FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From _______ to _________________________
Commission File Number 0-29351
HYBRID FUELS, INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
88 0384399
(I.R.S. Employer Identification No.)
PO Box 41118 RPOS Winfield, B.C., Canada, V4V 1Z7
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 250-868-0600
Indicate by check mark whether 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 shorter period that registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes No [X]
The number of shares outstanding of the registrant's common stock as of November 5, 2001 was 20,853,600.
The number of shares issued of the registrant's common stock as of November 5, 2001 was 21,286,353.
Transitional Small Business Disclosure Format (Check one): Yes No [X]
HYBRID FUELS, INC.
FORM 10-QSB
For the quarter ended September 30, 2000
INDEX
Part I - Financial Information Page Item 1. Financial Statements......................................F-3 to F-10 Balance sheet as of September 30, 2000.......................F-3 Statements of operations for the three months ended September 30, 2000 and June 2000.............................F-4 Statements of cash flows for the three months ended September 30, 2000 and June 2000.............................F-5 Notes to Financial Statements................................F-6 Item 2. Management's Discussion and Analysis or Plan of Operation....11 Part II - Other Information...........................................15 Item 6. Exhibits and Reports on Form 8-K.............................15 |
Hybrid Fuels, Inc.
(formerly Polo Equities, Inc.)
(A Development Stage Company)
Consolidated Balance Sheets
September 30, June 30, 2000 2000 $ $ (unaudited) (audited) ------------------------------------------------------------------------------- ASSETS Current Assets Cash 485 485 ------------------------------------------------------------------------------- Total Assets 485 485 ------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities Accounts payable 4,645 3,111 Accrued liabilities 5,500 - Note payable (Note 4) 33,638 - Advances payable (Note 5) 51,746 42,013 Shareholder loan payable (Note 6(a)) 178,098 163,748 Amounts owing to a Director (Note 6(b)) 93,240 74,432 ------------------------------------------------------------------------------- Total Current Liabilities 366,867 283,304 ------------------------------------------------------------------------------- Temporary Equity (Note 6(d)) 223,000 223,000 ------------------------------------------------------------------------------- Stockholders' Deficit Common Stock (Note 7): $0.001 par value; 50,000,000 shares authorized 19,523,600 shares are issued and outstanding 19,524 19,524 Additional Paid-in Capital 162,474 162,474 Donated Capital - Imputed Interest (Notes 5 and 6) 68,837 56,735 Deficit Accumulated During the Development Stage (840,217) (744,552) ------------------------------------------------------------------------------- Total Stockholders' Deficit (589,382) (505,819) ------------------------------------------------------------------------------- Total Liabilities and Stockholders' Deficit 485 485 ------------------------------------------------------------------------------- |
Nature of Operations and Continuance of Business (Note 1) Contingency - Disputed Compensation (Note 8)
(See Accompanying Notes to the Consolidated Financial Statements)
Hybrid Fuels, Inc.
(formerly Polo Equities, Inc.)
