms on senior secured note 900,000 $ 0.1562 140,580
Convertible debenture (principal) 21,331,058 $0.04688 1,000,000
---------- --------- ----------
23,356,058 $1,365,580
========== ==========
6
RICH COAST INC.
Consolidated Statements of Operations
Nine Months Ended January 31, 2001 and 2000
(Unaudited)
3. SIGNIFICANT SALES CONCENTRATIONS
The Company's customers are concentrated in the Great Lakes region,
including Canada. During the nine months ended January 31, 2001 and 2000,
approximately 15.5% and 14%, respectively, of total sales arose in Canada.
4. RESTATEMENT OF FINANCIAL STATEMENTS
In 1993, the Company purchased a distillation unit for use in the
clarification of sulfur. When the price of sulfur dropped in late 1993, the
Company believed that the distillation unit provided an opportunity to enter the
business of removing contaminants from polluted soil, such as oily sludge. From
1993 through 1999, the Company investigated several uses for the unit, none of
which proved economically feasible. No depreciation had been taken on the unit,
as it had never been placed in service, and at May 1, 1999 its carrying value
was $2,024,706. In its previously issued financial statements for the year
ended April 30, 2000, the Company recorded $1,224,706 of impairment losses
related to the unit during the quarter ended January 31, 2000.
Based on the history of the asset and how it was used, the Company has
determined that the cost of the asset should have been recorded as research and
development costs in accordance with SFAS No. 2 as early as 1993. Accordingly,
the financial statements have been restated to correct this error, resulting in
an increase in the accumulated deficit of $800,000 as of July 31, 2000. The
restatement did not effect net loss or basic and diluted net loss per common
share outstanding for the three and nine months ended January 31, 2001. However,
the restatement did effect net loss and basic and diluted net loss per common
share outstanding for the three and nine months ended January 31, 2000. Net loss
decreased $1,224,706, from $1,410,837 to $186,131 and basic and diluted net loss
per common share outstanding decreased $0.13, from $0.15 to $0.02 during the
three months ended January 31, 2000. Net loss decreased $1,224,706, from
$2,275,272 to $1,050,566 and basic and diluted net loss per common share
outstanding decreased $0.17, from $0.31 to $0.14 during the nine months ended
January 31, 2000.
5. 8% CONVERTIBLE DEBENTURES
At October 31, 2000, the Company had outstanding $1,275,500 of 8%
convertible debentures, secured by property and equipment and other assets. The
debentures, penalties and accrued interest 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 debentures 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, during the fiscal year ended April 30, 1999, the Company
was not in compliance with certain covenants of the debentures. The Company and
the holders of the debentures entered into a standstill agreement whereby the
debenture holders agreed not to take any action with respect to exercising their
conversion rights or declaring the debentures to be in default through
7
RICH COAST INC.
Consolidated Statements of Operations
Nine Months Ended January 31, 2001 and 2000
(Unaudited)
November 2000. In return, the standstill agreement required the Company, among
other actions, to make payments on the debentures of $50,000 in June 2000 and
$25,000 each in August and September 2000; effect a timely registration of the
shares underlying the possible conversion of the debentures, and to complete
$2,000,000 of funding. If the Company were to meet all of the required
conditions of the standstill agreement, neither penalties nor penalty interest
would be due on the debentures. During 1999 and 2000, the Company made the
debenture payments required by the standstill agreement, began the process of
registration of the shares underlying the possible conversion of the debentures
and entered into an agreement with an investment banker to provide up to
$2,000,000 of either equity or debt financing. During the year ended April 30,
2000, $600,000 of equity financing was provided in exchange for the issuance of
3,000,000 shares of common stock. An additional $225,000 was received in June
2000 in exchange for the issuance of 1,125,000 shares of common stock. However,
during the quarter ended October 31, 2000, management determined that it was no
longer probable that the Company would be able to complete the remaining funding
under its agreement with the investment banker by November 2000. Therefore, the
standstill agreement expired in November 2000.
As a result of the foregoing, penalties and interest of $1,214,350 became
due on November 1, 2000 and are charged to interest expense during the quarter
ended October 31, 2000. Penalties of 2% per month on the outstanding principal
balance will continue to accrue and penalty interest on the debentures will
remain at 20% until such time as the shares underlying the possible conversion
are registered and interest and penalties of $178,804 were charged to interest
expense during the quarter ended January 31, 2001. On December 15, 2000, Trans
National Holding Ltd. purchased rights to the debenture. In order to facilitate
the sale to Trans National Holding Ltd., the Company agreed to issue warrants to
the sellers of the debentures to purchase 150,000 shares of its common stock,
exercisable at $0.50 per share for five years. The Company did not record
expense related to these warrants as the exercise price equaled or exceeded the
fair value of the warrants at the date of issuance. On January 19, 2001, the
purchaser converted $1,000,000 principal into Rich Coast common shares at a 25%
discounted price of $0.04688 per share for a total purchase of 21,331,058
shares.
