<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-13966
HARISTON CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CANADA 33-0645339
- ---------------------------------- ------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1500 West Georgia Street, Suite 1555, Vancouver, British Columbia, V6G 2Z6
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(Address of principal executive offices)
(604) 685-8514
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(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date, June 30, 1995:
Common Stock: 10,851,476 Shares
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited Consolidated Statements of Operations and Deficit for
the three month periods ended June 30, 1995 and June 30, 1994, and for the six
month periods ended June 30, 1995 and June 30, 1994, the unaudited Consolidated
Statements of Changes in Financial Position for the six month periods ended
June 30, 1995 and June 30, 1994, and the unaudited Consolidated Balance Sheets
as of June 30, 1995 and December 31, 1994, of Hariston Corporation ("Hariston"
or the "Company") follow.
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<PAGE> 3
HARISTON CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1995 1994
-------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 787 $ 1,199
Receivables 126 526
Current portion of notes receivable 630 612
Inventory - -
Prepaids 24 6
-------- --------
1,568 2,342
Notes Receivable 406 691
Investments 2,044 2,049
Oil and gas royalty and working interests 2,177 2,285
Furniture and equipment 210 201
Minerals recovery project - 260
-------- --------
4,836 5,487
-------- --------
$ 6,404 $ 7,829
======== ========
LIABILITIES
Current
Payables $ 401 $ 1,164
Current portion of term debt 877 882
-------- --------
1,278 2,045
Term debt 980 1,238
-------- --------
2,258 3,283
SHAREHOLDERS' EQUITY
Capital stock 29,348 29,348
Deficit (25,201) (24,802)
-------- --------
4,146 4,546
-------- --------
$ 6,404 $ 7,829
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
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<PAGE> 4
HARISTON CORPORATION
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT (UNAUDITED)
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
3 MONTHS ENDED JUNE 30
--------------------------
1995 1994
----------- -----------
(Note 3)
<S> <C> <C>
REVENUES
Retail sales $ - $ 2,750
Oil and gas production royalties 287 607
Rent and other 6 320
----------- -----------
293 3,677
----------- -----------
COST OF SALES AND PRODUCTION EXPENSES
Cost of sales - 2,306
Oil and gas royalties and operating costs 156 193
Interest on term debt associated with oil
and gas properties 18 4
Amortization of oil and gas royalty interests 30 154
----------- -----------
204 2,657
----------- -----------
GROSS MARGIN 89 1,020
----------- -----------
OPERATING AND CORPORATE EXPENSES
Administration, office, and travel 114 512
Consultants and directors fees, salaries
and employee benefits 174 514
Accounting, legal and other professional fees 91 219
Rent and other 32 686
Depreciation and amortization 5 87
----------- -----------
416 2,018
----------- -----------
(327) (998)
----------- -----------
OTHER
Foreign exchange loss - (74)
Share in net loss of companies subject to
significant influence - (30)
Net interest (expense) income (27) 135
Recovery of doubtful receivables 214 -
Gain on disposal of PLI shares - 1,323
----------- -----------
187 1,354
----------- -----------
(LOSS) INCOME BEFORE NON-CONTROLLING INTEREST (140) 356
----------- -----------
NON-CONTROLLING INTEREST - 139
----------- -----------
NET (LOSS) INCOME FROM CONTINUING OPERATIONS (140) 495
----------- -----------
DISCONTINUED OPERATIONS (NOTE 11)
Factoring - 173
Minerals recovery project 12 -
----------- -----------
12 173
----------- -----------
NET (LOSS) INCOME $ (128) $ 668
DEFICIT, beginning of period (24,802) (10,405)
----------- -----------
DEFICIT, END OF PERIOD $ (25,201) $ (9,737)
=========== ===========
PRIMARY (LOSS) EARNINGS PER SHARE (NOTE 12) $ (0.01) $ 0.07
=========== ===========
Shares used in primary computation 10,851,476 9,186,476
=========== ===========
FULLY DILUTED (LOSS) EARNINGS PER SHARE (NOTE 12) $ (0.01) $ 0.06
=========== ===========
Shares used in fully diluted computation 10,851,476 11,633,879
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
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<PAGE> 5
HARISTON CORPORATION
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT (UNAUDITED)
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
6 MONTHS ENDED JUNE 30
--------------------------
1995 1994