(A Development Stage Company)
Consolidated Statements of Operations
(unaudited)
Accumulated from Three Months Three Months February 26, 1960 Ended Ended (Date of Inception) September 30, September 30, to September 30, 2000 2000 1999 $ $ $ ------------------------------------------------------------------------------- Revenue - - - ------------------------------------------------------------------------------- Expenses Advances written-off (Note 3) 42,076 42,076 - Deposit on plant written-off (Note 3) 170,561 - - Disputed compensation (Note 8(b)) 243,463 - - Executive compensation (Note 6(b)) 90,000 18,000 18,000 Filing and regulatory fees 12,680 2,242 - General and administration 56,216 240 190 Interest 110 110 - Imputed interest (Notes 5 and 6) 68,837 12,102 5,897 Investor relations 14,124 1,518 - Professional fees 86,199 17,250 127 Rent and telephone 36,864 1,641 796 Research and development 8,000 - - Travel and promotion 11,087 486 95 ------------------------------------------------------------------------------- 840,217 95,665 25,105 ------------------------------------------------------------------------------- Net Loss (840,217) (95,665) (25,105) ------------------------------------------------------------------------------- Net Loss Per Share (.01) (.01) ------------------------------------------------------------------------------- Weighted Average Shares Outstanding 19,524,000 15,024,000 ------------------------------------------------------------------------------- |
(See Accompanying Notes to the Consolidated Financial Statements)
Hybrid Fuels, Inc. (formerly Polo Equities, Inc.) (A Development Stage Company) Consolidated Statements of Cash Flows (unaudited) Three Months Three Months Ended Ended September 30, September 30, 2000 1999 $ $ ------------------------------------------------------------------------------- Cash Flows To Operating Activities Net loss (95,665) (25,105) Non-cash item Imputed interest 12,102 5,897 Adjustment to reconcile net loss to cash Accounts payable and accrued liabilities 7,034 - ------------------------------------------------------------------------------- Net Cash Used In Operating Activities (76,529) (19,208) ------------------------------------------------------------------------------- Net Cash Used By Investing Activities - - ------------------------------------------------------------------------------- Cash Flows From Financing Activities Proceeds from notes payable 33,638 - Advances payable 9,733 - Amounts owing to a Director 18,808 18,608 Shareholder loans payable 14,350 600 ------------------------------------------------------------------------------- Net Cash Provided By Financing Activities 76,529 19,208 ------------------------------------------------------------------------------- Net Increase (Decrease) in Cash - - Cash - Beginning of Period 485 - ------------------------------------------------------------------------------- Cash - End of Period 485 - ------------------------------------------------------------------------------- Non-Cash Financing Activities - - ------------------------------------------------------------------------------- Supplemental Disclosures Interest paid in cash - - Taxes paid in cash - - ------------------------------------------------------------------------------- |
(See Accompanying Notes to the Consolidated Financial Statements)
Notes to Financial Statements
1. Nature of Operations and Continuance of Business
The Company was originally incorporated in the State of Florida on February 16, 1960. After a number of name changes the Company changed its name to Polo Equities, Inc. on June 3, 1993. Prior to May, 1998 the Company had no business operations.
In May 1998, the Company caused a Nevada corporation to be formed under the name Polo Equities, Inc., (Polo) (a Nevada corporation), with authorized capital of 50,000,000 common shares of $.001 par value. The two companies then merged pursuant to Articles of Merger adopted May 28, 1998 and filed with the State of Nevada on June 10, 1998, which changed its domicile to Nevada.
On May 28, 1998, the Company acquired, by issuing 12,000,000 shares, Hybrid Fuels, USA, Inc. and 330420 B.C. Ltd., which changed its name to Hybrid Fuels (Canada) Inc. This acquisition was accounted for as a reverse merger whereby the shareholder of Hybrid Fuels, USA, Inc. and Hybrid Fuels (Canada) Inc. gained control of Polo Equities Inc. which changed its name to Hybrid Fuels, Inc. As part of the acquisition, three shareholders representing 12,000,000 previously issued shares returned their shares for cancellation. For accounting purposes the acquisition was treated as a business purchase by Hybrid Fuels, Inc. of Hybrid Fuels, USA, Inc. and Hybrid Fuels (Canada) Inc. No amount was allocated to the intellectual asset as it was acquired from a related party and the transfer had no cost basis associated with it. There was no public market for the shares of Polo Equities, Inc. at the time of the reverse merger. The Company operates through these two wholly-owned subsidiaries.
On May 29, 1998 the Company changed its name to Hybrid Fuels, Inc., herein "the Company". On June 10, 1998 the Company began trading on the OTC Bulletin Board under the symbol "HRID" and in December, 1999 was moved to the "Pink Sheets". From May 1998 to June 1999 the Company operated out of an office in California which was set up for investor relations and to raise additional capital. This office was shut down in June and the new President and directors are operating out of Kelowna, BC, Canada and Calgary, Alberta, Canada.
