SECURITIES AND EXCHANGE COMMISSION
                              Washington DC. 20549

                                   FORM 10-KSB

[X]     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934  For the fiscal year ended December 31, 1999

[ ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934 For the transition period from __________ to ___________.

Commission file number:  0-27853

                              HYATON ORGANICS INC.
             (Exact name of registrant 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) (Zip Code)

                                 (604) 623-3300
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock

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 such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
at least the past 90 days.  Yes     X    No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. X

As of March 15, 2000,  the  aggregate  market value for the shares of the common
stock, no par value, held by non-affiliates was approximately $71,782,020.

The number of shares  outstanding of registrant's only class of common stock, as
of March 15, 2000, was 27,556,000 shares of its common stock, no par value.

Documents Incorporated by Reference: None

Exhibit Index is located at Page 18.

<PAGE>2


With the exception of historical facts stated herein,  the following  discussion
may contain  forward- looking  statements  regarding events and financial trends
which may affect the Company's future operating results and financial  position.
Such  statements  are  subject to risks and  uncertainties  that could cause the
Company's actual results and financial  position to differ materially from those
anticipated in such forward-looking statements.  Factors that could cause actual
results to differ materially include, in addition to other factors identified in
this report, the Company's  operating losses,  its need for additional  capital,
its ability to commercially develop its proposed products, and dependence on key
personnel,  all of which  factors are set forth in more  detail in the  sections
entitled "Certain  Considerations" and "Management's  Discussion and Analysis or
Plan of Operation" herein. Readers of this report are cautioned not to put undue
reliance on "forward looking"  statements which are, by their nature,  uncertain
as reliable indicators of future  performance.  The Company disclaims any intent
or obligation to publicly update these "forward looking" statements,  whether as
a result of new information, future events, or otherwise.

        In this  statement,  all dollar  amounts are  expressed in United States
dollars unless otherwise stated.

                                     PART I.

Item 1.  Description of Business

                              BUSINESS DEVELOPMENT

Historical Information

        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.  In 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.

        As part of the  Company's new business  plan,  on November 2, 1998,  the
Company  entered into a Plan and  Agreement of  Reorganization  ("Reorganization
Agreement")   with  Kafus   Industries  Ltd.   ("Kafus"),   a  British  Columbia
corporation.  Under the  Reorganization  Agreement,  the Company issued to Kafus
20,000,000  shares of its Common Stock in exchange for all of the Common  Shares
of Camden Agro-Systems Inc. ("Camden"), an Ontario corporation,  owned by Kafus.
Prior  to the  reorganization,  Kafus  owned  9,000  common  shares  of  Camden,
constituting  90% of  Camden's  outstanding  common  shares.  As a result of the
reorganization,  Kafus owns  approximately  72.6% of the  Company's  outstanding
shares of Common Stock and the Company's  primary  business  interest is Camden.
Unless  otherwise  indicated,  reference to "Hyaton" or the "Company" shall mean
Hyaton Organics Inc. and its wholly-owned subsidiary, Camden Agro-Systems Inc.

        Further,  as  part  of the  Reorganization  Agreement,  the  Company  is
required  to  issue  one  additional  common  share to  Kafus  for each  $.20 of
aggregate  earnings before  interest,  taxes,  depreciation  and amortization of
Camden  accumulated  during  the  period  beginning  on  the closing date of the

<PAGE>3

reorganization  and ending upon the  earlier of: (a) two years from  November 2,
1998, or (b) eighteen months from the commencement of commercial operations by a
Camden plant.

Camden Agro-Systems Inc.

        The Company's  primary  asset is its interest in Camden,  and all of the
Company's  operations  are conducted by Camden.  Camden is a  development  stage
company  that  intends  to  develop  turnkey  facilities  capable  of  producing
organic-based  fertilizers  from animal residues such as hog and poultry manure.
Prior to January 1999,  Camden also was planning the  development  of facilities
for the production of animal feed from food waste.

        Camden  Agro-Systems  Inc. was  incorporated  under the Ontario Business
Corporation  Act (1982) on  November  24,  1994,  for the  purpose  of  business
management,  consulting  and  product  development.  For at least the past three
years,  Camden  has  primarily  focused  its  business  on  the  development  of
converting  organic  waste into animal  feed and animal  residues  into  organic
fertilizer. Camden believes that there are environmental pollution concerns from
animal  residues.   Many   governmental   authorities  are  invoking   stringent
environmental laws and regulations  regarding  pollution,  contamination and the
accumulation  and disposal of waste  products  such as animal  residues.  Camden
believes that it is developing a waste management  process by reducing pollution
in ground and surface waters and by providing a valuable source of nutrients and
organic material for plant production.

         Since February  1998,  Camden had been operating a pilot program for an
organic waste processing  facility at Bartow,  Florida (the "Bartow Plant").  At
the Bartow Plant,  Camden processed organic waste supplied by dairy,  bakery and
ice cream makers into animal feed supplements.  During the pilot program, Camden
entered into an exclusive marketing distribution agreement with Miracle Feeds of
Canada,  Ltd.,  whereby  Miracle  Feeds of Canada  agreed,  subject  to  certain
conditions,  to purchase  all of Camden's  animal  feed  supplement  produced by
Camden at its Bartow  Plant.  In light of the  agreement  with Miracle  Feeds of
Canada, Camden began to upgrade its Bartow Plant to full commercial  production.
At full  production,  the  Bartow  Plant  would have been  capable of  producing
approximately 22,000 short tons of animal feed per year. In addition, Camden was
negotiating a product buy-out agreement with an animal feed supplier, and was in
the planning stages for an animal feed plant in Lakeland, Florida.

        In January 1999, Camden decided to discontinue its animal feed from food
waste program to concentrate its energy and resources on its organic  fertilizer
products.  In light of its limited  capital and resources,  Camden believed that
the organic  fertilizer  market,  which is larger  than the animal feed  market,
provided it a better and faster opportunity to earn revenues.  Further,  because
Camden's  proposed  animal  feed  processing  may be subject to  duplication  by
competitors, this could have the effect of increasing Camden's competitors. As a
result of this decision, Camden allowed its lease at the Bartow Plant to expire,
and ceased all animal feed research and development  including its operations at
the  Bartow  Plant and  proposed  construction  project  in  Lakeland,  Florida.
Notwithstanding  its current direction,  the Company may, in the future,  resume
the development of animal feed from organic waste.

        Organic Fertilizer Products

        Since its redirection in January 1999,  Camden has focused on developing
organic  fertilizer  products  from animal  residues.  Camden  believes that the
organic  fertilizer  market  provides  great  potential for the sale of Camden's
organic  fertilizers,  and justified the continued  research and  development of
proprietary organic fertilizers.  Since 1996, Camden has been collaborating with

<PAGE>4

experts in crop science, animal sciences,  agronomy,  fertilizers, and equipment
manufacturers to research and test its organic  fertilizer  process and proposed
products in Canada, the United States and abroad.

        In 1998,  Camden narrowed its organic  fertilizer  research by selecting
organic waste  materials,  such as animal  residues  that have been  aerobically
processed  under  specific,   optimally  controlled  conditions.  The  resulting
materials have then been used to manufacture three new products.  These products
were initially marketed under the brand VERDANT ORGANIC. However in 1999, Hyaton
applied  for TRULY  ORGANIC(TM)  as its  trademark  in the United  States.  This
application is currently pending. These proposed products are as follows:

     o    Pure Organic Fertilizer Blends, to be marketed as TRULY ORGANIC(TM)MTO
          series,  are a basic  product from which all other  Camden  fertilizer
          formulas will be based upon. They are designed to supply nitrogen (N),
          phosphorus   (P),   and  potash  (K)  to  plants  as   required  on  a
          bio-modulated  release  basis.  The  composition  of the Pure  Organic
          Fertilizer  Blends is designed to restore and  maintain  soil  organic
          matter quality and quantity,  to improve soil aggregation and porosity
          to  increase  water  infiltration  and  retention,  to enhance gas and
          cation exchange,  to improve root growth, and to reduce water and wind
          erosion;

     o    Enhanced  Organic   Fertilizer   Blends,   to  be  marketed  as  TRULY
          ORGANIC(TM)  MTE series,  are organic in origin,  then  enhanced  with
          chemical  nutrients.  The chemical  nutrients are added to the organic
          blend to meet individual crop requirements such as radishes,  lettuce,
          and tomatoes; and

     o    Growing Media, to be marketed as TRULY ORGANIC(TM) GROWING MEDIA, is a
          new  proposed  product  line that can be used as a  substrate  for the
          cultivation of greenhouse  plants, a potting soil or a soil supplement
          to home gardens.  This product line is  manufactured  from organic raw
          materials which contain sufficient  naturally-occurring  quantities of
          nitrogen,   phosphorus,   potash  and  other  essential  elements  for
          commercial plant growth.

        Camden plans to market Camden's organic fertilizer  products by engaging
compatible  corporate  partners to market and distribute its organic  fertilizer
products   as  well  as  large   volume   end   users   and   home  and   garden
distributors/retailers.