6. 8.5% CONVERTIBLE NOTES
On January 22, 2001, the Company received $100,000 and on February 9, 2001
the Company received $75,000 in exchange for 8.5% convertible notes. These notes
are due and convertible on January 22, 2003 and February 9, 2003, respectively,
and are convertible to shares of common stock exercisable at $0.0625 per share
(the quoted market price of the common stock at the date of issuance).
8
RICH COAST INC.
Consolidated Statements of Operations
Nine Months Ended January 31, 2001 and 2000
(Unaudited)
7. SHARE ISSUANCE
During the quarter ended January 31, 2001, the Company issued 21,331,058
shares of common stock to the holders of the Company's 8% convertible
debentures. The shares were issued upon the debenture holders election to
convert $1,000,000 of principal to common stock.
The shares were valued at $0.04688, which was 75% of the five day average
closing bid price for the five trading days immediately preceding the conversion
date of January 19, 2001. (The beneficial conversion feature had been recognized
and accounted for at the date the debentures were originally issued.)
On September 25, 2000, the Company issued warrants to purchase 100,000
shares of the Company's common stock at $0.20 per share and warrants to purchase
an additional 585,000 shares at $0.50 per share to the holder of the Company's
10% senior secured note. These warrants were issued in connection with the
September 2000 modification agreement to the senior secured note and were in
lieu of late payments of principal and interest prior to the modification. The
Company did not record expense related to these warrants as the exercise price
equaled or exceeded the fair value of the warrants at the date of issuance.
9
Item 2. Management's Discussion and Analysis
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 for interim financial
information.
Rich Coast's focus on implementing successful cattle slaughterhouse waste
stream clean up and waste recovery systems continues. The Company's first
production installation was completed in December 2000 and trial runs have
produced savings in excess of estimates incorporated in the Company's first
contract which is for five years with a large cattle slaughterhouse company.
Full scale production operation will commence in February 2001 and are expected
to provide earnings to Rich Coast from the sale of recovered fats and bone meal
plus a share of the savings in waste discharge penalties. Net earnings averaging
$60,000 per month are anticipated. Contracts for two additional customer sites
are being negotiated.
Rich Coast has also received a contract from a pulp-paper facility at which
successful demonstrations have been made. Environmental issues that have
delayed contract development are now resolved. The production system is now
being fabricated with installation expected to be completed in June 2001.
The sale of Rich Coast's Ford Road facility closed on August 11, 2000. On
the date of closing, Rich Coast's headquarters and all of its operations were
transferred to its nineteen-acre terminal location at 6011 Wyoming Avenue,
Dearborn, Michigan 48126.
The Company's major costs during the quarter ended January 31, 2001 were
made at its off-site slaughterhouse location and amounted to approximately
$130,000. Further modifications are anticipated to optimize operations;
however, trial runs have indicated that these modifications will be minor in
cost.
On September 25, 2000, the Company issued warrants to purchase 100,000
shares of the Company's common stock at $0.20 per share and warrants to purchase
an additional 585,000 shares at $0.50 per share to the holder of the Company's
10% senior secured note. These warrants were issued in connection with the
September 2000 modification agreement to the senior secured note and were in
lieu of late payments of principal and interest prior to the modification.