Pursuant to the acquisition, the Company acquired a number of proprietary technologies with the primary objective of the business being to build small farm scale ethanol facilities which involves a number of proprietary technologies exclusively owned by the Company. Other proprietary technology involves the use of a bio-gas burner which burns manure and bedding straw. This technology eliminates ground and ground-water contamination and produces most of the energy required for the facility by supplying heat for fermentation and vaporization and for the operation of a greenhouse, if desired. Another exclusive proprietary technology is a vegetable based formula which allows diesel and ethanol to emulsify. This hybrid fuel reduces particulate emissions without reduction in power when used in an unaltered diesel engine.
The Company is in the early development stage. In a development stage company, management devotes most of its activities in investigating business opportunities and further advancing its technologies. Because of a deficiency in working capital and other current commitments and significant operating losses, there is substantial doubt about the ability of the Company to continue in existence unless additional working capital is obtained.
Nature of Operations and Continuance of Business (con't)
technology in a specified territory. The agreement contemplates a 50% up front non-refundable fee which will be recognized as revenue when received and the balance will be paid over time. The Company will also need to rely on the forbearance of some creditors and related parties have agreed to continue to fund working capital as needed. The Company has entered into discussions with third parties to directly finance a facility in which the Company will then commence with its business plan.
2. Summary of Significant Accounting Policies
(a) Consolidated Financial Statements
These consolidated financial statements represent the consolidation of the Company and its two subsidiaries Hybrid Fuels, U.S.A., Inc, and Hybrid Fuels (Canada) Inc.
(b) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
(c) Use of Estimates
The preparation of financial statement in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
(d) Accounting for Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," requires that stock awards granted be recognized as compensation expense based on fair values at the date of grant. Alternatively, a company may account for stock awards granted under Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," and disclose pro forma income amounts which would have resulted from recognizing such awards at their fair value. The Company has elected to account for stock-based compensation for employees under APB No. 25 and make the required pro forma disclosures for compensation expense. Stock based compensation for non-employees are accounted for using SFAS No. 123.
3. Deposit on Plant
The Company deposited Cnd$250,000 ($170,561), with Mega Holdings, Inc., pursuant to an option agreement to purchase a beef processing plant owned by Mega Holdings, Ltd. The Company agreed to purchase the beef processing plant facility including land, buildings and equipment for Cnd$3,000,000 which was below appraised value. The purchase agreement required an additional payment of Cnd$150,000 on June 24, 2000, the parties agreed to extend the deadline for the payment until March 15, 2001. This payment was not made and the deposit was forfeited and the option agreement terminated. Upon anticipated completion of the purchase, this beef processing plant was to be operated by Blue Mountain Packers, Ltd. (a related company). The Company intended to acquire the issued and outstanding common shares of Blue Mountain Packers, Ltd. for a nominal amount and operate it as a wholly-owned subsidiary. Blue Mountain Packers, Ltd. had recently received certification by the Canadian Food Inspection Agency of the Government of Canada, Department of Agriculture for the processing of Canadian beef. Blue Mountain Packers is a related party due to having one common director. During the quarter ended September 30, 2000 the Company advanced $42,076 to Blue Mountain Packers Ltd. and subsequent
3. Deposit on Plant (con't)
to September 30, 2000 the Company advanced $42,876 to Blue Mountain Packers Ltd., all for plant refurbishing. These advances bear interest at 8%. Due to the termination of the option agreement these advances are considered uncollectible and have been charged to operations.
4. Note Payable
On September 15, 2000, the Company issued a note for Cnd$50,000 ($33,638) due and payable on or before September 15, 2001 plus 8% interest. Repayment of the note has been extended until completion of a financing. Interest of $2,129 has been accrued at June 30, 2001 and is included in accounts payable.
5. Advances Payable
A non-related company coordinated investor relations services for the Company and paid expenses of $45,308 on behalf of the Company and loaned Cnd$10,000 ($6,438). Subsequent to September 30, 2000 this company paid additional expenses of $23,940 and loaned the Company Cnd$68,000 ($43,782) for a total amount owing of $119,468 as at June 30, 2001. This debt was settled on June 29, 2001 by the issuance of 1,000,000 restricted common shares of the Company. These advances were non-interest bearing and unsecured until the settlement date. Imputed interest of $1,757 was charged to operations and treated as donated capital.