        As part of its business redirection, Camden is proposing to develop a 52
acre organic fertilizer  facility located in North Carolina.  Camden proposes to
convert organic  fertilizer  from animal  residues  acquired from local farmers.
Camden intends to use its process originally  developed at the Bartow Plant as a
template for creating  similar  organic  fertilizer  facilities  utilizing their
modular design and manufacturing process.  Camden has filed a patent application
in the United States for this process.  See "Camden  Agro-Systems Inc. - Patents
and Trademarks."

        The Camden Agro-System Process

        The Camden  process is a  procedure  in which  animal  residues  such as
poultry and hog manure is treated and  recycled  into organic  fertilizers.  The
principal steps are (a) receipt and mixing of the organic waste  materials,  (b)
aerobic  processing (which is similar to composting),  (c) mixing the composting
material  with  plant  nutrients, and (d) post aerobic processing and packaging.

<PAGE>5

        Camden intends to exploit its process by establishing organic fertilizer
manufacturing  facilities  internationally.  In  order to meet  this  objective,
Camden believes that it must:

     o    Enter into long-term,  supply agreements from organic waste generators
          such as farmers in the case of animal waste;

     o    Use its proprietary manufacturing process; and

     o    Enter into long-term  marketing and product  buy-out  agreements  from
          reputable companies.

        Camden  believes  that its  proposed  organic  fertilizer  manufacturing
facilities  can be  developed  worldwide.  In  determining  an area  that may be
conducive to one of Camden's facilities, Camden considers the following:

        1.     Identification of those areas that have documented  organic waste
               management  problems,  and can  generate  sufficient  volumes  of
               animal residues to sustain an organic fertilizer operation;

        2.     Active industry associations that are willing to work with Camden
               in  identifying  solutions  for  organic  waste  such  as  animal
               residues; and

        3.     Active local and state  governments that are willing to work with
               Camden in identifying  solutions for organic waste such as animal
               residues.

        In applying the above  criteria,  Camden has selected  North Carolina as
its first proposed organic  fertilizer  processing plant.  During the evaluation
process,  Camden  noted that the state of North  Carolina  had a large number of
both poultry and hog producers,  had active state and national  associations for
poultry and hog producers,  provides  incentives to poultry  producers to remove
animal  residues  through a  secondary  process  or where  land  application  is
avoided,  and had a mild climate that allowed  year-round  plant  operations and
allowed animal  residue  transportation  without damage due to weather,  such as
freezing.

        On May 19,  1999,  Camden  entered  into a letter of  intent to  acquire
approximately 52 acres in Merry Hill, North Carolina.  The property is currently
permitted as a composting  facility and Camden intends to retrofit it to convert
animal residues into organic fertilizer products. The proposed purchase price is
approximately  $750,000 to be paid in part by cash and the assumption of certain
debt. The letter of intent expired October 15, 1999, but Camden has extended the
deadline upon the payment of $10,000. However, Camden and the owner are still in
discussion  regarding  the  acquisition.  Camden has  obtained an  environmental
permit and  construction  permit for the Merry Hill site. The acquisition of the
property is subject to Camden, through the Company,  raising sufficient funds to
pay for the property  and no assurance  can be given that Camden will be able to
complete the acquisition.

        On February 15, 2000,  Hyaton  entered  into a purchase  agreement  with
Furst-McNess  Company under which Furst-McNess shall have the right to purchase,
promote,  market and distribute Hyaton's  fertilizers and growing media produced
at its proposed Merry Hill, North Carolina facility.  The purchase price for the
products  will be  equal  to the  net  selling  price  to the  end  user  less a
percentage to Furst- McNess. The amount of the percentage will be based upon the
net  selling  price.  The  term  of  the agreement will continue until the fifth

<PAGE>6

anniversary  of the final  completion  date of the Merry  Hill,  North  Carolina
facility, subject to extension and is subject to certain conditions.

        Research and Development

        Camden has conducted its research and  development in  conjunction  with
universities and governmental  agencies. In 1996, Camden conducted two livestock
feeding and fertilizer  trials at Kansas State  University,  Kansas.  During the
process,  several short tons of organic waste were  processed into two livestock
feed supplements and one organic-based  fertilizer.  The livestock feeding trial
conducted  by Kansas  State  University  involved  70 heads of  cattle,  and the
fertilizer  trial  consisted of comparing  grain  sorghum  yields in a series of
replicated field plots. The trials indicated that animal residues can be used as
a supplement to livestock  feed and that animal  residues used in  organic-based
fertilizers could exceed commercial fertilizers in yield/acre.

        More recently,  between  September 1998 and February  1999,  Camden,  in
cooperation  with the Eastern Cereal & Oilseed  Research  Centre,  a Division of
Agriculture and Agri-food Canada,  Ottawa,  Ontario,  conducted a joint research
project  assessing  the  physical,  chemical and  agronomic  characteristics  of
Camden's organic  fertilizer  blends and growing media,  TRULY  ORGANIC(TM) MTO,
TRULY ORGANIC(TM) MTE, and TRULY ORGANIC(TM) GROWING MEDIA. The research project
compared  Camden's organic  fertilizer blends and growing media with traditional
growing  media and  chemical  fertilizers.  Tests were  conducted on three major
types of crops: a leafy crop (lettuce);  a root crop (radish);  and a fruit crop
(tomato).  Results of the trials  indicated  that the  performance  of  Camden's
organic fertilizer blends met or exceeded that of traditional fertilizers.

        Agriculture and Agri-food Canada is a Canadian  governmental agency that
promotes the development,  adaptation and competitiveness of the agriculture and
agri-food  sector  through  policies  and programs  that are most  appropriately
provided by the  Canadian  federal  government.  The overall goal is to help the
sector  maximize  its  contribution  to  Canada's   economic  and  environmental
objectives  and achieve a safe,  high quality food supply  while  maintaining  a
foundation  for  agriculture.  Since  1997,  Camden has  expended  approximately
$200,000 for research and  development of its organic  products,  and Camden has
committed  an  additional  Cdn  $60,000  for  comparative  testing  and  further
development  of its  organic  fertilizer  blends at  Agriculture  and  Agri-food
Canada.

        The development of Camden's organic fertilizers blends and growing media
is in its initial stages.  No assurance can be given that Camden will be able to
produce the same test results under commercial production conditions.

        Sources and Availability of Raw Materials

        Camden's  main  source  of raw  materials  for  its  organic  fertilizer
products will be animal residues initially  consisting of poultry manure and hog
manure.  Camden  believes  that  there is a great  supply of these  ingredients.
Camden  intends to enter  into  by-products  supply  agreements  with  initially
poultry and hog farmers located in North Carolina.  Under the by-products supply
agreement,  the farmers will supply Camden with animal residues  meeting certain
specifications.  Camden  will pay the farmer for the  animal  residues  with the
right to receive any state  incentives for the disposal of the animal  residues.
Due to the  increase  in  organic  waste  material,  some  states  such as North
Carolina provide  incentives  and/or subsidies to companies that recycle organic
waste.

<PAGE>7

        Customers

        At this  time,  because  Hyaton  is in the  development  stage it has no
customers.   However,   Hyaton  has  entered  into  a  purchase  agreement  with
Furst-McNess  Company under which  Furst-McNess will purchase products of Hyaton
subject to certain conditions.

        Competition

        Camden is directly and indirectly in competition  with other  fertilizer
businesses,  including  other organic  recycling  facilities.  Further,  many of
Camden's  competitors  have greater  production  capacity and greater  financial
resources  and,  therefore,  may be better able to compete in the  domestic  and
international  markets.  Competing technology may also be developed by the other
companies in the industry. Further, many of Camden's competitors may take action
such as price  reductions to keep their markets and hinder  Camden's  ability to
sell its products. There can be no assurance that Camden will be able to develop
a competitive position in the fertilizer industry.

        Patents and Trademarks

        In the course of Camden's ongoing organic  fertilizer  research,  it has
developed  various  technological  innovations  in the  areas  of  manufacturing
process as well as products.  At June 24, 1999, the Minister of Agriculture  and
Agri-food  Canada on behalf of Camden  applied for patents in the United  States
for its three product lines: Pure Organic  Fertilizer  Blends,  Enhanced Organic
Fertilizer Blends,  and Growing Media.  Collectively,  the applications  include
composition claims for its organic fertilizers and manufacturing  processes.  In
conjunction with the evaluation of Camden's organic  products,  the patents were
transferred to Camden. These patent applications are currently pending.

        No assurance  can be given that Camden's  manufacturing  process will be
granted  a  patent,  or if  granted,  that it  will  afford  protection  against
competitors.   Further,  any  patent  issued  to  Camden  could  be  challenged,
invalidated or circumvented by others. Further, since patent applications in the
United  States  are  maintained  in secrecy  until the patent is issued,  Camden
cannot be certain that others have not filed patent applications directed toward
inventions  covered by its pending patent  applications or that it was the first
to file patent  applications on such inventions.  There can also be no assurance
that any  application  of Camden's  technologies  will not  infringe  patents or
proprietary  rights  of others  or that  licenses  that  might be  required  for
Camden's  processes  or products  would be available on  reasonable  terms.  The
extent to which Camden may be required to obtain licenses from others,  the cost
and the availability of such licenses are unknown.