----------- -----------
(Note 3)
<S> <C> <C>
REVENUES
Retail sales $ - $ 5,178
Oil and gas production royalties 562 1,063
Rent and other 11 461
----------- -----------
573 6,702
----------- -----------
COST OF SALES AND PRODUCTION EXPENSES
Cost of sales - 4,351
Oil and gas royalties and operating costs 225 304
Interest on term debt associated with oil
and gas properties 37 33
Amortization of oil and gas royalty interests 107 309
----------- -----------
370 4,997
----------- -----------
GROSS MARGIN 203 1,705
----------- -----------
OPERATING AND CORPORATE EXPENSES
Administration, office, and travel 173 646
Consultants and directors fees, salaries
and employee benefits 320 1,019
Accounting, legal and other professional fees 184 405
Rent and other 45 983
Depreciation and amortization 10 170
----------- -----------
733 3,224
----------- -----------
(530) (1,519)
----------- -----------
OTHER
Foreign exchange loss - (74)
Share in net loss of companies subject to
significant influence - (30)
Net interest income (expense) (18) 112
Recovery of doubtful receivables 214 -
Gain on disposal of PLI shares - 1,323
----------- -----------
196 1,330
----------- -----------
LOSS BEFORE NON-CONTROLLING INTEREST (333) (189)
----------- -----------
NON-CONTROLLING INTEREST - 220
----------- -----------
NET (LOSS) INCOME FROM CONTINUING OPERATIONS (333) 31
----------- -----------
DISCONTINUED OPERATIONS (NOTE 11)
Factoring - 337
Minerals recovery project (66) -
----------- -----------
(66) 337
----------- -----------
NET (LOSS) INCOME $ (399) $ 368
DEFICIT, beginning of period (24,802) (10,106)
----------- -----------
DEFICIT, END OF PERIOD $ (25,201) $ (9,738)
=========== ===========
PRIMARY (LOSS) EARNINGS PER SHARE (NOTE 12) $ (0.04) $ 0.04
=========== ===========
Shares used in primary computation 10,851,476 9,186,476
=========== ===========
FULLY DILUTED (LOSS) EARNINGS PER SHARE (NOTE 12) $ (0.04) $ 0.03
=========== ===========
Shares used in fully diluted computation 10,851,476 11,633,879
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
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<PAGE> 6
HARISTON CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION (UNAUDITED)
(EXPRESSED IN THOUSAND OF U.S. DOLLARS)
<TABLE>
<CAPTION>
6 MONTHS ENDED JUNE 30
-----------------------
1995 1994
------- ---------
(Note 3)
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income from continuing operations $ (333) $ 368
Non-cash items:
Amortization and depreciation 117 479
Non-controlling interest in losses of subsidiary - (220)
Share in net loss of companies subject to significant influence - 30
Unrealized foreign exchange loss - 74
Gain on disposal of investment - (1,323)
Changes in non-cash working capital items 260 (470)
------ -------
CASH PROVIDED BY (USED FOR) CONTINUING OPERATIONS 44 (1,062)
------ -------
Net (loss) from discontinued operations (66) -
Non-cash items:
Provision for costs of disposition of Metanetix Division 66 -
------ -------
CASH PROVIDED BY DISCONTINUED OPERATIONS - -
------ -------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 44 (1,062)
------ -------
FINANCING ACTIVITIES
Net term debt payments (286) (1,779)
Conversion of debentures - (595)
Issue of common stock - 2,306
------ -------
CASH (USED FOR) FINANCING ACTIVITIES (286) (68)
------ -------
INVESTING ACTIVITIES
Net purchase of assets (19) -
Collection of notes receivable 291 -
Net proceeds from disposal of investments - 3,711
Minerals recovery project (442) (2,722)
------ -------
CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES (170) 989
------ -------
NET (DECREASE) IN CASH (412) (141)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,199 1,367
------ -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 787 $ 1,226
====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
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<PAGE> 7
HARISTON CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
6 MONTHS ENDED JUNE 30, 1995
- --------------------------------------------------------------------------------
NOTE 1. OPERATIONS
The Company is incorporated under the Canada Business Corporations Act and has
operated, historically, as a diversified holding company. Management has
announced a more focused investment strategy and toward this end has pursued
the sale of certain assets. During the second quarter, the Company announced
the disposition of its Metanetix Division and the sale of its oil and natural
gas interests. These transactions closed on July 28, 1995 (other than with
respect to the Metanetix technology license) and August 14, 1995, respectively.