6. Related Party Transactions/Balances
(a) Cash loans of $498,402 were advanced to the Company by the major shareholder. A total of $365,590 was repaid with cash. The controlling shareholder also paid office, rent and professional fees totalling $45,206 on behalf of the Company. The balance of $178,078 is owing without interest or specific repayment terms. Imputed interest of $200 (1999 - $5,200) was charged to operations and treated as donated capital.
(b) The President who is also a Director of the Company, has paid office and related expenses from personal funds in the amount of $2,432. Effective July 1, 1999 the President is entitled to a deferred salary of US$6,000 per month and was owed a total of $90,000 at September 30, 2000. These amounts are unsecured, non-interest bearing and due on demand. Imputed interest of $3,145 (1999 - $697) was charged to operations and treated as donated capital.
(c) See Note 3 for subsequent advances to Blue Mountain Packers Ltd.
7. Stockholders' Equity
7. Stockholders' Equity (con't)
(b) On August 4, 1998 and March 23, 1999, the Company's former Board of
Directors authorized the issuance of 1,000,000 and 900,000 shares
respectively to individuals without consideration. On August 21, 1999, the
current Board of Directors resolved that share certificates representing
ownership of these 1,900,000 shares were issued without adequate
consideration being paid to the Company and were therefore not fully paid
and non-assessable. The Company cancelled the share certificates and
indemnified the transfer agent, for any costs or liability it may incur in
any way arising out of the cancellation of such shares and the transfer
agent removed the 1,900,000 shares from the stockholder list effectively
reversing the issuance. Six of the cancelled certificates, totalling
550,000 shares, have been endorsed and returned to the Company for
cancellation. The contingencies regarding the cancelled shares relate to
anyone who may have subsequent holder rights, and possibly the individuals
who were issued those shares who may claim that they were issued for due
consideration. The Company has determined that there is no amount to be
accrued for future liabilities associated with claims by subsequent
shareholders. To date when these shares are delivered to a broker for
possible resale the broker phones the Company or the transfer agent and
the shares are kept and cancelled. The Company will continue to monitor
this issue. No other contingent liabilities have been included as some of
the previous directors have been informed verbally of the cancellation. No
formal legal demand has been made as the former administration has failed
to provide addresses despite a number of requests.
(c) On May 17, 2000 the Company issued 1,500,000 shares pursuant to a subscription agreement for $150,000 dated February 17, 2000. On February 17 and 18, 2000, the Company accepted subscription agreements and notes whereby the Company would receive $300,000 for 3,000,000 shares. The 3,000,000 shares were issued and were then held in escrow. These shares were subsequently released from escrow to the investors to facilitate financing. The notes were to bear interest at 8% and were to be paid within 60 days or at the discretion of the President. In June 2000 the President extended the time for repayment to one week of the Company being re-listed on the Over-The-Counter Bulletin Board or other suitable exchange. When it became apparent there were going to be long delays the notes were demanded to be repaid by February 21, 2001. The notes were not paid as demanded, and the 3,000,000 shares have since been sold by the investors to innocent third parties. The investors did not and have not paid the Company for these shares, despite demands. Since these shares have been resold to innocent third parties they must be considered outstanding. The Company intends to sue the investors for the balance due on the notes, however the Company believes the balance is uncollectible.
7. Stockholders' Equity (con't)
(e) See Note 5 for 1,000,000 restricted common shares issued to a
non-related company to settle debt of $119,468.
8. Legal Issues
Although the Company is not involved in any legal proceedings, several issues may eventually lead to the Company instituting legal action as follows:
(a) See Note 7(b) for contingencies relating to improperly issued shares that were later cancelled.
(b) Unauthorized and/or unsupported payments in the amount of $243,463 were made from Company funds by past officers of the Company during the period May, 1998 to June, 1999. The Company has requested a full accounting from the past president. All amounts that were unauthorized by the board of directors or amounts that are not properly documented with invoices and receipts have been accounted for as disputed executive compensation. Actions of the previous administration have been reported to the Securities and Exchange Commission. At such time as Company resources permit, the Company will seek legal advice to determine whether or not it is possible to recover all such disputed and unauthorized amounts from the previous administration.
