UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
BANYAN CORPORATION
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(Exact name of Registrant as specified in its charter)
Colorado 84-1346327
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(State or other jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
4740 Forge Rd., Bldg. 112, Colorado Springs, Colorado 80907
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(Address of Principal Executive offices)
Issuer's Telephone Number: (719) 531-5535
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Securities to be registered pursuant to section 12(b) of the Act:
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None
Securities to be registered pursuant to section 12(g) of the Act:
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Common Stock, no par value
(Title of Class)
DOCUMENTS INCORPORATED BY REFERENCE: See the Exhibit Index attached hereto.
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Banyan Corporation
Form 10-SB
TABLE OF CONTENTS
PART I Page
Item 1. Description of Business 3
Item 2. Management's Discussion and Analysis or Plan of
Operation 16
Item 3. Description of Property 19
Item 4. Security Ownership of Certain Beneficial Owners
and Management 19
Item 5. Directors, Executive Officers, Promoters and
Control Persons 20
Item 6. Executive Compensation 21
Item 7. Certain Relationships and Related Transactions 22
Item 8. Description of Securities 23
PART II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters 26
Item 2. Legal Proceedings 26
Item 3. Changes in and Disagreements with Accountants 27
Item 4. Recent Sales of Unregistered Securities 27
Item 5. Indemnification of Directors and Officers 35
PART F/S Financial Statements 36
PART III
Item 1. Index to Exhibits 68
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This Registration Statement contains forward-looking statements which
involve risks and uncertainties. When used in this Registration Statement, the
words "believes," "anticipates," "expects" and other such similar expressions
are intended to identify such forward-looking statements. Actual results of the
Company (as defined below) may differ significantly from the results discussed
in the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in "Item 1. - Description of
Business - Risk Factors." Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
An investment in Banyan Corporation (the "Company") is highly speculative
and involves a high degree of risk. Prospective investors should consider the
risk factors involved in an investment in the Company, including the following:
(a) that the Company is a development stage company that has a limited operating
history, (b) the Company has not generated a profit, (c) there is intense
competition in the industry in which the Company operates and (d) the
uncertainty of future funding. Prospective investors should carefully read each
section of this registration statement which contain these and other risk
factors.
PART I.
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ITEM 1. DESCRIPTION OF BUSINESS
ORGANIZATION AND CHARTER AMENDMENTS
Banyan Corporation (the "Company") was organized under the laws of Oregon
on June 13, 1978 under the name Omni-Tech International Corporation to acquire
the exclusive licensing rights to an aluminum analyzing process and to an oil
absorbent material made from wood fibers.
The initial amount of authorized capital was $50,000 consisting of
5,000,000 shares of Common Stock, $0.01 par value. A copy of the Company's
initial Articles of Incorporation is attached hereto and is incorporated by
reference. See Part III, Item 1.
On August 25, 1981, the Company's Articles of Incorporation were restated.
The purpose of the amendment was to change the name of the corporation from
Omni-Tech International to Interactive Data Vision and to increase the
authorized Class A common stock from 5,000,000 to 50,000,000 shares with No Par
value. Additionally, the rights and preferences of the Class B common stock
was modified so that it no longer converted to Class A common stock as
well as increasing the authorized amount to 10,000,000 shares of Class B common
stock, No Par value. A class of Preferred stock was created by authorizing
10,000,000 shares of Preferred Class A. A copy of the Company's restated
Articles of Incorporation is attached hereto and is incorporated by reference.
See Part III, Item 1.
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On February 28, 1988, the Company's Articles of Incorporation were amended.
The purpose of the amendment was: 1) to change the name of the corporation from
Interactive Data Vision to Banyan Corporation (Article 1), 2) to create a Class
B preferred stock by authorizing 500,000 shares of Class B Preferred, No Par
value(Article 4.1), and 3) to specify specific legal powers of the Board of
Directors (Article 4.2). A copy of the Company's Articles of Amendment is
attached hereto and is incorporated by reference. See Part III, Item 1.
On February 28, 1988, the Company acquired 100% of Interactive Data Vision,
Inc., an Oregon company. Initially Interactive Data was a wholly-owned
subsidiary, but was subsequently merged with the Company to create a single
entity. Afterwards the Company changed its name to Interactive Data Vision,
Inc. Daily operations were suspended in April 1991, at which time the Company
became an inactive corporation.
On October 27, 1995, after several years of inactivity, the Company
acquired 100% of DoubleCase Corporation, a Kansas corporation, which became a
wholly-owned subsidiary. DoubleCase designs, manufactures and markets personal
computer accessory products, most notably for notebook computers and other
portable electronic devices.
On December 29, 1995, the Company's Articles of Incorporation were amended.
A copy of the Company's Articles of Amendment is attached hereto and is
incorporated by reference. See Part III, Item 1.
After acquiring DoubleCase the Company changed its name to Banyan
Corporation and filed a Form 15(c)211 with the National Association of
Securities Dealers (NASD) to allow its Common Stock to trade on the OTC Bulletin
Board stock exchange. The Company's Common Stock began trading on the OTC
Bulleting Board in April 1996, and is currently quoted on this stock exchange
under the trading symbol "BANY."
MATERIAL CHANGES IN CONTROL SINCE INCEPTION AND RELATED BUSINESS HISTORY
On or about January 10, 1979, the Company, under its original name of
Omni-Tech International Corporation, undertook an offering pursuant to
Regulation A under the Securities Act of 1933, as amended, for 500,000 shares of
Class A common stock. At the time of the offering the Company had 413,857
shares of Class A common stock issued and outstanding. Upon completion of
the Regulation A offering, the Company had 913,857 shares of Class A common
stock issued and outstanding.
On or about August 18, 1981, the Company, under the name of Omni-Tech
International Corporation, undertook an offering in reliance on the exemption
from registration provided by Section 3(a)(11) of the Securities Act of 1933, as
amended, and Rule 147 thereunder. The offering was for 787,500 shares of Class
B common stock. At the time of the offering the Company had 2,817,023 shares of
Class A common stock issued and outstanding. Pursuant to the Restated Articles
of Incorporation of August 11, 1981, "Upon any transfer of this stock (Class B
common stock) more than ten months after its issuance, the corporation shall
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convert (on a one for one basis) the stock transferred into Class A common stock
and issue Class A common stock to the transferee." There is no Class B common
stock issued or outstanding as of May 7, 1999. The Articles of Amendment dated
February 29, 1988, modified the rights and preferences of the Class B common
stock, as it is described later in this document, so that it no longer converts
to Class A common stock.