Additionally, subsequent to the second quarter, the Company purchased
substantially all of the assets and certain liabilities of a group of companies
doing business under the trade name Educorp Multimedia ("Educorp"). Educorp is
a San Diego-based publisher and direct marketing distributor of multimedia
software (see Note 10).
NOTE 2. ACCOUNTING POLICIES
BASIS OF PRESENTATION
In accordance with the requirements of the Canada Business Corporations Act,
the Company's accounting and reporting policies conform to Canadian generally
accepted accounting principles ("Canadian GAAP"). Accordingly, these
consolidated financial statements have been prepared in accordance with
Canadian GAAP. These interim statements also conform in all material respects
with United States generally accepted accounting principles ("U.S. GAAP"). For
further information on the Company's accounting policies, reference should be
made to Note 2 of the Notes to Consolidated Financial Statements included in
the Company's Annual Report on Form 20-F for the year ended December 31, 1994.
In the opinion of management, all adjustments necessary to fairly state the
results of operations for the three and six month periods ended June 30, 1995,
are of a normal recurring nature and have been made. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with GAAP have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. These interim
consolidated financial statements should therefore be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 20-F for the year ended December 31, 1994.
PRINCIPLES OF CONSOLIDATION
These interim consolidated financial statements include the accounts of all
companies in which the Company had a controlling interest. All significant
intercompany acccounts and transactions have been eliminated on consolidation.
NOTE 3. RESTATEMENT OF COMPARATIVE FIGURES
The comparative figures for the three and six month periods ending June 30,
1994 have been restated to correctly record the amortization of certain oil and
natural gas royalty and working interests, and to correctly record the gain on
disposition of shares in PLI. These corrections were previously reported in the
audited consolidated financial statements for the Company's fiscal year ended
December 31, 1994.
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<PAGE> 8
HARISTON CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
6 MONTHS ENDED JUNE 30, 1995
- --------------------------------------------------------------------------------
NOTE 4. SUMMARY OF SECURITIES ISSUED DURING THE SECOND QUARTER
None.
NOTE 5. SUMMARY OF OPTIONS GRANTED DURING THE SECOND QUARTER
None.
NOTE 6. AUTHORIZED AND ISSUED SHARE CAPITAL AS OF JUNE 30, 1995
<TABLE>
<CAPTION>
Authorized
Class Par Value Number Issued Number Amount
- ----- --------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Common None Unlimited 10,851,476 $29,347,760
</TABLE>
NOTE 7. SHARES IN ESCROW OR SUBJECT TO POOLING AS OF JUNE 30, 1995
None.
