U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2000
Commission file number 0-27853
HYATON ORGANICS INC.
(Exact name of small business issuer as specified in its charter)
Nevada 86-0913555
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1500 West Georgia Street, 13th Floor
Vancouver, British Columbia
Canada V6G 2Z6
(Address of principal executive offices)
(604) 623-3300
(Issuer's telephone number)
(Former address if changed since last report)
Check whether the issuer (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 [ ]
Number of shares of common stock outstanding as of June 30, 2000: 27,556,000
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HYATON ORGANICS INC.
(a development stage enterprise)
Consolidated Balance Sheets
(expressed in U.S. dollars)
(Unaudited and Prepared Internally by Management)
--------------------------------------------------------------------------------
June 30, December 31,
2000 1999
--------------------------------------------------------------------------------
(unaudited)
Assets
Current assets:
Cash $ 21,483 $ 3,218
Accounts receivable and other 8,663 11,887
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Total current assets 30,146 15,105
Computer equipment, net of accumulated depreciation
of $1,203 (1999 - $885) 2,770 1,084
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Total assets $ 32,916 $ 16,189
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Liabilities and Shareholders' Deficiency
Current liability:
Accounts payable and accrued liabilities $ 10,709 $ 30,214
Loans from related parties 1,298,028 940,850
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Total liabilities 1,308,737 971,064
Shareholders' deficiency:
Capital stock:
Authorized:
100,000,000 common shares with a par value
of $0.01
25,000,000 preference shares with a par
value of $0.01
Issued:
27,556,000 common shares (1999 - 27,559,000) 275,560 276,560
Additional paid-in capital 223,187 223,187
Deficit accumulated during the development stage (1,774,824) (1,430,962)
Other comprehensive income:
Cumulative translation adjustment 256 (22,660)
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Total shareholders' deficiency (1,275,821) (954,875)
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Total liabilities and shareholders' deficiency $ 32,916 $ 16,189
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See accompanying notes to consolidated financial statements.
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HYATON ORGANICS INC.
(a development stage enterprise)
Consolidated Statements of Operations and Deficit
(expressed in U.S. dollars)
(Unaudited and Prepared Internally by Management)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
Three month Three month Six month Six month November 24,
period ended period ended period ended period ended 1994 to
June 30, June 30, June 30, June 30, June 30,
2000 1999 2000 1999 2000
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ - $ 2,827 $ - $ 6,893 $ 87,666
Expenses:
Consulting and other
professional fees 148,087 73,835 286,967 141,466 828,300
Product research and
development costs 8,682 20,190 35,087 47,262 360,173
Travel 950 - 1,705 - 43,685
Administrative and other
expenses 9,898 24,408 20,103 34,402 137,242
Employee equity compensation - - - - 222,500
---------------------------------------------------------------------------------------------------------------
167,617 118,433 343,862 223,130 1,591,900
------------------------------------------------------------------------------------------------------------------
Net loss 167,617 115,606 343,862 216,237 1,504,234
Deficit accumulated during the
development stage, beginning
of period 1,607,207 792,401 1,430,962 691,770 -
Charge to deficit - - - - 270,590
------------------------------------------------------------------------------------------------------------------
Deficit accumulated during the
development stage, end
of period $ 1,774,824 $ 908,007 $ 1,774,824 $ 908,007 $ 1,774,824
------------------------------------------------------------------------------------------------------------------
Basic and diluted loss
per share $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.07
Weighted average number of
shares outstanding 27,556,000 27,559,000 27,556,000 27,559,000 22,239,978
------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
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HYATON ORGANICS INC.