On or about February 25, 1988 the Company, under the name of Omni-Tech,
entered into a Share Exchange Agreement dated February 25, 1988 ("Share Exchange
I") with the shareholders of Interactive Data Vision, Inc., an Oregon
corporation, and Coast Capital, Ltd. A copy of the Share Exchange I is attached
hereto and is incorporated by reference. See Part III, Item 1. Pursuant to the
Share Exchange I, the Company issued 8,141,712 shares of its Class A common
stock in exchange for all the issued and outstanding common stock of Interactive
Data Vision, Inc. According to the Share Exchange I, at the time of the share
exchange 2,657,265 shares of the Company's Class A common stock were issued and
outstanding. Upon completion of the share exchange, the Company had a total of
10,798,977 shares of Class A common stock issued and outstanding, and
Interactive Data Vision Inc. became a wholly-owned subsidiary of the Company.
Pursuant to the Articles of Amendment dated February 29, 1988, the Company
changed its name to Interactive Data Vision, Inc., and its wholly owned
subsidiary changed its name to IDV, Inc. Subsequently, on July 10, 1990, IDV,
Inc. merged with and into the Company, then known as Interactive Data Vision,
Inc.
An additional 4,925,000 shares of the Company's Class A common stock were
issued between the Share Exchange I and April 1991. Said shares were issued to
raise working capital for the Company and were issued exempt from registration
under Rule 504, Reg. D. Subsequent thereto, 400,000 shares were canceled by the
Company, resulting in a total of 15,323,977 shares of the Company's Class A
common stock issued and outstanding as of April 1991.
On or about December 9, 1994, the Board of Director's approved a 1-for-10
reverse stock split resulting in the Company having 1,532,398 shares of Class A
common stock issued and outstanding. Additionally, on February 15, 1995, the
Board of Directors approved a further 1-for-2 reverse stock split and cancelled
210,000 shares of the Company's issued and outstanding Class A common stock, all
of which resulted in an aggregate of 661,199 shares of the Company's Class A
common stock being issued and outstanding at that time.
Pursuant to a Share Exchange Agreement dated October 27, 1995 ("Share
Exchange II"), the Company acquired all of the outstanding common stock of
DoubleCase Corporation, a Kansas corporation, and also converted certain debt
owed by DoubleCase Corporation and the Company, respectively, into Class A
common stock of the Company and Class A preferred stock of the Company. A copy
of the Share Exchange II is attached hereto and is incorporated by reference.
See Part III, Item 1.
Upon completion of the Share Exchange II and debt conversion described in
the Share Exchange II, there were 4,825,384 shares of Class A Common stock and
187,190 shares of Class A Preferred stock issued and outstanding as of December
31, 1995.
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Between December 31, 1995 and August 22, 1996, the Company issued 2,250,000
shares of its Class A common stock. Said shares were issued on May 14, 1996, to
raise working capital for the Company. These shares were subscribed to by a
business development company and were issued exempt from registration under Rule
504, Reg. D.
On August 23, 1996, the Company underwent a 1-for-2 reverse split of its Class A
common stock. After the reverse split, there were 3,537,692 Class A common
shares outstanding and 187,190 shares of Class A Preferred stock.
Between August 24, 1996 and December 10, 1996, the Company issued 2,235,832
shares of its Class A common stock and retired 807,500 shares of its Class A
common stock resulting in 4,966,024 shares of Class A common stock issued and
outstanding as of December 10, 1996. On December 10, 1996, the Company
reversed split its Class a common shares 1-for-20, resulting in 246,669 shares
of Class A common outstanding.
On December 7, 1998, the Company issued a stock dividend of 200,000 shares
of Anything Internet Corporation, an Internet e-commerce company it invested in,
to its shareholders of record on November 3, 1998. As of May 7, 1999 the
Company retained 800,027 shares of Anything Internet, or about 26% of Anything
Internet's issued and outstanding shares.
Between December 10, 1996 and March 31, 1999, the Company issued a net
increase of 9,403,550 shares of its Class A common stock. There have been no
splits or dividends of the Company's Class A common stock between December 10,
1996 and March 31, 1999. On March 31, 1999, there were 9,650,219 shares of the
Company's Class A common stock and 187,190 shares of the Company's Class A
Preferred stock issued and outstanding.
BUSINESS
Banyan Corporation is a publicly traded holding company focused on
investing in and building a network of operating subsidiaries engaged in
designing, manufacturing and marketing products and services aimed at the
personal computer market, the notebook computer segment in particular, and
Internet e-commerce.
The notebook computer market is currently the fastest growing segment of
the personal computer industry - growing at an estimated rate of four times that
of the desktop personal computer market. Banyan offers a series of products
especially for the notebook computer market through its wholly-owned subsidiary,
DoubleCase Corporation.
DoubleCase is a leading U.S. supplier of hard-side protective carrying
cases for notebook computers. Compared to the more frequently used soft-side,
or "bag", type carrying case, the DoubleCase product line of hard-side
protective carrying cases offers a level of protection that will protect even
the most costly notebook computer or portable electronic device through most
sudden impacts, drops and rough handling.
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Banyan's interest in Internet e-commerce is a natural complement to its
personal computer products business interests. The largest segment of Internet
sales are expected to be computer hardware, software and consumer electronics
purchases. Forrester Research, Inc., a market research firm, issued a report in
December 1998 predicting U.S. business trade on the Internet will explode from
$43 billion in 1998 to $1.3 trillion in 2003. Meanwhile, International Data
Corporation ("IDC"), another market research firm, estimated the number of
Internet users worldwide will grow from approximately 69 million at the end of
1997 to approximately 320 million by 2002. In addition, IDC estimates that the
percentage of such Internet users buying goods and services on the Internet will
increase from 26% in 1997 to 40% in 2002.