NOTE 8. LIST OF DIRECTORS AS OF JUNE 30, 1995
Pierre Caland (Chairman) James P. Angus Neil S. MacKenzie
J.V. McGoodwin L. James Porter
NOTE 9. OPTIONS AND WARRANTS OUTSTANDING AS OF JUNE 30, 1995
<TABLE>
<CAPTION>
Number Market
of Shares Price
under Exercise on Date Option
OPTIONEE Vested Option Price of Grant Expiry Date
- -------- ------------- -------- -------- ------------------
<S> <C> <C> <C> <C>
William B. Sharp 35,000 0.93 0.93 September 15, 1996
Yvonne Tremblay 10,000 1.86 2.49 November 30, 1997
William B. Sharp 10,000 3.15 4.57 February 17, 1998
S. David Anfield 20,000 3.53 4.57 March 31, 1998
------
75,000
======
</TABLE>
<TABLE>
<CAPTION>
Market Price
Number Exercise on Date
WARRANT HOLDER of Shares Price of Grant Expiry Date
- -------------- --------- -------- ----------- ---------------
<S> <C> <C> <C> <C>
Oeri Finance Inc. 250,000 6.32 8.10 August 11, 1995
Near East Commercial Bank SAL 625,000 3.60 5.00 May 21, 1996
Near East Commercial Bank SAL 625,000 4.00 5.00 November 21, 1997
---------
1,500,000
=========
</TABLE>
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<PAGE> 9
HARISTON CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
6 MONTHS ENDED JUNE 30, 1995
- --------------------------------------------------------------------------------
NOTE 10. SUBSEQUENT EVENTS
SALE OF METANETIX DIVISION
In May 1995, Hariston reached an agreement to sell its Metanetix Division,
including the related technology license, to Consolidated Western and Pacific
Resources Corporation ("Consolidated") for a purchase price of up to $9
million, to be paid as a royalty equal to 50% of any profits that may be
generated by Consolidated's use of the Metanetix metal recovery process and
the Butte, Montana recovery plant. The sale received shareholder approval at
the Company's annual general meeting on June 30, 1995. The sale closed on July
28, 1995, with effect from April 29, 1995, excepting the sale of the tehnology
license which has not yet been fully completed.
SALE OF OIL AND NATURAL GAS INTERESTS
In June 1995, Hariston reached an agreement to sell its oil and natural gas
royalty and working interests. The sale received shareholder approval at the
Company's annual general meeting on June 30, 1995 and closed on August 14, 1995
with effect from August 1, 1995. The Company realized proceeds of $2.4 million
of cash and the assumption of $979,000 of debt, for total proceeds of
approximately $3.4 million.
PURCHASE OF EDUCORP
Effective August 25, 1995, through its wholly-owned subsidiary CD-Soft
Corporation, the Company purchased substantially all of the assets of Educorp
for a purchase price of approximately $6 million. The net assets acquired were
as follows:
<TABLE>
<S> <C>
(Expressed in Thousands)
Inventory, net accounts receivables,
property and equipment, prepaids $1,114
Customer mailing lists 1,000
Licenses 570
Covenant not to compete 25
Goodwill and other intangibles 3,358
------
$6,067
======
The purchase price was satisfied by:
(Expressed in Thousands)
Cash $4,893
Short-term seller's notes 374
Put option 300
Issuance of 200,000 Hariston common shares 500
------
$6,067
======
</TABLE>
NOTE 11. DISCONTINUED OPERATIONS
Effective September 30, 1994, the Company sold its CCFM factoring division.
Effective April 29, 1995, the Company sold its Metanetix minerals recovery
operations. Accordingly, these operations are
-8-
<PAGE> 10
HARISTON CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
6 MONTHS ENDED JUNE 30, 1995
- --------------------------------------------------------------------------------
presented as discontinued operations in these interim financial statements.
NOTE 12. EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per share is computed using the weighted average number
of shares of common stock outstanding during the periods presented. Fully
diluted earnings (loss) per share is computed as though all outstanding options
and warrants had been exercised, other than where the effect would be
antidilutive.
-9-
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following information should be read in conjunction with the
consolidated financial data and the notes thereto included in Item 1.
OVERVIEW
In accordance with management's previously stated strategy to
reposition the Company, management began negotiations during the second
quarter that would result in the divestiture of businesses and investments
unrelated to the Company's new focus on multimedia software publishing and
distribution. Subsequent to the second quarter, a series of significant events
occurred. On July 28, 1995 the Company completed the sale of its Metanetix
Division. On August 14, the Company completed the sale of its oil and natural
gas interests. On August 25, 1995, the Company purchased substantially all of
the assets and assumed certain liabilities of a group of affiliated businesses
operating under the trade name Educorp Multimedia ("Educorp").