        Camden also makes use of its trade  secrets or  "know-how"  developed in
the course of its research and development in the area of manufacturing process.
To the extent that Camden relies upon trade secrets, unpatented know-how and the
development  of  improvements  in  establishing  and  maintaining  a competitive
advantage in the market for Camden's  products,  there can be no assurances that
such  proprietary  technology will remain a trade secret or that others will not
develop substantially equivalent or superior technology to compete with Camden's
products.

        Hyaton has filed a trademark for "TRULY  ORGANIC" in the United  States.
The trademark is currently pending.

<PAGE>8

        If Camden  becomes  involved in litigation  regarding  its  intellectual
property,  it could consume a substantial portion of Camden's resources.  Camden
may lack the financial  resources to defend its intellectual  property claims or
to prosecute infringements by others.

Environmental Regulations

        The  location,   construction,   and  operation  of  organic  fertilizer
facilities  are  regulated by state and federal  environmental  laws.  Obtaining
local  approvals and state air,  water and  operating  permits is a detailed and
complex process.  This may especially be true where the proposed  facility is to
be located in or near urban  areas.  Requisite  approvals to be obtained in most
jurisdictions include Local Planning Board, Zoning Boards, Solid Waste and Water
Disposal Boards, Composting Operation Permits, Air Permits and Building Permits.
Recently,  Hyaton  received an  environmental  permit at its  proposed  facility
located in Merry Hill, North Carolina.

Employees.  As of December 31, 1999, the Company,  and its subsidiary,  had five
consultants and one employee.

                             CERTAIN CONSIDERATIONS

        In addition to the other  information  presented  herein,  the following
should be considered carefully in evaluating the Company and its business.  This
information   contains   forward-looking   statements  that  involve  risks  and
uncertainties.  The  Company's  actual  results may differ  materially  from the
results discussed in the  forward-looking  statements.  Factors that might cause
such a difference  include,  but are not limited to, those  discussed  below and
elsewhere herein.

        Lack of Profits and Going Concern  Opinion.  For the year ended December
31, 1999, the three months ended December 31, 1998, and year ended September 30,
1998,  the Company  incurred  net losses of  $739,192,  $126,131  and  $268,548,
respectively.  As a  result  of  these  losses  and  negative  cash  flows  from
operations,  the  Company's  auditors'  report  on  the  Company's  consolidated
financial   statements   include  an  additional   paragraph   which  refers  to
uncertainties  as to the  Company's  ability to  continue  to operate as a going
concern.

        Development  Stage  Company.   Hyaton  is  in  its  development   stage,
researching  and  developing  organic-based  fertilizers.  The  Company  has  no
commercial  products.  Although under test  conditions,  the Company's  proposed
organic fertilizers  performed as well, if not better, than traditional chemical
fertilizers,  no assurance can be given that the Company will be able to achieve
the same results under commercial conditions. Further, Hyaton will face the same
challenges experienced by other development stage companies,  including, but not
limited to, developing market acceptance for its proposed products.

        Need for  Additional  Capital.  The Company  believes  that it will need
additional working capital to finance and develop organic fertilizer  facilities
and for its  operations in 2000. No assurance can be given that the Company will
be successful in raising capital for its projects or, if raised, that it will be
on terms favorable to the Company. In the event the Company is required to raise
additional  capital through  private  placement of its equity  securities,  such
placement  of equity  securities  will  have the  effect  of  diluting  existing
shareholders'  ownership  interest in the  Company.  If the Company is unable to
raise sufficient funds to finance these projects, the Company may not be able to
complete  its  projects  which  will have an  adverse  effect  on the  Company's
business objectives.

<PAGE>9

     Dependence  on Key  Personnel.  The  Company  is  dependent  on Mr.  Robert
Novitsky,  President,  for his expertise.  The loss of Mr. Novitsky could have a
material adverse effect upon the Company.

     Concentration  of Stock  Ownership.  As of December 31,  1999,  Kafus owned
20,000,000  shares of Common  Stock of the  Company  constituting  approximately
72.6% of the outstanding  shares. As a result of its ownership,  Kafus will have
substantial  control over corporate  matters without  seeking other  shareholder
approval,  including  the  election of  directors  and  approval of  significant
corporate  transactions.  Further, such concentration of ownership may also have
the effect of delaying or preventing a change in control of the Company.

     Authorization of Preferred Stock; Possible Anti-Takeover Effects. The Board
of  Directors  is  authorized  to issue  Preferred  Stock and to  determine  the
dividend, liquidation, conversion, redemption and other rights, preferences, and
limitations of such shares without  further vote or action of the  stockholders.
Accordingly,  the Board of Directors is empowered, without shareholder approval,
to issue  Preference  Stock with  dividend,  liquidation,  conversion,  or other
rights  which  could  adversely  affect  the  voting  power or the rights of the
holders of the Common Stock. In the event of such issuance,  the Preferred Stock
could be utilized, under certain circumstances,  as a method of discouraging and
delaying or preventing a change in control of the Company.

     No Dividends.  The Company has not paid cash  dividends on its Common Stock
since its inception  and does not  anticipate  any cash  dividends on the Common
Stock in the foreseeable future. For the foreseeable future, the Company intends
to  reinvest  the  earnings  of the  Company,  if any,  in the  development  and
expansion of its business.

Item 2.  Description of Property

     The Company,  through Camden,  leases 900 square feet of office space in an
office building located at 2285 St. Laurent Boulevard, Unit 16, Ottawa, Ontario,
Canada.  The  lease  has no fixed  terms  and may be  terminated  within 30 days
written notice. The Company pays a monthly rent of approximately CDN $1,700.

Item 3. Legal Proceedings

     Neither the Company nor Camden is involved in any legal proceeding.

Item 4.  Submission of Matters to a vote of Security Holders

     None

Item 5.  Market for common equity and Related Stockholder Matters

     The Company's  Common Stock began  trading on the OTC Bulletin  Board under
the symbol  "HYTN" on September 30, 1998.  The Company has a limited  market for
its Common Stock with no real trading volume.  The following  quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual  transactions.  The high and low prices of the Company's Common
Stock on a quarterly basis since September 30, 1998, are as follows:

<PAGE>10

Quarter Ended                    High              Low
-------------                    ----              ---
December 31, 1999               $3.25             $2.00
September 30, 1999              $2.00             $2.00
June 30, 1999                   $2.50             $1.75
March 31, 1999                  $3.00             $1.50
December 31, 1998               $2.00             $0.19


Item 6.  Management's Discussion and Analysis or Plan of Operation

General

        The following discusses the Company's financial condition and results of
operations based upon the Company's consolidated financial statements which have
been prepared in accordance with generally accepted accounting principles.

        The Company was formed on August 20, 1996,  to evaluate  businesses  for
possible  acquisition.  Effective  November  2, 1998,  the  Company  completed a
reorganization  with Kafus whereby the Company issued  20,000,000  shares of its
Common  Stock in exchange  for Kafus'  9,000  common  shares of Camden.  Through
Camden,  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 fertilizers from animal waste.

        During fiscal year 1998, the Company changed its year end from September
30 to December 31. The following  information discusses the Company's results of
operations  for the year ended December 31, 1999, and for the three months ended
December  31,  1998.  Because  the  Company  is in the  development  stage,  the
following financial information is not indicative of the Company's operations in
the future.

Results of Operations

For the year ended December 31, 1999

        Revenues. For the year ended December 31, 1999, the Company had revenues
of $39,253.

        Expenses. Total  expenses for  the year ended  December  31, 1999,  were
$778,445.  Most of the expenses  consisted of consulting and  professional  fees
related to the development of the Company's organic  fertilizers and for product
development and research  costs.  Included in total expenses was employee equity
compensation of $222,500.

        Net Loss. The Company incurred a net loss of $739,192 for the year ended
December 31, 1999, primarily related to the lack of revenues.

<PAGE>11

For the three months ended December 31, 1998

        Revenues.  Revenues for the three months  ended  December 31, 1998, were
$36,465.  Revenues  were  primarily  derived  from  contract  services regarding
environmental studies.

        Expenses.  Total  expenses for the three months ended December 31, 1998,
were $162,596,  consisting  primarily of consulting and other professional fees,
product  development and research costs and  administrative  and other expenses.
Consulting fees related to engineer and administrative  services provided to the
Company.  Product  development  and  research  costs  relate  primarily  to  the
development  of organic  animal feed from organic waste and organic  fertilizers
from animal residues,  patent  applications for organic  fertilizers and project
costs for consulting  services  rendered.  As previously  discussed,  during the
beginning  of 1999,  the Company  began to  concentrate  its efforts  toward the
development of organic fertilizers from animal residues.