Currently, Banyan offers its products directly to consumers via the
Internet through its DoubleCase Internet site, www.doublecase.com, as well as
third party resellers such as Anything Internet Corporation, an Internet
e-commerce company which Banyan also retains a 26% ownership in.
DOUBLECASE CORPORATION
DoubleCase Corporation, a wholly-owned subsidiary of the Company, is
involved in the design, manufacture and marketing of personal computer accessory
products, most notably a unique line of hard-sided carrying cases for notebook
computers and portable electronic devices.
Notebook computers and portable electronic devices are often quite
expensive and are typically extremely sensitive to impact and extreme
temperatures. Through modern design and manufacturing techniques, DoubleCase
has created a line of attractive, functional and affordable hard-sided
protective carrying cases for notebook computers and other sensitive electronic
devices. DoubleCase cases are built using four levels of protection: an outer
shell, an air cushion barrier, an inner shell, and The Perfect Fit Protective
Foam Interior System(tm).
DoubleCase cases range in size from the NB-1000 Series, which carries a
single notebook computer with no accessories or documents, all the way to the
NB-5000 Series, which has storage room for the notebook computer, power
supplies, extra batteries, and even a portable printer, as well as a folio for
executive briefs and documents. DoubleCase cases are typically price
competitive with other manufacturer's similarly configured and sized hard-sided
and soft-sided offerings.
Complementing its line of protective cases, DoubleCase also manufactures
and markets a line of custom-fit "saddlebag" products which attach securely to
the outside of the protective case to provide additional storage for less
sensitive items and reduce the need to carry a briefcase in addition to the
DoubleCase product. Various sized saddlebag products are available to fit
DoubleCase's entire line of protective cases.
In addition to cases for portable computers, DoubleCase also offers a line
of hard-sided carrying cases that can be customized to protect a variety of
other sensitive portable electronic devices, including digital cameras and
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external data storage devices such as the Iomega Zip(tm) and Jazz(tm) Drives.
Markets for these devices are expanding rapidly, and DoubleCase seeks to take
advantage of that growth by offering the same level of protection for these
devices as it does for notebook computers.
All DoubleCase products are manufactured and assembled in United States and
carry a limited lifetime warranty. At the Company's facility in Colorado
Springs, final assembly, warehousing, shipping and all marketing and
administrative functions occur. The Company has its carrying cases blow molded
by third party molders in the United States then shipped to Colorado Springs.
At the Colorado Springs facility, the final assembly consists of assembling the
interior of the case with components (foam, file folders, partition panels, lid
stays) purchased from third party suppliers who make these items specifically
for DoubleCase. A single case can be assembled, packaged, warehoused or shipped
in 0.25 man hours.
Additionally, DoubleCase is currently evaluating several options to expand
its current product lines. These options include developing new products that
fill niches in the notebook computer accessory market, acquiring new products
and technologies from third party inventors, and acquiring other companies that
complement DoubleCase's strategic business goals without losing its focus on the
notebook computer market.
MARKETING AND SALES
The Company, through its DoubleCase subsidiary, has targeted notebook
computer users as its primary market. The notebook computer market is currently
the fastest growing segment of the computer industry. According to BIS
Strategic Decisions, Inc., a market research firm, sales of notebook computers
are growing at about four times the rate of desktop computers. The market is
extremely competitive and is dominated by well-known manufacturers such as IBM,
Toshiba, NEC, Texas Instruments, and Apple. Intense competition has resulted in
sharp price reductions by manufacturers and shorter periods of time for bringing
new technologies to market. These are the same factors that put desktop
computers into a large percentage of U.S. homes. Management believes notebook
computers are gaining similar large-scale acceptance.
The Company is focusing its marketing efforts in the following areas:
CONSUMER MARKET - DoubleCase is currently selling its products through the
computer distributor Ingram Micro who in turn resells the products to dealers
who in turn sell to the end user, or consumer. Additionally, DoubleCase
maintains a world wide wed site (www.doublecase.com) which illustrates all of
the DoubleCase's products and allows end-users to purchase DoubleCase products.
Management has targeted several major U.S. computer retailers to offer
DoubleCase products although none do so yet. Currently the consumer market,
whether it be through "distribution/channel sales", company direct, or internet
sales, accounts for approximately 60% of the Company's sales.
GOVERNMENT/INSTITUTIONAL MARKET - DoubleCase is rapidly becoming a major
supplier of protective carrying cases to various federal, state and local
government agencies, as well as Fortune 500 companies. DoubleCase products are
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currently listed by two DoubleCase government resellers on the GSA Schedule,
which streamlines the purchasing process by having DoubleCase products "pricing
approved" so that the government agency does not have to acquire several bids
before purchasing. DoubleCase products are also approved for government VISA
authorization, which helps expedite government sales. This market segment
currently accounts for approximately 30% of the company's sales.
DISTRIBUTION/CHANNEL SALES - Channel Sales are the primary method used by
manufacturers to get their products to market. The "channel" begins with the
manufacturer and ultimately end with the consumer. Typically, the manufacturer
will sell its product to a distributor which in turn sells the product to
resellers, dealers and value added resellers (VARs) who then sell it to the end
consumer. This method is preferred by most resellers, dealers and VARs because
it eliminates their need to coordinate inventory purchases from hundreds, if not
thousands, of individual manufacturers; in essence, the distributor is a
"shopping mall" for most resellers, dealers and VARs. DoubleCase is working on
increasing the number of distributors from one, Ingram Micro (NYSE: IM), to
carry its products in order to expand its channel sales presence.
ORIGINAL EQUIPMENT MANUFACTURERS (OEM's) - DoubleCase is just entering the
realm of becoming an OEM supplier, allowing DoubleCase products to be sold as
standard or optional equipment on new notebook computer purchases. In June
1998, Dell Computer (NASDAQ: DELL), an innovator in the computer business and
one of the fastest growing manufacturers of notebook computers in the world,
selected DoubleCase at its provider of hard-sided protective carrying cases for
its notebook computers. Under this non-exclusive agreement, DoubleCase cases
are presently being offered as an option on new notebook purchases and are being
sold under the DoubleCase brand; Dell is under no obligation to purchase
DoubleCase products, now or in the future. To date, being an OEM supplier
accounts for less that 5% of the Company's sales.