Founded in 1984, Educorp is a San Diego, California based publisher
and direct mail distributor of CD-ROM multimedia software. Through its
catalogs, Educorp offers what is thought to be one of the largest selections
of consumer CD-ROM software titles in the industry. In fiscal 1994, Educorp
mailed more than two million catalogs and newsletters to its customer base.
Through its affiliates, Educorp is also involved in the development and
publishing of software titles as well as wholesale and international
distribution.
In the future, the Company's multimedia operations may be expanded
through the acquisition of complementary businesses and through the: (1)
development and publishing of new software titles, (2) increased number and
mailing frequency of print catalogs, (3) development of new distribution
channels, and (4) international expansion of the business. Although the Company
is considering all of these alternatives, no assurance can be given that these
or any other activities will be successful.
The Company continues to retain its sizable investment, directly and
through a collateral position for a note receivable, in Polish Life Improvement
S.A ("PLI").
CORPORATE STRUCTURE
Effective January 1, 1995 Hariston amalgamated with its wholly-owned
Canadian subsidiaries, Canadian Capital Financial Markets Inc. and Metanetix
Corporation. This allowed Hariston access to the tax loss balances in the two
subsidiary companies and simplified legal and reporting requirements.
During June 1995, Hariston incorporated a wholly-owned California
subsidiary, CD-Soft Corporation, to pursue Hariston's strategy of focusing its
investment capital and managerial expertise on the multimedia software
publishing and distribution business. In July, 1995, CD-Soft Corporation
incorporated a wholly-owned California subsidiary for the purpose of acquiring
substantially all of the assets and selected liabilities of Educorp.
-10-
<PAGE> 12
MANAGEMENT AND BOARD OF DIRECTORS
Effective February 17, 1995, J.V. McGoodwin, Hariston's CEO and a
Director, was appointed to the additional post of President. On the same date,
William B. Sharp resigned from the positions of President and Director.
Subsequent to June 30, 1995 Mr. McGoodwin was also appointed Chairman of the
Board in replacement of Pierre Caland, who did not stand for re-election at the
June 30, 1995 Annual General Meeting.
Effective February 1, 1995, L. James Porter was appointed Chief
Financial Officer of Hariston. Mr. Porter is a Chartered Accountant and a
Chartered Financial Analyst and, prior to joining Hariston, was a Senior
Manager with Arthur Andersen & Co. Effective February 17, 1995 Mr. Porter was
appointed to the Board in replacement of Mr. Sharp and was named to the
additional post of Secretary.
At the June 30, 1995 Annual General Meeting, Nuno Brandolini was
elected to the Board. Mr. Brandolini is an experienced venture capital
investor and was most recently Managing Director of Rosecliff, Inc., a private
equity investment firm. Previous to that position, Mr. Brandolini was
Vice-President, Corporate Finance - Mergers and Acquisitions, at Salomon
Brothers, Inc.
RESULTS OF OPERATIONS
The Company incurred a consolidated net loss of $128,000 for the three
months ended June 30, 1995 and $399,000 for the six months ended June 30, 1995.
Oil and natural gas royalty net income declined from $109,000 in the first
quarter to $83,000 in the second quarter, reflecting depressed natural gas
prices. Operating and corporate expenses increased from $317,000 in the first
quarter to $416,000 in the second quarter, reflecting non-recurring costs
incurred in connection with completing the disposition of the Company's
Metanetix Division and oil and gas interests, and reflecting higher shareholder
communications costs incurred as a consequence of printing and mailing the
1994 annual and first quarter 1995 reports.
METANETIX OPERATIONS
During the first quarter, staffing at the Butte, Montana minerals
recovery plant was significantly reduced. During the second quarter, management
commenced negotiations for the sale of the facility. Prior to taking these
actions, management reviewed the facility's historical results and assessed
future expectations for the technology and the facility, and concluded that
development of the technology and the Butte facility is best completed by
companies with far greater financial and technical resources than Hariston.