        Net Loss.  The  Company  had a net loss of $126,131 for the three months
ended December 31, 1998.

Year ended September 30, 1998 compared to Year ended September 30, 1997

        Revenues.  Revenues for the year ended  September 30, 1998,  were $2,805
compare to no revenues  for the year ended  September  30, 1997.  Revenues  were
primarily derived from contract services regarding environmental studies.

        Expenses.  Total  expenses for the year ended  September 30, 1998,  were
$271,353  compared to total expenses of $22,059 for the year ended September 30,
1997. During the year ended September 30, 1998, expenses increased substantially
in consulting and other  professional  fees,  product  development  and research
costs and administrative and other expenses. Consulting fees related to engineer
and  administrative  services provided to the Company.  Product  development and
research  costs relate  primarily to the  development of organic animal feed and
fertilizers from animal residues.

        Net Loss. For the year ended  September 30, 1998, the Company had a loss
of $268,548 compared to a loss of $22,059 for the year ended September 30, 1997.
The  substantial  loss incurred during the year ended September 30, 1998, can be
attributed to the increase in total expenses  related to the  development of the
Company's proposed products.

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
substantial revenues,  and does not anticipate any substantial revenues until it
is able to develop and sell its products.  Previously,  the Company has received
loans to fund its operations and provide working capital. It is anticipated that
the Company will continue to finance its operations through loans and equity and
debt financings.  As of December 31, 1999, the Company's working capital deficit
was $15,109 and as of December  31,  1998,  the  Company's  working  capital was
$12,029.

<PAGE>12

Impact of the Year 2000 Issue

        The Year 2000 Issue is the result of  computer  programs  being  written
using two digits  rather  than four to define the  applicable  year.  Any of the
Company's,  or  its  suppliers'  and  customers'  computer  programs  that  have
date-sensitive  software may recognize a date using "00" as the year 1900 rather
than the year 2000.  This could  result in system  failures  or  miscalculations
causing  disruptions of operations  including,  among other things,  a temporary
inability to process  transactions,  send invoices,  or engage in similar normal
business activities.

        Because the Company is in the  development  stage and has no significant
operations,  the  Company  does not  anticipate  that its  software  or computer
systems will require any significant  modification or replacement in response to
the Year 2000  Issue.  As of  December  31,  1999,  the Year 2000  Issue did not
materially affect the operations of the Company and its subsidiary.  The Company
will continue to monitor any Year 2000 Issue.

Item 7.  Financial Statements

        The information required by item 310(a) of Regulation S-B is attached to
this Annual Report.

Item 8.  Changes in and Disagreements with Accountants

        None

Item 9.  Directors, Executive Officers, Promoters and Control Persons


                                   MANAGEMENT

Executive Officers and Directors

        The directors  and executive  officers of the Company as of December 31,
1999, are as follows:


<TABLE>
<CAPTION>

           Name                    Age      Office or Position                   Held Position Since
           ----                    ---      ------------------                   -------------------

<S>                              <C>       <C>                                     <C>
Executive Officers and Directors
of the Company:

Robert Novitsky                    52       President, Director                         1999

Manfred Schultz                    51       Vice President of Business                  1999
                                            Development, Director

Michael McCabe                     42       Chief Financial Officer, Director           1998

Peter Schlesinger                  65       Director                                    1999

Milton Datsopoulos                 59       Director                                    1999

Gordon Robinson                    59       Director                                    1999

Paul McClory                       59       Director                                    1999

<PAGE>13

           Name                    Age      Office or Position                   Held Position Since
           ----                    ---      ------------------                   -------------------

Tony Valentine                     38       Director                                    1999

Lynda Murdock                      38       Treasurer                                   1999

Fiama Walker                       55       Secretary                                   1999

Executive Officers of Camden:

Robert Novitsky                    52       President                                   1996

Manfred Schultz                    51       Vice President of Business                  1999
                                            Development

</TABLE>


     The  following  sets forth the principal  occupations  during the past five
years of the  directors  and  certain  executive  officers  of the  Company  and
executives of its subsidiary.

     Robert L. Novitsky has been the President and Director of the Company since
March 1999 and has been with the Company since 1998. Mr.  Novitsky has also been
the President of Camden since 1996. Mr.  Novitsky was a Director of The CanFibre
Group Ltd. from August 1992 to December 1997.  Since 1990, Mr. Novitsky has been
President  and Director of Notra  Environmental  Services Inc. and Notra Marine.
From 1989 to 1990, he was Executive  Vice-President  in charge of management for
Amtek Engineering Service Incorporated,  an engineering consulting company. From
1986 to 1990, he was President of SSI Monenco  Limited and  responsible  for all
corporate activities  associated with that professional  engineering company. He
has a Bachelor  degree in Chemical  Engineering  from Royal Military  College in
Kingston,  Ontario, an Ocean Engineer degree from MIT and a Master of Science in
Materials Engineering and Science from MIT.

     Manfred W. Schultz has been the Vice  President of Business  Development of
the Company  since  September 1, 1999,  and Director of the Company since August
1999. Mr. Schultz has also worked with Camden on a consultative basis since June
1999. From 1995 to 1999, Mr. Schultz worked as a business consultant for various
businesses  and held senior  executive  and  Director  positions  at  Integrated
Resources Corp. and Northern Ostrich Corp. From 1987 to 1995, he founded and was
President  and Chief  Executive  Officer of Koala  Beverages  Ltd.  where he was
responsible for development  and overall  management.  He has a Bachelor of Arts
degree in Economics from the University of Western Ontario.

     Michael  McCabe  has been Chief  Financial  Officer  and a Director  of the
Company  since  1998.  Since  1997,  Mr.  McCabe has served as  President  and a
Director  of Kafus  Industries  Ltd.  From 1996 until May 1997,  Mr.  McCabe was
Managing  Director  of Project  Finance for Key Global  Finance  Ltd. in Boston,
Massachusetts.  From 1991 to 1996,  he was Senior Vice  President of BTM Capital
Corporation.  He  has a BS in  Chemistry  and  Physics  from  Bridgewater  State
College,  an MS in Chemical  Engineering from Purdue  University,  and an MBA in
Finance from Pace University.

     Peter  Schlesinger  has been a Director of the Company  since  August 1999.
Since  December  1993 Mr.  Schlesinger  has been a Director  of, and since March
1998,  Chairman of the Board and Chief Financial  Officer of, MGPX Ventures Inc.
Now self-employed,  Mr.  Schlesinger was a partner of a Canadian  stockbrokerage
firm,  Annett  Partners,  for ten years  and  manager  of a  Bermuda  investment
company, Tatra Ltd., since 1974. He was president of Halton Insurance, a Bermuda

<PAGE>14

insurance company,  listed on The Toronto Stock Exchange, from 1988 to 1994. For
ten years he has also served as  president  of the  Canadian  Parkinson  Disease
Foundation.  Mr. Schlesinger has a BS in Psychology and Economics, and an MBA in
Finance from Columbia University.

     Milton  Datsopoulos  became a Director of the Company on October 15,  1999.
Mr.  Datsopoulos  has also been a director of Kafus since March 25, 1998.  Since
1974, Mr. Datsopoulos has been a partner of Datsopoulos, MacDonald & Lind, P.C.,
attorneys at law.

     Gordon  Robinson  became a Director of the Company on October 15, 1999. Mr.
Robinson has also been a director of Kafus since March 25, 1998. Since 1992, Mr.
Robinson owns and operates a home improvement business.

     Paul  McClory was  appointed to the Board of Directors on October 15, 1999.
He was also director of Kafus from June 11, 1996,  until 1998. For over the past
five years, Mr. McClory, through his wholly-owned company Willow Holdings, Inc.,
has been a consultant to several public and private  companies  including  Kafus
and North American Tire Recycling Ltd.

     Tony  Valentine  became a Director of the Company on October 15, 1999.  Mr.
Valentine has also been a director of Kafus since  February 3, 1999.  Since July
5, 1999, Mr.  Valentine has been  Executive  Vice President and Chief  Financial
Officer of Kafus.  Prior to this time and since 1997,  Mr.  Valentine has been a
Vice President of Enron Capital & Trade Resources  Corp.'s  Industrial  Services
Group in Houston.  From 1993 to 1995,  Mr.  Valentine  was a Vice  President  of
General  Electric  Capital  Services  and  from  1989  through  1993,  he was an
associate with Chase  Manhattan  Bank in New York. Mr.  Valentine was a Chemical
Engineer  with Shell Oil  Company in New Orleans  from 1984  through  1987.  Mr.
Valentine received a Bachelor of Science degree in Chemical Engineering from the
University of Tennessee and an MBA from Harvard Business School.

     Lynda Murdock was  appointed  Treasurer to the Company on October 15, 1999.
Since June 1999, Ms.  Murdock has been Senior Vice President of Taxation,  Audit
and  Accounting for Kafus.  Prior to her time with Kafus,  Ms. Murdock has spent
the last 15 years in public accounting practice,  most recently as a Tax Partner
with KPMG LLP of Canada. Ms. Murdock is a Chartered  Accountant and has a B.Comm
honor's degree from the University of British Columbia.