(c) See Note 7 (d) for temporary equity and related rescission rights for subscribers of 361,120 shares of the Company.
9. Subsequent Events
(a) A further $18,157 was received from the major shareholder.
(b) See Note 3 for forfeiture of the deposit on plant and advances to Blue Mountain Packers.
(c) See Note 5 for further advances from a non-related company and issuance of 1,000,000 restricted common shares to settle debt of $119,468.
(d) On June 29, 2001, 100,000 restricted common shares, valued at $5,000, were issued to a non-related consultants for plant refurbishing work to March 15, 2001.
(e) On September 19, 2001, 200,000 restricted common shares valued at $10,000 were issued to a director and officer of the company for professional services rendered.
Item 2. Management's Discussion and Analysis or Plan of Operation
This Form 10-QSB contains forward-looking statements. The words "anticipate", "believe", "expect", "plan", "intend", "estimate", "project", "could", "may", "foresee", and similar expressions identify forward-looking statements that involve risks and uncertainties. You should not place undue reliance on forward-looking statements in this Form 10-QSB because of their inherent uncertainty. The following discussion and analysis should be read in conjunction with the Financial Statements and Notes thereto and other financial information included in this Form 10-QSB and our Form 10-KSB for the year ended June 30, 2000. Actual results could differ materially from the results discussed in the forward-looking statements.
Except for disclosures that report the Company's historical results, the statements in this document are forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company assumes no obligation to update forward-looking statements or comments or the reasons why actual results may differ therefrom.
The Company is a developmental stage company and has had no income since the acquisition of the Hybrid Fuels technology in June 1998, nor is it likely to have any significant cash flow until after the end of its current fiscal period ending June 30, 2001. If the Company is unable to obtain funds from external sources, it is probable that it will be unable to continue to operate in the long term.
Although the Company is in the developmental stages, the process behind Hybrid's proposed business has been researched and developed over more than a decade. A plant that integrated the process described below was constructed and operated near Dalum, Alberta from 1994 to 1996. That operation is the source of the actual operating results that are referred to later in this report.
After that plant was closed in 1996, further research, development and construction helped us discover ways to improve the buildings and equipment and refine the process, which is now ready for market.
The Company's business plan is to sell and build farm scale plants that produce ethanol and are integrated with a cattle finishing operation. Grain, corn or other feedstock is fermented and then distilled to make the ethanol. Left over from the ethanol production process are a high protein mash, called "distillers grain" and water, called "stillage water". These are used as feed and water for beef animals because they contain nutrients. In addition, the fermentation process frees a higher percentage of the total food value from the feedstock and make it more "available" to the animals digestive system. The result is higher than average weight gains for the animals without the use of hormones. By using the distillers grain and stillage water on site the animals get the benefit of the nutrients in these byproducts and the plants save the energy it would otherwise require to dry and transport the distillers grain and dispose of the stillage water.
The manure and used bedding straw are cleaned up frequently, thus removing the media in which disease would otherwise grow. They are burned in a gasifier and the heat produced is used in the fermentation and distillation processes, with leftover heat being available to operate a greenhouse. The ethanol is mixed with a proprietary emulsifier and diesel. When this emulsion was tested at The British Columbia Institute of Technology, in June 1996, in an unaltered diesel engine, it reduced the particulate (black smoke) emissions by over 62% and the Nox emissions by over 22%, without any loss of power.
Item 2. Management's Discussion and Analysis or Plan of Operation (con't)
These plants are referred to as "micro energy food facilities" or "MEFFs", because of the small amount of energy from outside sources that is necessary to operate them.
Hybrid plans to earn revenue from several streams:
1. profit on the sale of each MEFF;
2. the lease of the column and spinner to each operator;
3. the royalties and service fees that each operator will pay;
4. the purchase of the ethanol mixture from the operator at 80 % of wholesale
value and the sale to distributors or end-users;
5. the marketing of the finished animals.
