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 September 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)
c/o 19 Ferguson Drive
Belfast, Ireland
BT4 2AZ
(Address of principal executive offices)
44-28-9050-4567
(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 September 30, 2000:
27,556,000
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
HYATON ORGANICS INC.
(a development stage enterprise)
Consolidated Balance Sheets
(expressed in U.S. dollars)
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September 30, December 31,
2000 1999
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(Unaudited)
Assets
Current assets:
Cash $ 311 $ 3,218
Accounts receivable and other - 11,887
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Total current assets 311 15,105
Computer equipment, net of accumulated
depreciation of $1,313 (1999 - $885) 2,604 1,084
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Total assets $ 2,915 $ 16,189
================================================================================
Liabilities and Shareholders' Deficiency
Current liability:
Accounts payable and accrued liabilities $ 8,543 $ 30,214
Loans from related parties 1,309,490 940,850
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Total liabilities 1,318,033 971,064
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 275,560 276,560
Additional paid-in capital 223,187 223,187
Deficit accumulated during the
development stage (1,812,941) (1,430,962)
Other comprehensive income:
Cumulative translation adjustment (924) (22,660)
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Total shareholders' deficiency (1,315,118) (954,875)
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Total liabilities and shareholders' deficiency $ 2,915 $ 16,189
================================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
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 Nine month Nine month November 24,
period ended period ended period ended period ended 1994 to
September 30, September 30, September 30, September 30, September 30,
2000 1999 2000 1999 2000
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ - $ 15,882 $ - $ 22,775 $ 87,666
Expenses:
Consulting and other
professional fees 10,670 77,472 297,637 218,938 838,970
Product research and
development costs 20,496 9,902 55,583 57,164 380,669
Travel 259 - 1,964 - 43,944
Administrative and
other expenses 6,692 6,575 26,795 40,977 143,934
Employee equity
compensation - - - - 222,500
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38,117 93,949 381,979 317,079 1,630,017
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Net loss 38,117 78,067 381,979 294,304 1,542,351
Deficit accumulated
during the development
stage, beginning of
period 1,774,824 908,007 1,430,962 691,770 -
Charge to deficit - - - - 270,590
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Deficit accumulated
during the
development stage,
end of period $ 1,812,941 $ 986,074 $ 1,812,941 $ 986,074 $ 1,812,941
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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 22,470,962
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</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HYATON ORGANICS INC.
(a development stage enterprise)
Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
(Unaudited and Prepared Internally by Management)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
Nine month Nine month November 24,
period ended period ended 1994 to
September 30, September 30, September 30,
2000 1999 2000
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<S> <C> <C> <C>
Cash flows from (used in)
operating activities:
Net loss $ (381,979) $ (294,304) $ (1,542,351)
Items not involving the use of cash:
Depreciation 467 236 1,333
Employee equity compensation - - 222,500
Shares issued as a financing fee - - 5,000
Changes in non-cash operating working capital:
Accounts receivable and other 11,662 39,296 9,119
Accounts payable and accrued liabilities (21,263) (13,261) (4)
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(391,113) (268,033) (1,304,403)
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. 323,230 329,578 896,107
Cameron Strategic Planning Ltd. 56,939 41,995 362,156
Mr. Robert L. Novitsky - - 39,744
Kafus Bio-Composites, Inc. - - 1,107
Notra Environmental Services, Inc. 7,713 - 7,713
Berkeley Investments Inc. 4,183 - 4,183
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392,065 371,573 1,311,667
Effect of exchange rate changes on foreign currency
cash balances (1,836) 1,882 (3,062)
Increase (decrease) in cash (2,907) 105,422 311
Cash, beginning of period 3,218 9,210 -
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Cash, end of period $ 311 $ 114,632 $ 311
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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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</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HYATON ORGANICS INC.
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
(Unaudited and Prepared Internally by Management)
September 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 September 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 September 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 September 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.
<PAGE>
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)
September 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.
<TABLE>
<CAPTION>
===================================================================================================================================
For the period
Three month Three month Nine month Nine month November 24,
period ended period ended period ended period ended 1994 to
September 30, September 30, September 30, September 30, September 30,
2000 1999 2000 1999 2000
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<S> <C> <C> <C> <C> <C>
Comprehensive loss (income):
Net loss $ 38,117 $ 78,067 $ 381,979 $ 294,304 $ 1,542,351
Currency translation
adjustment 1,180 (589) (21,736) 25,255 924
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$ 39,297 $ 77,478 $ 360,243 $ 319,559 $ 1,543,275
===================================================================================================================================
</TABLE>
5. Comparative figures:
Comparative figures have been reclassified to conform to the current
periods' presentation.
<PAGE>
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
Nine months ended September 30, 2000 compared to September 30, 1999
Revenues. The Company had no revenues for the nine months ended September 30,
2000, compared to revenues of $22,775 for the nine months ended September 30,
1999.
Expenses. Total expenses for the nine months ended September 30, 2000, were
$381,979 compared to total expenses of $317,079 for the nine months ended
September 30, 1999. Expenses primarily increased in the area of consulting and
other professional fees related to the development of the Company's organic
fertilizers and decreased in the area of administrative and other expenses.
Net loss. The Company incurred a net loss of $381,979 for the nine months ended
September 30, 2000, as compared to a net loss of $294,304 for the nine months
ended September 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.
<PAGE>
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 September 30, 2000 and December 31, 1999, the Company's working capital
was $(8,232) and $(15,109), respectively.
Hyaton is undertaking a restructuring of its' investment in CASI subsequent to
September 30, 2000, which will essentially result in a change from a common
equity interest to a preferred equity interest. As of December 21, 2000, no
agreements have been finalized. When the agreement is finalized the Company
will de-consolidate CASI's financial information.
<PAGE>
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.
<PAGE>
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: December 22, 2000 /s/ Gordon Robinson
--------------------------
Title: Director
<PAGE>