     Fiama Walker has been  Secretary of the Company  since  September 16, 1999.
Ms. Walker has been Assistant  Corporate  Secretary and Manager of Compliance of
Kafus  since  July 7,  1998.  For the last 25  years,  Ms.  Walker  worked  as a
paralegal  and  legal  assistant  for  various  law firms in  British  Columbia,
specializing in corporate and commercial law. She has completed  diploma courses
in  business  administration,  accounting  and law  from  various  colleges  and
universities in British Columbia.

Item 10.  Executive Compensation

Executive Compensation

     None of the  Company's  directors,  officers,  or employees or officers and
employees  of its  subsidiaries  earned in excess of $100,000 for the year ended
December 31, 1999.

<PAGE>15

        The  following  table  sets  forth  the  compensation  of the  Company's
president during the last fiscal year. No officer  received annual  compensation
in excess of $100,000 during the last fiscal year.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                              Long Term Compensation
                                                                             ------------------------------------------------------
                                           Annual Compensation                         Awards                Payout
                               -------------------------------------------   ---------------------------  -------------
                                                                               Restricted  Securities
                                                           Other Annual           Stock    Underlying         LTIP       All Other
Name and Principal                                         Compensation         Award(s)     Options         Payout      Compensa-
Position                Period     Salary      Bonus ($)        ($)                ($)         (#)             ($)       tion ($)
--------------------------------------------------------------------------   ---------------------------  -------------------------

<S>                      <C>     <C>           <C>          <C>                <C>        <C>               <C>         <C>
Robert L. Novitsky       1999    $45,767(1)
President                1998    $10,149(2)           -          -                 -            -               -            -


</TABLE>

(1)  Represents  consulting  fees. Mr.  Novitsky does not receive any salary for
     serving as President.

(2)  Mr.  Novitsky has been receiving a salary in the form of consulting fees of
     Cdn $3,383 per month for  serving as the  president  of Camden.  The figure
     $10,149 represents three months' salary.

        At this time,  the Company does not pay its  directors  compensation  as
serving as such and for their  attendance at board  meetings.  Further,  at this
time, the Company does not provide  pension,  retirement or similar  benefits to
its  officers  and  directors.  However,  directors  receive  stock  options  as
compensation.

Outstanding Options Granted to Directors and Executive Officers

        The  following  table  provides  information  relating to share  options
granted to  directors  and  certain  executive  officers  of the Company and its
subsidiary, Camden, as a group, and outstanding as of December 31, 1999.

<TABLE>
<CAPTION>


           Name                 Number of Options      Exercise Price            Expiration Date
           ----                 -----------------      --------------            ---------------
<S>                                <C>                      <C>                <C>
Robert Novitsky                    125,000                  $1.50               October 13, 2004

Michael A. McCabe                   25,000                  $1.50               October 13, 2004

Peter Schlesinger                   25,000                  $1.50               October 13, 2004

Manfred W. Schultz                 100,000                  $1.50               October 13, 2004

Milton Datsopoulos                  25,000                  $1.50               October 13, 2004

Gordon Robinson                     25,000                  $1.50               October 13, 2004

Paul McClory                        25,000                  $1.50               October 13, 2004

Tony Valentine                      25,000                  $1.50               October 13, 2004

Lynda Murdock                       10,000                  $1.50               October 13, 2004

Fiama Walker                        5,000                   $1.50               October 13, 2004

<PAGE>16

           Name                 Number of Options      Exercise Price            Expiration Date
           ----                 -----------------      --------------            ---------------

Officers and Directors as           390,000
a group (9 persons)

</TABLE>

        In addition to the  foregoing,  the Company has granted to its employees
five-year options to purchase,  in the aggregate,  55,000 shares of Common Stock
of the Company at $1.50 per share.

        The  following  table sets  forth the  options  granted to Mr.  Novitsky
during the past fiscal year.

<TABLE>
<CAPTION>

                               OPTION GRANTS IN LAST FISCAL YEAR

                                Individual Grants
                    --------------------------------------------------------------------------------------
                          Number of        % of Total Options
                          Securities           Granted to
                      Underlying Options      Employees in       Exercise or Base
       Name              Granted (#)          Fiscal Year          Price ($/Sh)        Expiration Date
----------------------------------------------------------------------------------------------------------

<S>                        <C>                    <C>                   <C>           <C>
Robert Novitsky             125,000                45.5%                 $1.50         October 13, 2004

</TABLE>

        The following table sets forth Mr. Novitsky's fiscal year option values.
No options were exercised by Mr. Novitsky during 1999.


                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                                                          Value of
                                                                                     Unexercised In-the-
                                                          Number of Unexercised at    Money Options at
                                                                 FY-End (#)             FY-End ($)(1)

                      Shares Acquired    Value Realized         Exercisable/            Exercisable/
       Name           on Exercise (#)         ($)              Unexercisable            Unexercisable
----------------------------------------------------------------------------------------------------------
<S>                     <C>              <C>              <C>                         <C>
Robert Novitsky             None              None          125,000 Exercisable/       $125,000 /  $0
                                                               0 Unexercisable

</TABLE>

(1)  Market price at November 3, 1999,  the last reported trade for the calendar
     year ended 1999, for a share of common stock was $2.81.

<PAGE>17

Item 11.  Security Ownership of Certain Beneficial Owners and Management


                             PRINCIPAL SHAREHOLDERS

        The  following  table sets  forth,  as of  December  31,  1999,  certain
information  with respect to the  beneficial  ownership of the Company's  Common
Stock by (a) each stockholder known by the Company to be the beneficial owner of
more than 5% of the  Company's  Common  Stock,  (b) each  executive  officer and
director of the  Company,  and (c) each  director and  executive  officer of the
Company and its subsidiary as a group.
                                                              Percentage
                                           Number of         Beneficially
Name and Address                           Shares(1)             Owned
----------------
Kafus Industries Ltd.                     20,000,000              72.6%
1500 West Georgia Street 13th Floor
Vancouver, British Columbia
Canada   V6G 2Z6
Robert Novitsky                              245,000(2)              *
Manfred Schultz                              100,000(3)              *
Michael McCabe                                25,000(3)              *
Peter Schlesinger                             25,000(3)              *
Milton Datsopoulos                            25,000(3)              *
Gordon C. Robinson                            25,000(3)              *
Paul McClory                                  25,000(3)              *
Tony Valentine                                25,000(3)              *
Lynda Murdock                                 10,000(3)              *
Fiama Walker                                   5,000(3)              *
All directors and executive officers as a    510,000(3)            1.7%
group (9 persons)


*       Represents less than 1%.

(1)     Except as otherwise indicated,  the Company believes that the beneficial
        owners of the Common Stock listed above, based on information  furnished
        by such owners,  have sole  investment  and voting power with respect to
        such  shares,  subject to  community  property  laws  where  applicable.
        Beneficial  ownership is determined in accordance  with the rules of the
        Securities  and Exchange  Commission  and generally  includes  voting or
        investment  power with  respect to  securities.  Shares of Common  Stock
        subject to options or warrants  currently  exercisable,  or  exercisable
        within 60 days,  are deemed  outstanding  for purposes of computing  the
        percentage ownership of the person holding such option or warrants,  but
        are not deemed  outstanding  for  purposes of computing  the  percentage
        ownership of any other person.

<PAGE>18

(2)  As of December 31, 1999,  Mr. Robert  Novitsky  holds an option to exchange
     his ten percent (10%) interest in Camden (which  represents 1,000 shares of
     Camden's  common shares) for 120,000 shares of the Company's  Common Stock.
     See "Item 12. Certain Relationship and Related Transactions." Also includes
     options to purchase 125,000 shares of Common Stock.

(3)  Represents options  exercisable within 60 days to purchase shares of Common
     Stock.

Item 12.  Certain Relationships and Related Transactions

        In  connection  with the  Reorganization,  Mr.  Novitsky and the Company
entered  into an  agreement  pursuant  to which Mr.  Novitsky  has the option to
exchange his 1,000 shares in Camden,  representing 10% of the outstanding Camden
common shares, for 120,000 shares of Common Stock of the Company.

        The Company pays rent for office space to Notra  Environmental  Services
Inc. of which Mr. Robert L.  Novitsky is also the President and a Director.  Mr.
Novitsky is also the  President  and director of the Company,  the  President of
Camden,  and a minority  shareholder  of Camden,  owning  ten  percent  (10%) of
Camden.  For the year ended  December 31,  1999,  and for the three months ended
December  31,   1998,   the  Company  paid  rent  of  $13,730  and  Cdn  $5,100,
respectively.

        As at December 31, 1999 and  December  31,  1998,  the Company had loans
outstanding  in the  aggregate  amount of $900,710 and $373,605 due to Kafus and
its  affiliates.  The loans are  non-interest  bearing with no specific terms of
repayment.