Royalties and service fees are expected to be payable monthly in amounts yet to be determined. Incentives in the form of reduced royalties may be offered to the first 10 to 20 operators who make early commitments to purchase plants. Service fees to cover the cost of ongoing training, service, technical support, and quality control are expected to be in the $150 to $250 per month range.
Initially it is anticipated that most of the finished beef will be sold at auction until the Company develops specialty markets. The Company believes that it will be able to generate premium prices for the beef because of its high quality and taste. In the test trials at the prototype plant, the purchaser of the first lot of beef agreed to pick up subsequent lots at the plant and pay a premium of $0.10 per pound for all of the beef that could be produced by this process. The Company anticipates entering into an agreement with its operators which will pay the Company an incentive for obtaining premium prices for the sale of the beef. We anticipate this will be in the form of a percentage of the premium realized.
Possible sources of premium prices that the Company has investigated include markets in Europe and the Far East, high-end restaurants, cruise ships and specialty meat markets that sell organic and hormone free meat to concerned consumers.
Management has recognized that it would be advantageous to be able to control the processing, marketing and distribution of the finished beef. A number of possibilities have been considered with the most promising being Company operated or sponsored retail outlets, development of foreign markets and specialty markets. The first, and perhaps the most important, obstacle encountered was the lack of meat processing facilities that could and would process the beef to our specifications.
In the second quarter of 2000, Hybrid found a packing plant that was within a two-hour drive of our head office and was not operating. This plant seemed to be perfect for our needs because of its size and the fact that it was constructed to meet the specifications necessary in order to process beef for shipment to Europe and the Far East. The Company negotiated an agreement with the owners to take possession of the plant, get it operating and obtain an operating certificate from the Canadian Food Inspection Agency (CFIA).
The agreement contemplated the Company operating the plant for several months before the balance of the purchase price was due to be paid. That operating period was necessary in order to satisfy the financial institutions who were to advance the money to pay the balance of the purchase price of our ability to generate cash flow from the operation.
Item 2. Management's Discussion and Analysis or Plan of Operation (con't)
did the work to get the plant operating. It was further intended that Hybrid would acquire all of the shares of Blue Mountain Packers LTD., for a nominal amount and operate it as a wholly owned subsidiary. During the quarter, Hybrid borrowed money and advanced it to Blue Mountain to pay start-up costs.
By the end of the quarter ended September 30, 2000, the plant was ready for inspection by CFIA and an inspection had been scheduled for mid-October. However, the investors failed to deliver the balance of money in a timely manner and we were unable to commence operations until we receive money. Therefore, as at the end of the quarter ended September 30, 2000, we were unable to schedule commencement of operations as a result of the money shortage. This could have a serious impact on future operations.
The Company and Blue Mountain Packers Ltd., continue to search for money to acquire the plant and commence operations. No commitment will be made to purchase the plant until sufficient money is committed to pay the purchase price and cover operating expenses, until positive cash flow is achieved. Cash flow is expected to begin within 30 to 60 days after operations begin and it is anticipated that it would take about six to nine months to achieve positive cash flow.
At the beginning of the quarter, the Company was the holder and payee of two outstanding promissory notes from two investors for shares that had been issued pursuant to an Offering under Rule 504. At their request, the makers of the notes were granted an extension of time to pay and the shares were delivered to the Investors to facilitate the raising of money.
If the notes are not paid when the extension is to expire, the Company may have difficulty collecting the balance that is due on the promissory notes and legal proceedings may need to be commenced to recover the shares. At this time, the Company does not have the financial resources to retain attorneys to commence those legal proceedings.
Until such time as the Company sells and constructs MEFFs and recognizes revenue, the Company will continue to experience a cash shortage. Because the Company is a developmental stage company, it is unlikely to be able to borrow money from banks and other traditional financial institutions. The lack of long term, adequate financing continues to be of great concern to management.
The Company will require additional capital in the near future in order for it to continue as a going concern in the long term. For the coming quarter, management anticipates spending most of its energies on raising money.