The Company and the holders of its 8% convertible debentures (the "8%
Debentures") 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. In
return, the standstill agreement required the Company, among other actions, to
make payments on the debentures of $50,000 in June 2000 and $25,000 each in
August and September 2000; effect a timely registration of the shares underlying
the possible conversion of the debentures, and to complete $2,000,000 of
funding. If the Company were to meet all of the required conditions of the
standstill agreement, neither penalties nor
10
penalty interest would be due on the debentures. During 1999 and 2000, the
Company made the debenture payments required by the standstill agreement, began
the process of registration of the shares underlying the possible conversion of
the debentures and entered into an agreement with an investment banker to
provide up to $2,000,000 of either equity or debt financing. During the year
ended April 30, 2000, $600,000 of equity financing was provided in exchange for
the issuance of 3,000,000 shares of common stock. An additional $225,000 was
received in June 2000 in exchange for the issuance of 1,125,000 shares of common
stock. However, during the quarter ended October 31, 2000, management determined
that it was no longer probable that the Company would be able to complete the
remaining funding under its agreement with the investment banker by November
2000. Therefore, the standstill agreement expired in November 2000.
On December 15, 2000 the 8% Debentures were sold to an investor who
expressed a willingness to not declare the Company in default. In order to
facilitate the sale, the Company agreed to issue warrants to the sellers of the
debentures to purchase 150,000 shares of its common stock, exercisable at $0.50
per share for five years. The debt evidenced by the 8% Debentures has rapidly
increased in conversion value due to accrued interest and penalties. After
conversion of $1,000,000 principal to common stock on January 19, 2001, the
outstanding principal is $275,500, plus penalties and interest through January
31, 2001 of $1,662,490, for total conversion value of $1,937,990. The Company
and the new holder of the 8% Debentures negotiated an Amendment to the
Debentures in December 2000. Under the Amendment the new holder waived the
right to declare the Company in default under the 8% Debentures until December
31, 2001. The Amendment also removed the 4.9% limit on the number of shares the
Debenture holder can own, thereby allowing the Debenture holder to convert into
and hold a controlling interest in the Company.
Results of Operation
- --------------------
Sales increased $204,718, or 9.8%, from $2,095,694 during the nine months
ended January 31, 2000 to $2,300,412 during the nine months ended January 31,
2001. This increase is a result of retaining the Company's existing customer
base in conjunction with adding new business through the efforts of two sales
people hired in late 1999.
Cost of sales increased $114,643, or 12.1%, from $944,309 during the nine
months ended January 31, 2000 to $1,058,952 during the nine months ended January
31, 2001. This increase is partly due to the increase in sales. Furthermore,
cost of sales as a percentage of sales increased 2%, from 45.1% during the nine
months ended January 31, 2000 to 46% during the nine months ended January 31,
2001. This increase is primarily due to costs associated with off-site
operations.
General and administrative expenses increased $222,536, or 14.5%, from
$1,535,678 during the nine months ended January 31, 2000 to $1,758,214 during
the nine months ended January 31, 2001. This increase is primarily due to
higher payroll and payroll related expenses.
11
Sales and marketing expenses decreased $7,665, or 5.4%, from $141,040
during the nine months ended January 31, 2000 to $133,375 during the nine months
ended January 31, 2001. This decrease is partly due to lower consulting
expenses.
During the nine months ended January 31, 2000, the Company recorded
$169,739 of impairment of property related to the expected sale of the Ford Road
Facility.
During the nine months ended January 31, 2001, the Company recorded $49,096
of loss on disposal of property and equipment. This relates to losses on the
completed sale of the Ford Road Facility of approximately $75,000 offset by
gains of approximately $26,000 on the sale of equipment.
During the nine months ended January 31, 2000, the Company incurred
$150,000 of lawsuit settlement expense involving Comer Holdings, Ltd. and Mobil
Oil Corporation.
Interest expense increased $1,634,978, or 795.6%, from $205,494 during the
nine months ended January 31, 2000 to $1,840,472 during the nine months ended
January 31, 2001. The increase was primarily due to default interest and
penalties in the amount of $1,214,350 accruing on the 8% Debentures during the
quarter ended October 31, 2000 with an additional $178,804 accruing during the
quarter ended January 31, 2001.
Net loss increased $1,489,131, or 141.7%, from $1,050,566 during the nine
months ended January 31, 2000 to $2,539,697 during the nine months ended January
31, 2001. Net loss per common share increased $0.07, or 50%, from $0.14 per
share during the nine months ended January 31, 2000 to $0.21 per share during
the nine months ended January 31, 2001. Net loss per common share was impacted
by an increase in the weighted average number of common shares of 4,828,589.
Liquidity and Capital Resources
- -------------------------------
The Company's financial statements for the nine months ended January 31,
2001 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 nine months ended January 31, 2001, the
Company reported a net loss of $2,539,697 and has a stockholders' deficit of
$3,119,140. At January 31, 2001, a significant portion of the Company's debt is
currently due and the Company has a working capital deficit of $5,210,196. 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:
12
(a) Financing negotiations
Through January 31, 2001, $825,000 ($225,000 during the nine months ended
January 31, 2001) of equity financing has been provided in exchange for the
issuance of 4,125,000 shares of common stock (1,125,000 shares during the nine
months ended January 31, 2001). In addition, $100,000 of long-term debt
financing has been provided in exchange for a 8.5% convertible note during the
quarter ended January 31, 2001. The Company also received $75,000 in exchange
for an 8.5% convertible note on February 9, 2001.
(b) Other plans
In September 2000, the Company renegotiated payment terms on the senior
secured note for monthly interest plus $5,000 principal payments to be made
until May 10, 2001, then equal monthly installments of principal and interest
from May 10, 2001 until repayment of all principal. In December 2000 the 8%
Debentures were sold and the Company negotiated an Amendment with the new
holders which provides that the Company cannot be declared in default until
2002. 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, 2001 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 existing and potential contracts for customer site
installation 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, promises to allow 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.