Item 13.  Exhibits and Reports on Form 8-K

(a)    Exhibits

     2.1  Plan and Agreement of Reorganization,  dated November 2, 1998, between
          the Company and Kafus Environmental Industries Ltd.(1)

     3.1  Amended and  Restated  Articles  of  Incorporation  of Hyaton  Company
          Incorporated (1)

     3.2  Amended  Articles  of  Incorporation  of Hyaton  Company  Incorporated
          changing its name to Hyaton Organics Inc.(1)

     3.3  Amended and Restated Bylaws of the Company (1)

     10.1 Option   Agreement   between   Robert   Novitsky  and  Hyaton  Company
          Incorporated(2)

     10.2 Purchase  Agreement with  Furst-McNess  Company (portions of which are
          deemed confidential and have been omitted)

     27.1 Financial Data Schedule

(1)  Previously filed with the Company's Form 10-SB on October 28, 1999.

(2)  Previously  filed with the Company's Form 10-SB amendment no. 1 on November
     10, 1999.

(b)    Form 8-K

       None

<PAGE>19

                                   SIGNATURES

        In  accordance  with  Section  13 or  15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                                   HYATON ORGANICS INC.



Dated: March 27, 2000                              /s/   Robert Novitsky
                                               By: Robert Novitsky, President


        In  accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.


/s/ Robert Novitsky                               Dated:   March 27, 2000
Robert Novitsky, President and Director

/s/ Manfred Schultz                               Dated:   March 28, 2000
Manfred Schultz, Vice President and
Director

/s/ Michael McCabe                                Dated:   March 28, 2000
Michael McCabe, Chief Financial Officer
and Director

/s/ Peter Schlesinger                             Dated:   March 27, 2000
Peter Schlesinger, Director

/s/ Milton Datsopoulos                            Dated:   March 29 2000
Milton Datsopoulos, Director

/s/ Gordon Robinson                               Dated:   March 27, 2000
Gordon Robinson, Director

/s/ Paul McClory                                  Dated:   March 27, 2000
Paul McClory, Director

<PAGE>F-1



Auditors' Report

To the Shareholders and Board of Directors
Hyaton Organics Inc.
  (formerly Hyaton Company Incorporated)


We have  audited the  consolidated  balance  sheets of Hyaton  Organics  Inc. (a
development  stage  enterprise)  as at  December  31,  1999  and  1998  and  the
consolidated  statements of  operations  and deficit and cash flows for the year
ended  December 31, 1999,  the three month period ended  December 31, 1998,  the
year  ended   September   30,  1998  and  the  period  from  November  24,  1994
(incorporation)   through  December  31,  1999.  These  consolidated   financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as at
December 31, 1999 and the results of its  operations  and its cash flows for the
year ended  December 31, 1999,  the three month period ended  December 31, 1998,
the year  ended  September  30,  1998 and the  period  from  November  24,  1994
(incorporation)  through December 31, 1999 in accordance with generally accepted
accounting principles in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern.  As discussed in note 1(a) to
the  consolidated  financial  statements,  the Company is  dependent  on raising
financing to fund the construction of a manufacturing  facility for its patented
fertilizer  products and the  attainment  of  profitable  operations  that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in this regard are also described in note 1(a).  The financial  statements
do not  include  any  adjustment  that  might  result  from the  outcome of this
uncertainty.



(signed) "KPMG LLP"

Chartered Accountants


Vancouver, Canada

March 23, 1999


<PAGE>F-2


HYATON ORGANICS INC.
(formerly Hyaton Company Incorporated)
(a development stage enterprise)

Consolidated Balance Sheets
(expressed in U.S. dollars)

December 31, 1999, with comparative figures for 1998

<TABLE>
<CAPTION>


                                                                 1999              1998
                                                             ------------      -----------
<S>                                                         <C>               <C>
Assets

Current assets:
  Cash                                                       $      3,218      $     9,210
  Accounts receivable and other                                    11,887           41,108
                                                             ------------      -----------
  Total current assets                                             15,105           50,318

Computer equipment, net of accumulated depreciation
  of $885 (1998 - $394)                                             1,084            1,474
                                                             ------------      -----------
Total assets                                                 $     16,189      $    51,792
                                                             ============      ===========
Liabilities and Shareholders' Deficiency

Current liability:
  Accounts payable and accrued liabilities (note 3)          $     30,214      $    38,289

Loans from related parties (note 3)                               940,850          412,811
                                                             ------------      -----------
Total liabilities                                                 971,064          451,100

Shareholders' deficiency:
  Capital stock (note 4):
    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 (1998 - 27,559,000)                275,560          276,247
    Additional paid-in capital                                    223,187                -
    Deficit accumulated during the development stage           (1,430,962)        (691,770)
    Other comprehensive income (note 5):
      Cumulative translation adjustment                           (22,660)          16,215
                                                             ------------      -----------
    Total shareholders' deficiency                               (954,875)        (399,308)

Contingencies (notes 1(a) and 6)
                                                             ------------      -----------
Total liabilities and shareholders' deficiency               $     16,189      $    51,792
                                                             ============      ===========

</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>F-3

HYATON ORGANICS INC.
(formerly Hyaton Company Incorporated)
(a development stage enterprise)

Consolidated Statements of Operations and Deficit
(expressed in U.S. dollars)


<TABLE>
<CAPTION>

                                                                                          For the period
                                                              Three month                   November 24,
                                               Year ended    period ended    Year ended       1994 to
                                               December 31,   December 31,  September 30,   December 31,
                                                  1999           1998           1998            1999
                                             --------------  -------------  -------------  --------------

<S>                                          <C>             <C>            <C>            <C>
Revenue                                      $     39,253    $     36,465   $       2,805  $       87,666

Expenses (note 3):
    Consulting and other professional fees        356,021          69,692          97,504         541,333
    Product research and development
      costs                                       131,686          64,092         126,770         325,086
    Travel                                         12,488           1,389          22,083          41,980
    Administrative and other expenses              55,750          27,423          24,996         117,139
    Employee equity compensation                  222,500               -               -         222,500
                                             ------------    ------------   -------------  --------------
                                                  778,445         162,596         271,353       1,248,038
                                             ------------    ------------   -------------  --------------
Net loss                                          739,192         126,131         268,548       1,160,372

Deficit accumulated during the
  development stage, beginning
  of period                                       691,770         295,049          26,501               -

Charge to deficit (note 1)                              -         270,590               -         270,590
                                             ------------    ------------   -------------  --------------
Deficit accumulated during the
  development stage, end of period           $  1,430,962    $    691,770   $     295,049  $    1,430,962
                                             ============    ============   =============  ==============
Basic and diluted loss per share             $       0.03    $       0.01   $        0.01  $         0.05
Weighted average number of
  shares outstanding                           27,557,997      24,847,620      20,000,000      21,960,502
                                             ============    ============   =============  ==============

</TABLE>


See accompanying notes to consolidated financial statements.


<PAGE>F-4


HYATON ORGANICS INC.
(formerly Hyaton Company Incorporated)
(a development stage enterprise)

Consolidated Statements of Cash Flows
(expressed in U.S. dollars)

<TABLE>
<CAPTION>


                                                                                                                  For the period
                                                                            Three month                             November 24,
                                                         Year ended         period ended         Year ended            1994 to
                                                        December 31,        December 31,        September 30,       December 31,
                                                            1999                1998                1998                1999
                                                       -------------        ------------        -------------       ------------
<S>                                                  <C>                   <C>                 <C>                 <C>
Cash flows from (used in) operating activities:
    Net loss                                           $    (739,192)       $   (126,131)       $    (268,548)      $ (1,160,372)
    Items not involving the use of cash:
        Depreciation                                             472                 114                  280                866
        Employee equity compensation                         222,500                   -                    -            222,500
        Shares issued as a financing fee                           -               5,000                    -              5,000
    Changes in non-cash operating working capital:
        Accounts receivable                                   31,120             (37,549)               2,403             (2,543)
        Accounts payable and accrued
         liabilities                                         (10,096)             20,550               10,730             21,259
        Deposit on building                                        -                   -               10,158                  -
                                                       -------------        ------------        -------------       ------------
                                                            (495,196)           (138,016)            (244,977)          (913,290)
Cash flows used in investing activities:
    Capital expenditures                                           -                   -               (1,868)            (1,868)

Cash flows from financing activities:
    Issuance of common shares                                      -                   -                    -                657
    Loans from related parties:
        Kafus Industries Ltd.                                420,828             132,149               19,900            572,877
        Cameron Strategic Planning Ltd.                       66,827              14,470              174,060            305,217
        Mr. Robert L. Novitsky                                     -                   -               39,744             39,744
        Kafus Bio-Composites Inc.                              1,107                   -                    -              1,107
                                                       -------------        ------------        -------------       ------------
                                                             488,762             146,619              233,704            919,602
Effect of exchange rate changes on
  foreign currency cash balances                                 442                (127)                 (74)            (1,226)
                                                       -------------        ------------        -------------       ------------
Increase (decrease) in cash                                   (5,992)              8,476              (13,215)             3,218
Cash, beginning of period                                      9,210                 734               13,949                  -
                                                       -------------        ------------        -------------       ------------
Cash, end of period                                    $       3,218        $      9,210        $         734       $      3,218
                                                       =============        ============        =============       ============
Supplementary information:
  Interest paid                                        $           -        $          -        $           -       $          -
  Income taxes paid                                                -                   -                    -                  -
  Non-cash transactions:
      Issuance of common shares:
        For investment in Camden Agro-Systems Inc.                 -             270,590                    -            270,590
        As a financing fee                                         -               5,000                    -              5,000
        Options issued as employee
         equity compensation                                 222,500                   -                    -                  -
                                                       =============        ============        =============       ============
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>F-5

HYATON ORGANICS INC.
(formerly Hyaton Company Incorporated)

(a development stage enterprise)

Notes to Consolidated Financial Statements
(expressed in U.S. dollars)


1.   Nature and continuance of operations:

     Hyaton Organics Inc. (formerly Hyaton Company Incorporated)  ("Hyaton") was
     incorporated  pursuant  to the laws of the State of  Nevada  on August  20,
     1996.  Effective  November 2, 1998, Hyaton holds a 90% investment in Camden
     Agro-Systems Inc. ("CASI"), a Canadian company, as its sole asset. Prior to
     that date Hyaton was inactive.