INTERNET SALES - DoubleCase is targeting Internet e-commerce sales for
future growth. Through its own site, www.doublecase.com, and others such as
www.dell.com and www.anythingpc.com, DoubleCase is building a strong Internet
retail presence. With the growing popularity of shopping from home or the
office via the Internet, Internet storefronts such as these are expected to
become a significant source of future revenues.
INTERNATIONAL SALES - Although DoubleCase has concentrated its marketing
efforts primarily on the United States, where nearly half of all notebook
computers are purchased, it has also pursued opportunities to establish
international sales. Currently, DoubleCase products are sold through
international dealers in France, Canada and England. DoubleCase intends to
continue pursuing growth opportunities in these markets. To date, international
sales account for approximately 5% of the Company's sales.
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COMPETITION
Currently, the market for carrying cases for notebook computers and
sensitive electronic equipment is dominated by soft-sided products. Management
believes DoubleCase products are in an advantageous position as one of the few
existing manufacturers and marketers of hard-sided protective carrying cases.
The only direct competition DoubleCase has encountered to date for its
hard-sided cases is from Samsonite, which offers only two models of its own
hard-side carrying case, and Zero Haliburton, which does not market its products
through normal retail channels and tends to have significantly higher suggested
retail prices. Targus, a large provider of soft-side carrying cases as recently
offered one of its soft side bags in a hard shell design. It is to soon to tell
what acceptance this new Targus hard shell case will have in the market. What
impact this will have on DoubleCase's marketing and sales efforts is unknown at
this time. With little direct competition from hard-side case manufacturers to
date, DoubleCase intends to focus its competitive efforts on emphasizing that
the DoubleCase designs provide superior protection at affordable prices.
The soft-side carrying case market is primarily dominated by two
manufacturers: Targus and Kensington Microware.
Targus designs and manufactures soft-sided carrying cases for notebook
computers. Targus has recently introduced the "Hard Shell Universal Bag" which
is a hard-shell design of the Targus soft-sided "Universal Bag". Their
literature represents that it is not available in retail stores although it is
offered for sale on their web site and also on the Dell computer web site. It
is to soon to evaluate market acceptance of the "Hard Shell Universal Bag"
although Targus is well established and is believed to have significant
financial resources available for marketing.
Kensington Microware is a wholly owned subsidiary of ACCO World, the
large office supply company based in San Mateo, California, and manufactures a
wide variety of computer accessory products, including a line of soft-sided
cases for notebook computers.
By targeting the soft-sided carrying case market, DoubleCase will be
competing against well established companies that have significantly greater
financial and personnel resources than the Company. Management will focus
competitive efforts on emphasizing the superior protection offered by and
affordability of the DoubleCase product line and continue furthering efforts to
get DoubleCase products into the all appropriate retail markets.
ANYTHING INTERNET CORPORATION
On August 19, 1998, the Company entered into a Share Exchange Agreement
with Anything, Inc., subsequently renamed Anything Internet Corporation. Under
the terms of the agreement, Anything Internet was re-capitalized with 200,000
shares of Banyan restricted Common Stock and granted stock options to purchase
300,000 shares of Banyan Common Stock at: 100,000 shares at $0.50 a share,
expiring February 28, 1999 which were extended to expire on August 31, 1999;
100,000 shares at $1.00 a share expiring August 31, 1999; and 100,000 shares at
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$2.00 a share, expiring August 31, 2000. In return for this equity issuance,
the Company received 1,000,000 shares of Anything Internet Common Stock and,
after a stock dividend to its shareholders, the Company now retains 800,027, or
about 26%, of Anything Internet. In addition, Banyan appointed two members,
Cameron Yost and J. Scott Sitra, to Anything Internet's Board of Directors.
Anything Internet is an Internet e-commerce holding company focused on
building a network of successful e-commerce operating companies, joint ventures,
strategic alliances and partnerships.
Currently Anything Internet operates through one wholly-owned subsidiary,
AnythingPC Internet Corporation ("AnythingPC"). AnythingPC is a rapidly growing
Internet based discount retailer of over 201,000 different computer hardware,
software and peripheral products to end consumers and businesses. Through its
Internet storefronts - www.anythingpc.com, www.anythingmac.com, and
www.anythingunix.com - AnythingPC offers one-stop shopping to its customers 24
hours a day, seven days a week. In addition to its wide array of product
offerings, AnythingPC's storefronts feature competitively priced "Hot Products",
an easy-to-use graphical interface, a powerful search engine to locate any
product desired, a unique "quote monkey" for pricing assistance on hard-to-find
products, and a special "notify me" feature that automatically notifies
customers when a backordered product arrives in stock and keeps the customer
appraised of the estimated time of arrival.
At the present time the Company views its relationship with Anything
Internet as purely a strategic investment. Anything Internet does, however,
sell the Company's products via its Internet storefronts, which are responsible
for generating more than 10% of the Company's gross sales. More in depth
information on Anything Internet may on be found through its own SEC filings.
RISK FACTORS
LIMITED OPERATING HISTORY; LACK OF PROFITABILITY.
The Company was incorporated under the laws of the state of Oregon on June
13, 1978, but did not enter the computer accessory products business until
October 1995 when it acquired 100% of DoubleCase Corporation. Since then the
Company has not been able to generate enough revenue to show a profit, nor does
it have any significant assets.
The Company's prospects must be considered in light of the risks, expenses
and difficulties frequently encountered by companies in their early stages of
growth, which include, but are not limited to, limited access to capital,
competing against companies with strong brand names and better capitalization,
and hiring and retaining qualified personnel. To address these risks, the
Company must, among other things, maintain and increase its customer base,
maintain and develop relationships with suppliers and distributors, implement
and successfully execute its business and marketing strategies, continue to
develop and expand its product line, provide superior customer service and order
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fulfillment, respond to competitive developments, and attract, retain and
motivate qualified personnel. There can be no assurance that the Company will
be successful in addressing such risks, and the failure to do so could have a
material adverse effect on the Company's business, financial condition and
results of operations.