In a news release dated May 30, 1995, Hariston announced that it had
signed an agreement to sell its Metanetix Division, including the related
technology license, to Consolidated Western and Pacific Resources Corporation
for proceeds of up to $9 million, to be paid from 50% of the profits generated
by Consolidated's use of the Metanetix minerals recovery process and Butte
recovery plant. The sale received shareholder approval at Hariston's June 30,
1995 annual general meeting and formally closed on July 28, 1995 with effect
from April 29, 1995, excepting the sale of the technology license which has not
yet been fully completed.
-11-
<PAGE> 13
No proceeds have been recognized on the sale of the Metanetix
Division due to management's belief that the ultimate realization of proceeds
cannot be reasonably determined at this time.
OIL AND GAS ROYALTY AND WORKING INTERESTS
Revenue from the Company's oil and natural gas royalty and working
interests of $562,000 for the six months ended June 30, 1995 represents a 47%
decline from the $1,063,000 of reported revenue for the same period of 1994.
Net income for the period of $192,000 represents a 54% decline from the
$417,000 comparable 1994 figure. The revenue and net income declines resulted
primarily from the depressed level of natural gas prices relative to the prior
year period.
In a news release dated June 8, 1995, Hariston announced that it had
signed an agreement to sell its oil and natural gas interests for cash proceeds
of $2.7 million and the assumption of approximately $818,000 of debt, subject
to receiving shareholder approval at the June 30, 1995 annual general meeting.
Shareholder approval was received, and the sale closed formally on August 14,
1995. In a news release dated August 18, 1995 the Company announced that it
had realized proceeds of $2.4 million of cash and the assumption of $979,000 of
debt. The gain on sale of $1.1 million will be booked by Hariston in the third
quarter.
OPERATING AND CORPORATE EXPENSES
Operating and corporate expenses were $416,000 and $733,000 for the
three and six month periods ending June 30, 1995, respectively, as compared to
$2,018,000 and $3,224,000 during the same periods of 1994. The decline between
periods was primarily attributable to the non-consolidation during 1995 of
PLI's results. Prior to June 25, 1994 Hariston held a controlling interest in
PLI and PLI's results were therefore consolidated with Hariston's. The
majority of Hariston's non-consolidated operating and corporate expenses for
the six month period ending June 30, 1995 were general, administrative, and
salary costs, including in excess of $61,000 of costs incurred for shareholder
communications, and more than $167,000 of accounting and legal fees.
INVESTMENTS
POLISH LIFE IMPROVEMENT S.A.
PLI is a retail operator of supermarkets and home improvement stores
in Poland. PLI is a public Polish company which has applied for its shares to
be listed for trading on the Warsaw Stock Exchange.
Over 3 million shares in PLI are reported on Hariston's balance
sheet, at an average cost of approximately $0.64 per share. These include 1.4
million shares which the Company agreed to sell to a third party and for which
it has received a promissory note that is presently in default. The promissory
note is secured by the 1.4 million shares sold. Management has determined that
collection on the note is not reasonably assured and is discussing with the
purchaser the return of the 1.4 million PLI shares.
-12-
<PAGE> 14
After reducing the Company's PLI holding because of an obligation to
transfer 613,684 PLI shares under the terms of a stock sale agreement, and not
including the 1.4 million PLI shares discussed above, which Hariston does not
control or vote, Hariston's percentage ownership in PLI is approximately 23%.
Management is of the opinion that due to the Company's minority
ownership position in PLI, Hariston has not been able to exercise significant
influence over the operating, investing, and financial policies of PLI and
therefore the investment in PLI shares was accounted for on the cost method.