If the investors fail to advance the balance of funds as promised, the Company will need to raise money in some other way to continue operating for the next 12 months. To do so, it is likely that the Company will sell additional shares of its common stock to pay operating expenses for the next 12 months. The Company's general and administrative expenses for the next 12 months are expected to be less than $1500 per month, exclusive of executive compensation, which is deferred, and professional fees for legal and accounting services.
It is anticipated that related parties will continue to pay these operating expenses and advance funds to pay legal and accounting fees, but no assurances can be given.
Management is convinced that an environmentally friendly project such as ours, which produces cleaner food, cleaner air and cleaner water is a sound basis for a successful business. For this and other reasons, we believe that building and operating the first MEFF is essential to create cash flow and to demonstrate to potential operators that the technology works as advertised.
Item 2. Management's Discussion and Analysis or Plan of Operation (con't)
The prospective operators want to see it in operation before they commit themselves and so do the people who will approve the financing for the construction of plants.
The Company has found a suitable location for its first MEFF, which will be located near Kelowna, B.C., Canada. The Company will own this first MEFF and use it as a demonstration and training facility. The Company is presently negotiating with a private source to obtain the necessary financing to construct this first MEFF but is not in a position to estimate accurately when funds will be committed and construction started. The lender is expected to be given security on the plant in return for the loan.
We anticipate it will take approximately two to three months from the start of construction until the plant is operational and five to six months before it is generating positive cash flow. The financing that was being negotiated at year end has been delayed as a result of circumstances beyond the control of the Company and the investor and the Company is therefor looking for other sources of money to build the first plant.
Until such time as we have succeeded in obtaining financing, the Company will not proceed with construction and will keep operating costs to a minimum. Once money is available to pursue our program, operating costs will be kept to a minimum by using paid consultants as necessary on an ad hoc basis and no new employees will be hired until the Company has sufficient revenues.
During the quarter ended September 30, 2000, the Company appointed two new Directors.
John Morrison, Chartered Accountant, was appointed a Director, Secretary and Chief Financial Officer on August 6, 2000.
Mr. Morrison has an extensive accounting background with over thirty years experience with KPMG ("KPMG"). He graduated Summa Cum Laude, passed his CPA exams in 1966, and was appointed to Beta Alpha Psi as a result of receiving a GPA in excess of 3.5. He received his CA designation in 1968 and then worked his way from partner in KPMG's Winnipeg Office in 1972 to a senior partner in KPMG's Vancouver office in 1979. From 1980 to 1989, Mr. Morrison was the managing partner of KPMG's Kelowna office. He was also Vice-President of Thorne Ernst & Whinney Inc. from 1980 to 1989. During his tenure with KPMG, Mr. Morrison was involved in a large number of mergers, acquisitions and reorganizations. After his retirement from KPMG in 1989, he has provided ongoing consulting services to a wide range of clients in diverse industries.
Gordon Colledge was appointed Vice-President and Director on September 26, 2000. He is a counselor and instructor in family studies at Lethbridge Community College. Gordon Colledge has worked with dozens of towns and communities in Western Canada on community development projects through WESTARC, an applied research group at the University of Brandon, Manitoba. Assigned to work with farm and ranch families, Mr. Colledge knows the value of cost effective ranching and farming.
Mr. Colledge earned an international Teaching Excellence Award from the University of Texas at Austin and has earned recognition on the Premier's Council in Alberta for his support of Alberta families. He brings a wealth of knowledge of farming to the Company.
Item 2. Management's Discussion and Analysis or Plan of Operation (con't)
Also during the quarter ended September 30, 2000, the Company consolidated its connections with suppliers of bison and cattle for processing through the packing plant and feeder cattle for finishing in the MEFFs.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits Exhibit No. 3.1* - Articles of Incorporation 3.2* - Bylaws 4.1~ - Specimen Stock Certificate |
*Incorporated by reference from the registrant's Form 10-SB filed with the Commission on February 4, 2000.
~ Incorporated by reference from the registrant's Form 10-KSB for the period ended June 30, 2000 and filed with the Commission on June 12, 2001.
(b) Reports on Form 8-K. None.
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HYBRID FUELS, INC.
/s/Clay Larson November 5, 2001 By Clay Larson Date Its President |