UNPREDICTABILITY OF FUTURE OPERATING RESULTS; SEASONALITY.
Sales within the computer industry are substantially affected by new
product releases from manufacturers. Historically, such releases tend to
maintain or increase overall sales revenues. Therefore, a lack of or delay in
new product releases by manufacturers can negatively impact the Company's
revenues. The Company's current and future expense levels are based largely on
its investment plans and estimates of future revenues. Sales and operating
results generally depend on the volume of, timing of, and ability to fulfill
orders received, which are difficult to forecast. The Company may be unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in revenues in relation to
the Company's planned expenditures would have an immediate adverse effect on the
Company's business, prospects, financial condition, and results of operations.
The Company may experience seasonality in its business, reflecting seasonal
fluctuations in the computer industry and traditional retail, government and
corporate seasonal spending patterns and advertising expenditures. In
particular, the computer industry typically experiences a slowdown during the
summer months. Such seasonality may result in lower sales, unforeseen revenue
shortfalls and cause quarterly fluctuations in the Company's operating results
and could have a material adverse effect on the Company's business, operating
results and financial condition.
DEPENDENCE ON A SINGLE PRODUCT LINE.
The Company currently sells a single line of hard-sided protective carrying
cases through its wholly-owned subsidiary, DoubleCase Corporation. Although the
Company has plans to expand and develop its product line to carry additional
accessory products for personal computers, if its current single product line
fails to generate enough sales to produce a positive cash flow it could have a
material adverse effect on the Company's business, operating results and
financial condition.
COMPETITION.
The market for notebook carrying cases is intensely competitive and
dominated by soft-sided manufacturers such as Targus and Kensington Microware.
In the event consumers and businesses start buying more hard-sided cases there
are no assurances that Targus, Kensington or any other manufacturer may not
develop their own line of hard-sided cases to compete against the DoubleCase
brand. Additionally, some of these manufacturers have much better funding and
stronger brands. Increased competition from these and other sources could
require the Company to respond to competitive pressures by establishing pricing,
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marketing and other programs, or seeking out additional strategic alliances or
acquisitions, that may be less favorable to the Company than would otherwise be
established or obtained. Aggressive product price cuts or expending more on
marketing and promotional efforts than previously budgeted could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL.
The Company's performance is substantially dependent on the continued
services and on the performance of its senior management and other key
personnel, particularly its Chairman, President and Chief Executive Officer,
Cameron B. Yost. The Company does not have an employee contract with Mr. Yost
nor does not maintain key person insurance on him. The Company's performance
also depends on its ability to retain and motivate its other officers and key
employees. The loss of the services of any of its executive officers or other
key employees could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations. The Company's future
success also depends on its ability to identify, attract, hire, train, retain
and motivate other highly skilled technical, managerial, editorial,
merchandising, marketing and customer service personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will be
able to successfully attract, integrate or retain sufficiently qualified
personnel. The failure to attract and retain the necessary technical,
managerial, editorial, merchandising, marketing and customer service personnel
could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations.
PENDING INDICTMENT AGAINST KEY PERSONNEL.
The Company's Chairman, President and Chief Executive Officer, Cameron
Yost, is currently under indictment in the U.S. District Court for the Southern
District of New York for conspiracy to commit securities fraud, mail fraud and
commercial bribery in connection with the common stock of Banyan Corporation.
Mr. Yost has been, and plans on continuing to, vigorously deny any and all
charges brought against him. In the event Mr. Yost is convicted of any
wrongdoing, it could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations. If Mr. Yost is
successful, the Company's Bylaws may provide indemnification for him which is
not anticipated to exceed $300,000.
TRADEMARKS AND PROPRIETARY RIGHTS.
The Company regards its service marks, trademarks, trade secrets and
similar intellectual property as instrumental to its success, and relies on
trademark and copyright law, trade secret protection, and confidentiality and/or
licensing agreements with its employees, customers, strategic partners and
others to protect its proprietary rights. Such proprietary rights include, but
are not limited to, the DoubleCase trademark and the Perfect Fit Protective Foam
Interior System trademark. There can be no assurance that the steps taken by
the Company to protect its proprietary rights will be adequate or that third
parties will not infringe or misappropriate the Company's service marks,
trademarks, trade secrets and other intellectual property rights. In addition,
there can be no assurance that others will not independently develop
13
<PAGE>
substantially equivalent intellectual property. A failure by the Company to
protect its intellectual property in a meaningful manner could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations. Furthermore, litigation may be necessary in the future
to enforce the Company's intellectual property rights, to protect the Company's
trade secrets, or to determine the validity and scope of the proprietary rights
of others. Such litigation could result in substantial costs and diversion of
management and technical resources, either of which could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
In addition, there can be no assurance that other parties will not assert
infringement claims against the Company. The Company may receive notice of
claims of infringement of other parties' proprietary rights. There can be no
assurance that such claims will not be asserted or prosecuted against the
Company in the future or that any such assertion or prosecution will not
materially adversely affect the Company's business, prospects, financial
condition and results of operations. The defense of any such claims, whether
such claims are with or without merit, could be time-consuming, result in costly
litigation and diversion of management and technical personnel, cause product
shipment delays, or require the Company to develop non-infringing technology or
enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the
Company, or at all. In the event of a successful claim of product infringement
against the Company and the failure or inability of the Company to develop
non-infringing technology or license the infringed or similar technology on a
timely basis, the Company's business, prospects, financial condition and results
of operations would be materially adversely affected.
SALES AND OTHER TAXES.
The Company does not currently collect sales and other similar taxes in
respect to shipments of goods into states other than Colorado. However, one or
more local, state or foreign jurisdictions may seek to impose sales tax
collection obligations on out of state companies, such as the Company, which
engage in interstate commerce. In addition, any new operation in states outside
of Colorado could subject shipments into such states to state sales taxes under
current or future laws. A successful assertion by one or more states or any
foreign country that the Company should collect sales or other taxes on the sale
of merchandise could result in new liabilities for back taxes and have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations.