(a development stage enterprise)
Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
(Unaudited and Prepared Internally by Management)
--------------------------------------------------------------------------------
For the period
Six month Six month November 24,
period ended period ended 1994 to
June 30, June 30, June 30,
2000 1999 2000
--------------------------------------------------------------------------------
Cash flows from (used in)
operating activities:
Net loss $ (343,862) $ (216,237) $(1,504,234)
Items not involving the
use of cash:
Depreciation 337 19 1,203
Employee equity compensation - - 222,500
Shares issued as a
financing fee - - 5,000
Changes in non-cash operating
working capital:
Accounts receivable and other 3,224 25,676 681
Accounts payable and
accrued liabilities (19,505) (14,721) 1,754
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(359,806) (205,263) (1,273,096)
Cash flows used in investing
activities:
Capital expenditures (2,023) - (3,891)
Cash flows from financing activities:
Issuance of common shares - - 657
Loans from related parties:
Kafus Industries Ltd. 323,230 145,335 896,107
Cameron Strategic Planning Ltd. 56,939 54,847 362,156
Mr. Robert L. Novitsky - 2,114 39,744
Kafus Bio-Composites, Inc. - - 1,107
--------------------------------------------------------------------------------
380,169 202,296 1,299,771
Effect of exchange rate changes on
foreign currency cash balances (75) 971 (1,301)
--------------------------------------------------------------------------------
Increase (decrease) in cash 18,265 (1,996) 21,483
Cash, beginning of period 3,218 9,210 -
--------------------------------------------------------------------------------
Cash, end of period $ 21,483 $ 7,214 $ 21,483
--------------------------------------------------------------------------------
Supplementary information:
Interest paid $ - $ - $ -
Income taxes paid - - -
Non-cash transactions:
Issuance of common shares:
For investment in Camden
Agro-Systems Inc. - - 270,590
As a financing fee - - 5,000
Options issued as employee
equity compensation - - 222,500
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See accompanying notes to consolidated financial statements.
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HYATON ORGANICS INC.
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
(Unaudited and Prepared Internally by Management)
June 30, 2000
--------------------------------------------------------------------------------
1. Basis of presentation:
The consolidated unaudited financial statements do not include all
information and footnote disclosures required under generally accepted
accounting principles in the United States. In the opinion of management,
all adjustments (consisting solely of normal recurring accruals)
considered necessary for a fair presentation of the financial position,
results of operations and cash flows as at June 30, 2000 and for the
periods presented have been included. The unaudited consolidated balance
sheets, statements of operations and deficit and statements of cash flows
have been prepared in accordance with generally accepted accounting
principles for interim financial information in the United States.
Interim results for the period ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the fiscal year as a
whole. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's annual
report on Form 10-SB for the fiscal year ended December 31, 1999.
2. Future operations:
These consolidated financial statements have been prepared on the basis of
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
has suffered recurring losses and has not generated profitable operations
since inception. The continuance of the Company as a going concern is
dependent on obtaining financing for continued operations and the
construction of a manufacturing facility for its fertilizers, the
attainment of profitable operations and the avoidance of any cash costs
from early redemption of loans from related parties.
Furthermore, at June 1, 2000, Kafus Industries Ltd. ("Kafus"), the
Company's 72.6% parent corporation, ceased funding to the Company and its
90% owned subsidiary Camden Agro-Systems Inc. ("CASI"). On August 22, 2000,
a Receiving Order was made by the Supreme Court of British Columbia against
Kafus adjudging Kafus to be bankrupt. The Company is in the process of
obtaining financing from third parties.
If the Company is unable to obtain additional financing to achieve its
objectives, it may be obligated to liquidate certain assets in settlement
of liabilities and the value achieved on settlement may be less than the
carrying value of the assets. In the event that the Company is unable to
obtain additional financing, it may be forced to take action to protect its
assets.
3. Segmented information:
As at June 30, 2000, the Company's operations were primarily situated in
Canada or related to operations that are situated in Canada. Through CASI,
the Company's primary focus is on the manufacturing of organic fertilizer
from animal waste. Accordingly, the Company is considered to operate in a
single reportable and geographic segment.
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HYATON ORGANICS INC.
(a development stage enterprise)
Notes to Consolidated Financial Statements, page 2
(expressed in U.S. dollars)
(Unaudited and Prepared Internally by Management)
June 30, 2000
--------------------------------------------------------------------------------
4. Comprehensive income:
The Company is required to disclose changes in other comprehensive income,
which include gains and losses that affect shareholders' equity but are
excluded from net income. The components of comprehensive income to the
Company are net loss and changes in the foreign currency cumulative
translation adjustment account.