Improvements already implemented at the Wyoming Avenue terminal include new
and more efficient dumping pits, which increase capacity. By the spring of 2001,
these pits will be housed in a pre-fabricated steel structure, approximately
18,000 square feet in size, designed to accommodate supplemental pit waste
processing equipment which will reduce costs and further increase capacity.
However, additional equity financing will be required to take advantage of the
13
Company's proprietary systems. The Company has negotiated and received $75,000
of additional long-term debt financing in February 2001.
During the nine months ended January 31, 2001, net cash used in operating
activities was approximately $111,000. Net cash used in operating activities
during the nine months ended January 31, 2000 was approximately $424,000. Net
cash used in operating activities during the nine months ended January 31, 2001
includes the net loss for the nine months of approximately $2,540,000 reduced by
non-cash expenses and a net change in operating assets and liabilities of
approximately $2,429,000. Net cash used in operating activities during the nine
months ended January 31, 2000 includes the net loss for the nine months of
approximately $1,051,000 reduced by non-cash expenses and net changes in
operating assets and liabilities of approximately $627,000.
Cash flows used in investing activities was approximately $36,000 during
the nine months ended January 31, 2001 compared to $25,000 during the nine
months ended January 31, 2000. During the nine months ended January 31, 2001,
the Company spent $288,135 on capital expenditures. There were no outstanding
commitments for capital expenditures at January 31, 2001.
Cash flows provided by financing activities was approximately $129,000
during the nine months ended January 31, 2001 compared to cash flows provided by
financing activities of $524,000 during the nine months ended January 31, 2000.
During the nine months ended January 31, 2001, the Company accumulated
approximately $9,000 of bank overdraft, sold 1,125,000 shares of common stock
for $225,000, received $100,000 in proceeds from a convertible note and repaid
approximately $206,000 of long-term debt. During the nine months ended January
31, 2000, the Company relieved approximately $6,000 of bank overdraft, sold
3,000,000 shares of common stock for $600,000 and repaid $70,000 of long-term
debt.
Changes in Financial Condition
- ------------------------------
Rich Coast obtained $225,000 of equity financing during the nine months
ended January 31, 2001 through the sale of 1,125,000 shares of common stock at
$0.20 per share. In addition, Rich Coast obtained $100,000 of long-term debt
financing during the quarter ended January 31, 2001. Net losses for the nine
months ended January 31, 2001 totaled $2,539,697. The Company expects to
continue increasing its revenues in future quarters as traditional business
continues to improve and revenues are realized from anticipated contracts from
the installation of waste treatment systems at customer sites.
The Company expects conversion of the outstanding balance (at January 31,
2001, $275,500 principal plus $1,662,490 accrued interest) of the 8% Debentures
into common shares at a 25% discount to the market in the future with a
resultant substantial dilution of shareholders.
14
PART II. OTHER INFORMATION
Item 2(c). Equity Securities Sold During the Quarter
Rich Coast, Inc. issued 21,331,058 shares of common stock to the holders of
the 8% convertible debentures on January 19, 2001 in connection with the
conversion of $1,000,000 principal. No commissions were paid on the
transaction. The shares were issued in reliance on Section 4(2) of the
Securities Act of 1933.
Forward-Looking Statements
- --------------------------
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 Rich Coast proprietary systems, the expected installations
at slaughterhouses, the expected increase in revenue, and the business prospects
or any other aspect of Rich Coast, actual results and business performance may
differ materially from that projected or estimated in such forward-looking
statements. Rich Coast has attempted to identify in this document certain of
the factors that it currently believes may cause actual future experience and
results to differ from its current expectations.
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.
Item 6. Exhibits
(a) Exhibit 3.1 Articles of Incorporation. (1)
Exhibit 3.2 Bylaws. (1)
Exhibit 4.1 Amendment to Debentures. (2)
----------------
(1) Incorporated by reference from Registration Statement on Form S-3 and
as amended on Form SB-2, File No. 333-63289.
(2) Incorporated by reference from Registration Statement on Form S-3 and
as amended on Form SB-2, File No. 333-63289, Exhibit 10.10.
(b) No reports on Form 8-K were filed during the quarter ended 01/31/2001.
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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 22, 2001 By: /s/ James P. Fagan
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James P. Fagan, President and Chief
Executive Officer
Date: March 22, 2001 By: /s/ Michael M. Grujicich
-------------------------
Michael M. Grujicich, Chief Financial
and Accounting Officer
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