NO CASH DIVIDENDS AND NONE ANTICIPATED.
The Company anticipates using all future earnings to complete the
marketing, development and expansion of its business, for operating capital, and
for corporate development and expansion activities. The Company has not paid or
declared any cash dividends, nor, by reason of its present stage of growth and
anticipated financial requirements, does not anticipate paying any cash
dividends in the foreseeable future. The future payment of cash dividends by
the Company on its Common Stock, if any, rests within the sole discretion of the
Company's Board of Directors and will depend on, among other things, the
Company's earnings, capital requirements and overall financial condition.
14
<PAGE>
ANTI-TAKEOVER; "POISON PILL" PROVISIONS.
Certain provisions of the Company's Certificate of Incorporation and Bylaws
may make a change in the control of the Company more difficult to effect, even
if a change in control were in the shareholders' best interest. These
provisions include the ability of the Board of Directors, without further
shareholder approval, to issue Preferred Stock with all rights, powers and
privileges of the Common Stock. The issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change in control of the Company
without further action by the stockholders and may adversely affect the voting
and other rights of the holders of Common Stock. The Company has no present
plans to issue any new shares of Preferred Stock. Furthermore, certain
provisions of the Company's Certificate of Incorporation and Bylaws and Colorado
law could delay or make more difficult a merger, tender offer or proxy contest
involving the Company.
NEW SEC REGULATIONS
On January 1, 1999, the SEC imposed a new series of regulations mandating
all new listing OTC Bulletin Board companies to begin making regular filings
with the SEC prior to their first day of trading. As soon as the SEC declares
this disclosure statement "effective", the Company will be compelled to make
regular filings with the SEC and, as a result, will be in full compliance with
these new regulations, regardless of which stock exchange the Company's Common
Stock may be trading upon. Should the Company fail to comply with these new
regulations its stock would be at risk of being delisted.
PENNY STOCK RULES
The SEC has adopted a set of rules that regulate broker-dealer securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the Nasdaq system, provided that
current price and volume information regarding transactions in such securities
is provided by the exchange or system). The penny stock rules require a
broker-dealer to deliver to the customer a standardized risk disclosure document
prepared by the SEC that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with other information. The penny stock rules require that
prior to a transaction in a penny stock, the broker-dealer must determine in
writing that the penny stock is a suitable investment for the purchaser and
receive the purchaser's written agreement to the transaction. These disclosure
requirements may reduce the level of trading activity in the secondary market
for a stock that becomes subject to the penny stock rules. Investors in stocks
subject to the penny stock rules may, as a direct result, find it more difficult
to dispose of their shares of stock.
15
<PAGE>
EMPLOYEES
The Company believes its success depends to a significant extent on its
ability to attract, motivate and retain highly skilled management and employees.
To this end, the Company focuses on incentive programs such as employee stock
options and competitive compensation and benefits packages for its employees to
foster a corporate culture which is challenging and rewarding, yet fun. As of
May 7, 1999, the Company, including its subsidiaries, had three full-time
employees. Currently the only employee receiving health and dental benefits is
Cameron B. Yost. The Company also employs, from time to time, a limited number
of independent contractors and temporary employees on a periodic basis. None of
the Company's employees are represented by a labor union and the Company
considers its labor relations to be good.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Fiscal Year 1998 Ending December 31, 1998
Net sales for the fiscal year ending December 31, 1998 were $206,467, which
marked a decline of 16.7% compared to net sales of $247,773 for the same period
ending December 31, 1997. The reason for the decline was the Company's
marketing budget was sharply reduced due to a lack of working capital and
Management's decision to concentrate on cultivating long-term relationships with
customers who will order product in large volume such as Ingram Micro and Dell
Computer relationships. These efforts did not contribute materially to fiscal
1998 sales results.
Gross profits for fiscal year 1998 were 66.6% compared to 53.1% for the
same period a year ago. The increase in gross margins reflects the Company's
ability to purchase materials at lower prices by improving negotiating
practices.
Selling, general and administrative expenses for fiscal year 1998 were
$573,317, representing a declined of 14.1% over $667,941 for the same period a
year earlier as a result of the Company's ongoing cost reduction programs. In
order to preserve limited working capital the Company has aggressively reduced
expenses wherever possible. The number of employees has been reduced to three,
all unnecessary subscriptions, supplies, equipment and communications and other
expenses have been minimized. Interest expense declined 56.6% in fiscal year
1998 to ($22,913) compared to ($52,843) for fiscal year 1997 as a result of
several note holders converting their loans into Common Stock through a private
placement offering.
Additionally, in fiscal year 1998 the Company acquired a minority interest
in Anything Internet Corporation. For fiscal year 1998 the Company recorded
$39,590 as its share of Anything's operating loss under the equity method of
accounting for investments.
The net loss for the year ending December 31, 1998, was $498,232 compared
to a net loss of $589,163, before the impact of deferred income tax benefits
recorded, for fiscal year 1997. In fiscal year 1998 the Company reversed all
such fiscal year 1997 deferred tax benefits to comply with SEC accounting
16
<PAGE>
preferences. See Note 4 in the notes to the audited consolidated financial
statements.
Three-Months Ending March 31, 1999 Compared to Three-Months Ending March 31,
1998
Net sales for the three-months ended March 31, 1999, were $31,037, a
decrease of 46.9% compared to $58,486 for the same period a year ago. The
decrease in net sales was driven by reduced marketing budgets and a diversion of
Management's attention by contributing significantly to the development and
growth of Anything Internet.
Gross profits for the three-months ended March 31, 1999, were $10,904, or
35.1% of sales, compared to $7,077, or 12.1% of sales, for the same period a
year ago. The increase in gross profit was due to cost cutting measures and
improved product and inventory management.
Selling, general and administrative (SG&A) expenses for the three-months
ended March 31, 1999, were $67,196, a decrease of 43.1% over $96,184 for the
same period a year ago. The sharp decrease in SG&A expenses is the result of
continuing successful cost cutting measures implemented in fiscal 1998.