--------------------------------------------------------------------------------
For the
period
Three month Three month Six month Six month November
period ended period ended period ended period ended 24, 1994
June 30, June 30, June 30, June 30, to June 30,
2000 1999 2000 1999 2000
--------------------------------------------------------------------------------
Comprehensive
loss (income):
Net loss $ 167,617 $ 115,606 $ 343,862 $ 216,237 $1,504,234
Currency
translation
adjustment (20,864) 32,542 (22,916) 25,844 (256)
--------------------------------------------------------------------------------
$ 146,753 $ 148,148 $ 320,946 $ 242,081 $1,503,978
--------------------------------------------------------------------------------
5. Comparative figures:
Comparative figures have been reclassified to conform to the current
periods' presentation.
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Item 2. Management's Discussion and Analysis or Plan of Operation
Hyaton Organics Inc. ("Hyaton" or the "Company") was incorporated in Nevada
on August 20, 1996, under the name Hayoton Company Incorporated as a management
company for resorts and hotel properties. On September 24, 1996, the Company
changed its name from Hayoton Company Incorporated to Hyaton Company
Incorporated and then to Hyaton Organics Inc. on October 21, 1999. The Company
was dormant until June 1997, when the Board reevaluated its business plan and
decided to focus the Company's business on commodity production and/or purchase
and resale of same through strategic alliances with leading environmental
corporations. Effective November 2, 1998, the Company completed a
reorganization with Kafus Industries Ltd. ("Kafus") whereby the Company issued
20,000,000 shares of its common stock in exchange for Kafus' 9,000 common shares
of Camden Agro-Systems, Inc. ("CASI"), an Ontario corporation 90% owned by
Kafus. Through CASI, the Company is in the business of management consulting
and product development, and the Company's efforts have focused primarily on the
development of organic fertilizer from animal waste.
Results of Operations
Six months ended June 30, 2000 compared to June 30, 1999
Revenues. The Company had no revenues for the six months ended June 30,
2000, compared to nominal revenues of $6,893 for the six months ended June 30,
1999.
Expenses. Total expenses for the six months ended June 30, 2000 were
$343,862 compared to total expenses of $223,130 for the six months ended June
30, 1999. Expenses primarily increased in the area of consulting and other
professional fees related to the development of the Company's organic
fertilizers.
Net loss. The Company incurred a net loss of $343,862 for the six months
ended June 30, 2000, compared to a net loss of $216,237 for the six months ended
June 30, 1999.
Liquidity and Capital Resources
The Company is a development stage company that intends to develop and
market fertilizer derived from animal residues. At this time, the Company has
no revenues and does not anticipate any substantial revenues until it is able to
develop and sell its products. Accordingly, the Company does not have
sufficient revenues to fund its operations.
These consolidated financial statements have been prepared on the basis of
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
suffered recurring losses and has not generated profitable operations since
inception. The continuance of the Company as a going concern is dependent on
obtaining financing for continued operations and the construction of a
manufacturing facility for its fertilizers, the attainment of profitable
operations and the avoidance of any cash costs from early redemption of loans
from related parties.
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Page 8
Liquidity and Capital Resources (continued)
Furthermore, at June 1, 2000, Kafus, the Company's 72.6% parent
corporation, ceased funding to the Company and CASI. Furthermore, on August 22,
2000, a Receiving Order was made by the Supreme Court of British Columbia
against Kafus adjudging Kafus to be bankrupt. The Company is in the process of
obtaining financing from third parties.
If the Company is unable to achieve its objectives, it may be obligated to
liquidate certain assets in settlement of liabilities and the value achieved on
settlement may be less than the carrying value of the assets. In the event that
the Company is unable to obtain additional financing, it may be forced to take
action to protect its assets.
As of June 30, 2000 and December 31, 1999, the Company's working capital
was $19,437 and $(15,109), respectively.
Hyaton is undertaking a restructuring of its' investment in CASI subsequent
to June 30, 2000, which will essentially result in a change from a common equity
interest to a preferred equity interest. As of September 13, 2000, no
agreements have been finalized. When the agreement is finalized the Company
will de-consolidate CASI's financial information.
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PART II. OTHER INFORMATION
Items 1, 2, 3, 4 and 5
Not Applicable.
Item 6.
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on 8-K
None.
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SIGNATURES
In accordance with 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.
HYATON ORGANICS INC.
(Registrant)
Dated: September 13, 2000 /s/ Gordon Robinson
--------------------------
Title: Director
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