     CASI was incorporated under the Ontario Business Corporations Act (1982) on
     November 24, 1994 to carry on the  business of  management  consulting  and
     product   development.   CASI's  efforts  have  focused  primarily  on  the
     development of organic  fertilizers  and animal feed from animal waste.  In
     early  1999,  CASI's  management   discontinued  its  efforts  towards  the
     development of organic animal feed.

     Pursuant to the Plan and  Agreement  of  Reorganization  dated  November 2,
     1998, Hyaton issued 20,000,000 common shares from treasury for 9,000 issued
     and outstanding  common shares of CASI  representing a 90% holding in CASI.
     In addition,  the agreement  provides for the issuance of additional shares
     of Hyaton to the vendor of the 9,000 common shares of CASI at a rate of one
     common share for every $0.20 of earnings before interest, tax, amortization
     and  depreciation  of CASI for the  period  from  November  2,  1998 to the
     earlier  of  November  2,  2000  or 18  months  from  the  commencement  of
     commercial operations.  Furthermore,  the agreement provides for additional
     share  issuances at a rate of one share for every $0.05 of losses  incurred
     by the vendor under the  indemnification  granted to the vendor against any
     legal claims and other  contingencies.  Related to the  agreement,  500,000
     common shares of Hyaton were issued to Securities Trading Services Inc., an
     unrelated party, as a financing fee.

     The  agreement  resulted  in  control  of  Hyaton  passing  to  the  former
     shareholders   of   CASI.   The   transaction   is   accounted   for  as  a
     recapitalization  of CASI,  as if CASI had issued  common shares to acquire
     the net monetary  assets of Hyaton.  The financial  statements  reflect the
     operations  of CASI  from its  inception  with  the  activities  of  Hyaton
     consolidated from November 2, 1998, the date of the transaction.

     At the date of the  reorganization,  the net assets of Hyaton were nominal.
     The par value of Hyaton  shares  issued of  $275,590  has been  included in
     capital  stock  with an offset of  $270,590  to the  deficit  and $5,000 to
     consulting  fee expense.  The excess of $13,879 of the costs  incurred over
     the cash on hand in Hyaton at the date of  acquisition  has been charged to
     expense.  The contingent shares issuable by Hyaton will be accounted for as
     an additional cost of purchase, if and when issued.


    Consideration:
      Par value of common shares issued                   $  275,590
      Costs                                                   13,879
                                                          ----------
                                                          $  289,469
                                                          ==========
<PAGE>F-6

HYATON ORGANICS INC.
(formerly Hyaton Company Incorporated)

(a development stage enterprise)

Notes to Consolidated Financial Statements
(expressed in U.S. dollars)


1.  Nature and continuance of operations (continued):


    Consideration applied to:
        Net assets                                            $       -
        Less:
           Consulting expense                                     5,000
           Cash costs incurred in excess of cash on hand         13,879
           Charge to deficit                                    270,590
                                                              ---------
                                                              $ 289,469
                                                              =========

     (a)  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,  which  are
          consistent with management's  plans and intentions,  and the avoidance
          of any cash costs from early redemption of loans from related parties.
          If the  Company  is  unable to  achieve  these  objectives,  it may be
          obligated to liquidate certain assets in settlement of liabilities and
          the value achieved on settlement may be less than the assets' carrying
          values.

     (b)  Development stage enterprise:

          For  U.S.  accounting  purposes  the  Company  is  considered  to be a
          development  stage  enterprise  from the inception of CASI on November
          24, 1994 to December  31, 1999 as its efforts are  primarily  directed
          towards the  development of a new product.  The  identification  of an
          entity  as  a  development   stage  enterprise  does  not  impact  the
          measurement and recognition  principles  applied in these consolidated
          financial  statements  but does  require the  disclosure  of specified
          cumulation from inception and other information.


2.   Significant accounting policies:

     The consolidated financial statements have been prepared in accordance with
     generally accepted accounting principles in the United States.

     (a)  Principles of presentation:

          These consolidated financial statements include the accounts of Hyaton
          and its 90% owned  subsidiary,  CASI.  All  intercompany  balances and
          transactions have been eliminated.

          The  preparation of financial  statements in accordance with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities and the disclosure of contingent assets and liabilities at
          the date of the  financial  statements  and the  reported  amounts  of
          revenues and expenses  during the  reporting  period.  Actual  results
          could differ from these estimates.

<PAGE>F-7

HYATON ORGANICS INC.
(formerly Hyaton Company Incorporated)

(a development stage enterprise)

Notes to Consolidated Financial Statements
(expressed in U.S. dollars)



2.   Significant accounting policies (continued):

     (b)  Foreign currency translation:

          These consolidated financial statements are presented in U.S. dollars.
          Hyaton's  functional  currency  is the  U.S.  dollar.  The  functional
          currency  of  CASI  is the  Canadian  dollar  as the  majority  of its
          operations occur in Canada and are conducted in Canadian dollars.  The
          Canadian dollar accounts have been translated into U.S.  dollars using
          the  exchange  rate in effect at the balance  sheet date for asset and
          liability  amounts and at the average exchange rate for the period for
          amounts included in the  determination of income.  Any gains or losses
          from  this  translation  are  included  in  the  separate   cumulative
          translation   adjustment  account  in  shareholders'   equity  in  the
          consolidated balance sheet.

          Transactions  denominated  in other  than the  operation's  functional
          currency are  measured at exchange  rates in effect at the date of the
          transactions   with  exchange   gains  and  losses   included  in  the
          determination of income.

     (c)  Computer equipment:

          Computer equipment is recorded at cost.  Depreciation is calculated on
          the declining-balance  basis from the date of acquisition at a rate of
          30% per annum.

     (d)  Income taxes:

          The Company  follows the asset and liability  method of accounting for
          income taxes.  Under this method,  deferred tax assets and liabilities
          are  recognized   based  on  the  estimated  future  tax  consequences
          attributable to differences  between the financial  statement carrying
          amounts of existing assets and  liabilities  and their  respective tax
          bases and of loss carry forwards.  Deferred tax assets and liabilities
          are measured  using  enacted tax rates in effect for the year in which
          those  temporary  differences are expected to be recovered or settled.
          The effect on deferred tax assets and  liabilities  of a change in tax
          rates  is  recognized  in  income  in the  period  that  includes  the
          enactment date. To the extent that the realizability of the benefit of
          deferred  tax assets is not  considered  to be more likely than not, a
          valuation allowance is provided.

     (e)  Revenue recognition:

          Revenue  relating  to  consulting  services  is  recognized  when  the
          professional services have been rendered.

     (f)  Research and development costs:

          Research and developments costs are expensed as incurred.

     (g)  Stock option plan:

          The Company has a stock-based  compensation plan which is described in
          note 4(b).  For  accounting  purposes these options are deemed to have
          been  granted  in the year  ended  December  31,  1999.  For grants to
          employees,  compensation expense is recognized over the vesting period
          in an amount equal to the difference, if any, between the market value
          of the  Company's  common  shares  at that  measurement  date  and the
          exercise price.  The value recognized for option grants is included in
          the   consolidated   statements  of  operations  as  "employee  equity
          compensation".  Options granted to  non-employees  will be recorded at
          their fair value.


<PAGE>F-8

HYATON ORGANICS INC.
(formerly Hyaton Company Incorporated)

(a development stage enterprise)

Notes to Consolidated Financial Statements
(expressed in U.S. dollars)


2.  Significant accounting policies (continued):

     (h)  Loss per share:

          Loss per share is  calculated  using the  weighted  average  number of
          shares outstanding during the fiscal period.  This average includes as
          outstanding  common shares,  shares issued in a reporting  period from
          the date of their  issuance.  Fully  diluted per share amounts are not
          presented  as the  effect  of  outstanding  stock  options  and  other
          convertible securities is anti-dilutive.