MADISON PARTNERS LIMITED
Madison Partners Limited ("Madison") is a Canadian-based supplier of
proprietary home medical products. Madison's shares are listed for trading on
the Canadian Dealing Network, a division of the Toronto Stock Exchange. As of
June 30, 1995, Hariston held 1,175,000 shares of Madison common stock,
representing approximately a 7% interest in Madison, reported on Hariston's
balance sheet at a cost of $0.07 per share. Hariston subsequently sold 305,000
Madison shares on July 24, 1995 and 70,000 shares on August 16, 1995, at an
average price (after commissions) of $0.40 per share, realizing a gain of over
$123,000.
LIQUIDITY AND CAPITAL RESOURCES
No shares or term debt were issued in the first or second quarters of
1995. The Company remains able to finance its ongoing operations for the
foreseeable future. As of June 30, 1995, the Company had cash balances in
excess of $780,000, a working capital ratio of 1.23, and a debt/equity ratio of
0.54. The Company's principal capital requirements include working capital to
finance the internal expansion of Educorp, and costs which may be incurred in
connection with the acquisition of businesses in the future.
Historically, the Company has also required capital to finance
operating losses, having incurred operating losses in each year after 1990. As
of June 30, 1995, the Company had an accumulated deficit of $25,201,188. By
June 30, 1995, however, the Company had disposed of, written off, or initiated
plans for disposal of substantially all of the operations and investments that
gave rise to this accumulated deficit, retaining only the Company's investment
in shares of PLI. Management presently believes that PLI will not require the
financial assistance of the Company in the foreseeable future.
-13-
<PAGE> 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Not Applicable.
Item 2. Changes in Securities.
Not Applicable.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its general Annual Meeting on June 30, 1995.
Following is a brief description of each matter voted upon at the general
Annual Meeting, and the number of votes cast for, against, withheld, abstained
or not voted with respect to each such matter:
<TABLE>
<CAPTION>
Matter Voted Upon In Favor Against Withhold Abstain Not Voted
----------------- -------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
The report of directors and receipt of 1,616,742 9,600 80,200
Consolidated Audited Financial
Statements for the period ending
December 31, 1994
The election of James P. Angus 1,696,140 1,300 9,102
The election of Nuno Brandolini 1,695,609 1,831 9,102
The election of James V. McGoodwin 1,696,137 1,303 9,102
The election of Neil S. MacKenzie 1,696,127 1,303 9,102
The election of L. James Porter 1,696,137 1,303 9,102
The granting of and changes to 932,395 29,007 80,360 664,780
incentive stock options, subject to
regulatory approval
The change of auditors to Arthur 1,694,090 11,242 1,210
Andersen & Co.
The sale of Metanetix Corporation 192,003 14,794 80,320 1,419,425
The sale of oil and gas royalty 181,843 24,734 80,420 1,419,525
interests
</TABLE>
Pierre Caland did not stand for reelection as a director.
Item 5. Other Information.
None.
-14-
<PAGE> 16
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K: None
-15-
<PAGE> 17
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.
HARISTON CORPORATION
Dated: July 3, 1996 By: /s/ JAMES V. McGOODWIN
-----------------------------
James V. McGoodwin, President
(Principal Executive Officer)
Dated: July 3, 1996 By: /s/ L. JAMES PORTER
-----------------------------
L. James Porter, Chief
Financial Officer (Principal
Financial Officer and
Principal Accounting Officer)
-16-
<PAGE> 18
EXHIBIT INDEX
Exhibit No. Exhibit Description Page
- ----------- ------------------- ----
27.1 Financial Data Schedule . . . . . . . . . . . . . .
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 787
<SECURITIES> 0
<RECEIVABLES> 126
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,568
<PP&E> 210
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,404
<CURRENT-LIABILITIES> 1,278
<BONDS> 980
0
0
<COMMON> 29,348
<OTHER-SE> (25,201)
<TOTAL-LIABILITY-AND-EQUITY> 6,404
<SALES> 562
<TOTAL-REVENUES> 573
<CGS> 0
<TOTAL-COSTS> 370
<OTHER-EXPENSES> 733
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (18)
<INCOME-PRETAX> (399)
<INCOME-TAX> 0
<INCOME-CONTINUING> (333)
<DISCONTINUED> (66)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (399)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