The net loss for the three-months ended March 31, 1999, was ($70,841), or
($0.01) a share, a decrease of 29.9% over ($101,069), or ($0.02) a share, for
the same period a year ago. The decrease in net loss is attributable to cost
cutting measures and a sharp decrease in SG&A expenses.
The Company does not believe that inflation has had a material adverse
effect on sales or income. Increases in raw materials or other operating costs
may adversely affect the Company's operations; however, the Company believes it
will be able to maintain, or even improve, its present gross profit margins by
monitoring and adjusting the prices of the products it sells to offset increases
in costs of raw materials or other operating costs. Similarly, quarterly
fluctuations in sales may be caused by the timing of large orders from one or
more customers, the timing of shipments based on receipt of materials from
vendors and the success of specific marketing programs.
Based on its experience to date, the Company believes that its future
operating results may be subject to quarterly variations based on a variety of
factors, including seasonal buying patterns in the computer industry. Such
effects may not be apparent in the Company's operating results during a period
of expansion. However, the Company can make no assurances that its business can
be significantly expanded under any circumstances.
Liquidity and Capital Resources
The Company's operations to date have focused on developing and marketing
personal computer accessory products, building brand awareness, initiating
government, corporate and consumer sales, and securing the necessary financing
to fund the development, operations and expansion of its business.
17
<PAGE>
As of March 31, 1999, the Company had $14,409 cash on hand, accounts
receivable of $60,821, and an investment in Anything Internet Corporation valued
at $35,287.
As of March 31, 1999, cash used by operating activities was $65,847. This
was used to support ongoing operations.
As of March 31, 1999, cash provided by financing activities totaled
$50,000. This was entirely from the proceeds of equity issued for cash
financing.
The Company anticipates making significant investments in the future to
support its overall growth and substantially expand its product offerings,
including hiring a seasoned general sales manager that will create an
anticipated increase in payroll expenses of about $75,000 annually. However, as
indicated in the Company's most recent financial statements available herein,
while operating activities provide some cash flow, the Company is currently cash
flow negative. There can be no assurances that the Company's ongoing operations
will begin to generate a positive cash flow or that unforeseen events may not
require more working capital than the Company currently has at its disposal. At
the current time, the Company intends to fund its capital requirements from a
periodic sale of Anything Internet stock until it is able to meet its needs from
the cash flow generated by sales of products. As the Company is able to
complete the funding of new cases and fund an ongoing marketing program, sales
are expected to improve. The new cases will also have lower manufacturing
costs, thus gross profit is expected to increase at a faster rate. With the
exception of new product development and the ongoing marketing program, all
other expenses will be carefully controlled. If the Company's plans are
successful, cash flow should improve and replace the need to sell shares of
Anything Internet to meet operational requirements.
Year 2000 Compliance
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. 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. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with such "Year 2000"
requirements. The Company utilizes third-party equipment and software that it
believes is Year 2000 compliant, which include Year 2000 compliant BIOS
technology, operating systems and mission critical software. The Company has
conducted an audit of its third-party suppliers and distributors, namely Ingram
Micro, as to the Year 2000 compliance of their systems and is satisfied their
critical systems are Year 2000 compliant. The Company does not believe it will
incur significant costs in order to comply with Year 2000 requirements.
However, failure of the Company's internal computer systems or of such
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<PAGE>
third-party equipment or software, or of systems maintained by the Company's
suppliers, to operate properly with regard to the Year 2000 and thereafter could
require the Company to incur unanticipated expenses to remedy any problems. The
Company anticipates in a worst case scenario it would replace its entire
computer network at an estimated cost of less than $15,000.
Item 3. DESCRIPTION OF PROPERTY
The Company, and its wholly-owned subsidiary DoubleCase Corporation, share
combined headquarters in Colorado Springs, Colorado at 4740 Forge Rd., Bldg. 112
in a 2,760 square foot office/warehouse space. The Company pays $1,138 a month,
for this leased office space. The lease expires on April 30, 2000 and the
Company is negotiating two one-year extension options.
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of Common Stock as of May 7, 1999, by (i)
each Director of the Company, (ii) each executive officer of the Company, (iii)
all directors and executive officers as a group, and (iv) each person known to
the Company to be the beneficial owner of more than 5% of its outstanding shares
of Common Stock.
<TABLE>
<CAPTION>
Shares Beneficially Owned
-------------------------
Percentage
Directors and Executive Officers Shares Held Owned (1)
- -------------------------------- ----------- ---------
<S> <C> <C>
Cameron B. Yost (2)
4740 Forge Rd., Bldg. 112
Colorado Springs, CO 80907 1,227,154 12.7%
Lloyd Parrish, Jr.
4740 Forge Rd., Bldg. 112
Colorado Springs, CO 80907 1,055,837 10.9%
Lawarance Stanley
4740 Forge Rd., Bldg. 112
Colorado Springs, CO 80907 44,020 0.5%
All current directors and executive
officers as a group (3 persons) 2,327,011 24.1%
Five Percent Shareholders
- -------------------------
Ann L. Gee (3)
110 S. Main Street, #510
Wichita, KS 67202 581,932 6.0%
- -------------------------------- ----------- ---------
<FN>
(1) Percentage of ownership is based on 9,650,219 shares of Common Stock
issued and outstanding as of March 31, 1999.
(2) Includes a vested stock option to purchase 11,154 at an aggregate price
of $0.05 a share.
(3) Ann L. Gee is Lloyd K. Parrish Jr.'s sister. Mr. Parrish is a Director.
</TABLE>
19
<PAGE>
Item 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors, executive officers promoters and control persons of the
Company, their ages as of March 31, 1999, and their positions with the Company
are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- ---------
<S> <C> <C>
Cameron B. Yost 46 Chairman, President, Chief Executive
Officer and Director
Lloyd K. Parrish Jr. 61 Director
Lawarance Stanley 51 Secretary and Director
</TABLE>
The Board of Directors of the Company is comprised of only one class of
director. Each director is elected to hold office until the next annual meeting
of shareholders and until his successor has been elected and qualified.
Officers are elected annually by the Board of Directors and hold office until
successors are duly elected and qualified. The following is a brief account of
the business experience of each director and executive officer of the Company.
There is no family relationship between any Director or Executive Officer of the
Company.