3.   Related party transactions and balances:

     Kafus Industries Ltd., a public company,  is a majority  shareholder of the
     Company.  Cameron Strategic Planning Ltd., a private Canadian company,  and
     Kafus  Bio-Components Inc., a U.S.  corporation,  are subsidiaries of Kafus
     Industries Ltd.

     Mr. Robert L.  Novitsky is an officer of the Company and a shareholder  and
     officer of CASI.

     The  Company  has  entered  into  the  following   material  related  party
     transactions:

     (a)  Loans from related parties:

          Loans from related parties consist of the following:

                                                     1999             1998
                                                     ----             ----
        Kafus Industries Ltd.                     $  591,301        $ 149,457
        Cameron Strategic Planning Ltd.              308,302          224,148
        Mr. Robert L. Novitsky                        40,140           39,206
        Kafus Bio-Composites Inc.                      1,107               -
                                                  ----------        ---------
                                                  $  940,850        $ 412,811
                                                  ==========        =========

          The loans  from  related  parties  are  non-interest  bearing  with no
          specific  terms of repayment.  The loan from Mr. Robert L. Novitsky is
          convertible  into common shares of the Company,  prior to financing of
          the first manufacturing plant, on a mutually acceptable basis.

     (b)  Accounts payable and accrued liabilities:

          Included in accounts  payable and accrued  liabilities is $nil (1998 -
          $5,052) payable to a private  company  controlled by an officer of the
          Company.

     (c)  Fees:

          The Company has been charged administrative, management and consulting
          fees  aggregating  $155,725  (three  months ended  December 31, 1998 -
          $34,777; year ended September 30, 1998 - $70,365) by certain officers,
          directors and private companies controlled by them.

<PAGE>F-9

HYATON ORGANICS INC.
(formerly Hyaton Company Incorporated)

(a development stage enterprise)

Notes to Consolidated Financial Statements
(expressed in U.S. dollars)



4.   Capital stock:

     (a)  Issued:

<TABLE>
<CAPTION>


                                                                    Number        Value          Assigned
                                                                  of shares     per share          value
                                                                 ----------     ---------       -----------

<S>                                                            <C>             <C>           <C>
     Issued for cash at inception, November 24, 1994                  1,000       $0.657        $       657
                                                                 ----------     ---------       -----------
        Issued and outstanding at all period ends prior to
         September 30, 1998                                           1,000                             657

        Issued during period ended December 31, 1998:
        For investment in CASI                                   27,058,000         0.01            270,590
        For financing fee                                           500,000         0.01              5,000
                                                                 ----------     ---------       -----------
        Issued and outstanding at December 31, 1998              27,559,000                         276,247

        Adjustments resulting in an increase in
          additional paid-in capital:
           Shares cancelled                                          (3,000)        0.01                (30)
           Authorized par value change                                    -                            (657)
                                                                 ----------     ---------       -----------
        Issued and outstanding at December 31, 1999              27,556,000                     $   275,560
                                                                 ==========     =========       ===========

</TABLE>



          Shares  issued for non-cash  consideration  have been  recorded at the
          market value of the shares on the date at which the obligation arises.

     (b)  Options:

          (i)  During  1999,  the  directors  of the Company  approved the "1999
               Stock  Option  Plan"  (the  "Plan").   The  Plan  is  subject  to
               shareholder  approval  which is intended to be  requested  at the
               next annual general meeting. Generally, the Plan provides for the
               granting  of  options  to  employees,   officers,  directors  and
               consultants  to the Company.  On October 15, 1999,  the Company's
               directors  approved the grant of 445,000 stock options  having an
               exercise  price of $1.50 each and an expiry  date of October  13,
               2004 to  employees,  officers  and  directors.  The  Plan and the
               granting  of these  options  are  intended  to be approved by the
               shareholders  of the  Company  at its annual  general  meeting in
               2000.  The  vesting  date  and  terms  will  also be  subject  to
               shareholders' approval.

<PAGE>F-10

HYATON ORGANICS INC.
(formerly Hyaton Company Incorporated)

(a development stage enterprise)

Notes to Consolidated Financial Statements
(expressed in U.S. dollars)


4.  Capital stock (continued):

     (b)  Options (continued):

               In accordance with the Company's  accounting policy for its Plan,
               compensation  expense of  $222,500  has been  recognized  for its
               stock  options equal to the  difference  between the market price
               and exercise  price on the date of board  approval with an offset
               to additional paid-in capital.  As accounting  principles require
               the  disclosure  of  information  as if  the  Company  determined
               compensation  expense  based on the fair  value at the grant date
               for its stock  options,  the  Company's  loss for 1999 would have
               been increased to the pro forma amounts indicated below:


               Net loss:
                 As reported                        $    739,192
                 Per share                             1,304,342

               Basic and diluted loss per share:
                 As reported                        $       0.03
                 Pro forma                                  0.05

               The per  share  weighted-average  fair  value  of  stock  options
               granted  during  1999 was  $1.77  on the  date of  grant  using a
               binomial  option-pricing  model with the  following  assumptions:
               expected dividend yield of 0%, risk-free  interest rate of 6%, an
               expected  life  of  5  years,  and  a  volatility  62.5%.   These
               calculations assume that all options vested at date of grant.

          (ii) Call/put options:

               The Company has entered into a call/put option agreement with the
               minority  shareholder (the  "Shareholder") of CASI exercisable at
               any time on or before November 3, 2003.  Under this option,  both
               Hyaton  and the  Shareholder  have the  option  to  exchange  the
               Shareholder's  1,000 common shares of CASI for 120,000  shares of
               Hyaton common stock at $1.00 per Hyaton share.


5.   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                         November 24,
                                                   Year ended         period ended     Year ended           1994 to
                                                  December 31,        December 31,    September 30,      December 31,
                                                      1999               1998              1998              1999
                                                  ------------        ------------    ------------       -------------
<S>                                             <C>                 <C>              <C>                 <C>
    Comprehensive income (loss):
        Net loss                                  $   (739,192)       $   (126,131)   $   (268,548)      $    (927,472)
        Currency translation adjustment                (38,875)              4,261          15,216             (22,660)
                                                  ------------        ------------    ------------       -------------
                                                  $   (778,067)       $   (121,870)   $   (253,332)      $    (950,132)
                                                  ------------        ------------    ------------       -------------
</TABLE>


<PAGE>F-11

HYATON ORGANICS INC.
(formerly Hyaton Company Incorporated)

(a development stage enterprise)

Notes to Consolidated Financial Statements
(expressed in U.S. dollars)



6.   Contingencies:

     (a)  Legal claims:

          In the  normal  course of  business,  the  Company  may be  subject to
          various claims and contingencies related to lawsuits,  taxes and other
          matters.  Management believes the ultimate liability,  if any, arising
          from such  claims or  contingencies  is not  likely to have a material
          adverse  effect on the  Company's  results of  operations or financial
          condition.

     (b)  Concentration of risk:

          The Company was formed to develop,  operate,  finance, and construct a
          manufacturing  facility  which will produce  high  quality  fertilizer
          products  from  animal  waste.  Because  a project  of this  scope and
          technology has not yet been completed,  there is concentration of risk
          inherent in the  Company's  business,  including,  but not limited to,
          technology, construction, financing, and operations risk.


7.   Income taxes:

     The  Company  has  approximately  $845,000 of  non-capital  losses  carried
     forward available to reduce taxable income otherwise  calculated in Canada.
     These losses expire up to 2006.

                                                      1999             1998

    Future tax asset:
        Non-capital loss carry forwards           $   845,000       $  360,000
        Less valuation allowance                     (845,000)        (360,000)
                                                  -----------       ----------
    Net future tax assets                         $         -       $        -
                                                  ===========       ==========
    Future tax liabilities                        $         -       $        -
                                                  ===========       ==========


8.   Financial instruments:

     (a)  Fair value:

          The fair values of financial  instruments  included in current  assets
          and liabilities  (excluding  loans from related  parties) are equal to
          their carrying  values due to their ability for prompt  liquidation or
          the short-term to their settlement.

          The fair  value of loans from  related  parties  cannot be  reasonably
          estimated due to the nature of the amounts due and their  relationship
          between  the  liable  party  and the  Company  and the lack of a ready
          independent market for such amounts payable.

     (b)  Currency fluctuation risk:

          The  Company  has not  entered  into  any  material  foreign  exchange
          contracts  to  minimize or  mitigate  the effects of foreign  exchange
          fluctuations   on  the  Company's   operations   or  these   financial
          statements.  However,  as the majority of assets and  liabilities  are
          located in Canada and  originally  denominated  in  Canadian  dollars,
          management does not believe it faces any significant  foreign currency
          fluctuation risk.

<PAGE>F-12

HYATON ORGANICS INC.
(formerly Hyaton Company Incorporated)

(a development stage enterprise)

Notes to Consolidated Financial Statements
(expressed in U.S. dollars)



9.   Segmented information:

     At December 31, 1999, 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.