CAMERON B. YOST, Chairman, President, Chief Executive Officer and Director, Mr.
Yost is the founder of DoubleCase Corporation, a wholly-owned subsidiary of
Banyan. He founded DoubleCase in 1991 and served as President before joining
Banyan in 1995 when the two companies merged together. Prior to joining Banyan
and DoubleCase, from 1984 to 1988 Mr. Yost was President of BYCO, Ltd., a
manufacturer of evaporative cooler products located in Greeley, Colorado. In
1988 and until he founded DoubleCase in 1991, Mr. Yost participated in forming
Vornado Air Circulation Systems, Inc., a start-up venture located in Wichita,
Kansas as a Co-Founder and Vice President. Mr. Yost is a graduate of Western
State College in Gunnison, Colorado. Mr. Yost also serves as a director at
Anything Internet Corporation. Mr. Yost is currently under indictment in the
U.S. District Court for the Southern District of New York for conspiracy to
commit securities fraud, mail fraud and commercial bribery in connection with
the common stock of Banyan Corporation. Mr. Yost has been, and plans on
continuing to, vigorously deny any and all charges brought against him.
LLOYD K. PARRISH JR., Director, has held his position since 1995 and is
concurrently a director at DoubleCase Corporation. Mr. Parrish has an extensive
background in business development and operations. Since 1996 he has held the
position of President at Parrish Corporation, oil & gas property operation and
management firm. He has owned Parrish Oil Company, oil and gas production in
Kansas, Oklahoma and Nebraska since 1972. In 1996 he served as the National
President to the Society of Independent Professional Earth Scientists. And
since 1998 he has helped manage and is a part owner of Sandhill LLC, a natural
gas gathering, purchasing and marketing corporation.
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<PAGE>
LAWARANCE STANLEY, Secretary and Director, has his positions since 1998. Mr.
Stanley has been the owner of Stanley Accounting Services, an independent
accounting business since 1992, and owns half of The P3 Group, which has
provided management training to companies of all sizes since 1997. Prior to
starting these businesses, he was President of Kaman Instrumentation
Corporation, a subsidiary of Kaman Corporation, and Controller of a division of
Bendix Corporation.
The Company does not currently have employment agreements with any of its
officers and management personnel, but has had such agreements in the past and
is contemplating do so again in the near future.
Item 6. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid during the fiscal year
ended December 31, 1998, to the Company's Chief Executive Officer and each of
the Company's officers and directors. No person received compensation equal to
or exceeding $100,000 in fiscal 1998 and no bonuses were awarded during fiscal
1998.
<TABLE>
<CAPTION>
Annual Compensation Awards Payouts
------------------------------ ------------------------- ---------
Other All
Annual Restricted Securities Other
compen- Stock Underlying LTIP Compen-
sation Award(s) Options/SAR Payouts sation
Name and Principal Position Year Salary ($) Bonus ($) ($) ($) (#) ($) ($)
- ---------- ---- ---------- --------- ------- ----------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cameron Yost
President,
CEO and
Director 1998 90,400 14,000
1997 86,000 (1) 66,000
1996 74,000
Lloyd Parrish, Jr.
Director 1998 14,000
1997 (1) 66,000
1996
Lawrence Stanley
Secretary
and Director 1998 8,000
1997
1996
<FN>
(1) For accrued Board of Directors' fees. $6,000 annually between 1991 and 1997 for DoubleCase Corporation
aggregating $42,000 and $8,000 annually between 1995 and 1997 for Banyan Corporation aggregating $24,000.
</TABLE>
In addition, the Company has adopted an incentive stock option plan for its
officers, directors and salaried employees. The plan is administered by the
Board of Directors. The options are exercisable for a period of 10 years,
except in the case of any option holders owning 10% or more of the Company's
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<PAGE>
outstanding Common Stock, in which case the exercise period is five years. The
exercise price for options granted pursuant to the plan is 95% of the closing
market price of the Common Stock on the date the option is granted, or if no
market exists, then as determined by the Board of Directors. An Aggregate of
105,345 shares are reserved for issuance under the plan. As of March 31, 1999,
options to purchase an aggregate of 11,154 shares of Common Stock, at an
exercise price of $0.05 per share, had been granted to Cameron Yost. The
following table summarizes the current options issued and outstanding.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares at FY-end (#) at FY-end ($)
Acquired on
Exercise Exercisable/ Exercisable/
Name (#) Value Realized ($) Unexercisable Unexercisable
- ---- ----------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Cameron Yost
President,
CEO and
Director -0- -0- 11,154 $ 8,365.50
</TABLE>
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 and in which any director or executive officer, or any
security holder who is known to the Company to own of record or beneficially
more than five percent of the Company's Common Stock, or any member of the
immediate family of any of the foregoing persons, had a material interest.
CERTAIN BUSINESS RELATIONSHIPS
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 and in which any director or executive officer, or any
security holder who is known to the Company to own of record or beneficially
more than five percent of the Company's Common Stock, or any member of the
immediate family of any of the foregoing persons, had a material interest.
22
<PAGE>
INDEBTEDNESS OF MANAGEMENT
DoubleCase Corporation is indebted to Mr. Parrish in the amount of $66,589.
This obligation is represented by a promissory note, bears interest at the rate
of 10% per annum and is secured by the DoubleCase's furniture, equipment,
inventory and accounts receivable. The note is due and payable on April 1,
2000. DoubleCase used the proceeds of this note for working capital shortfalls.
As of May 7, 1999, DoubleCase was indebted to Mr. Yost in the amount of
$21,155 for accrued and unpaid salary.
As of March 31, 1999, DoubleCase was indebted to one stockholder for an
aggregate amount of $38,647. These obligations bear interest at rates ranging
from 6% to 12% per annum and are not secured by assets of the Company, and do
not mature until April 1, 2000.
Item 8. DESCRIPTION OF SECURITIES
The Company's authorized capital consists of 70,500,000 shares, no par
value, of which 50,000,000 shares are Class A Common Stock, 10,000,000 shares
are Class B Common Stock, 10,000,000 are Class A Preferred Stock, and 500,000
are Class B Preferred Stock. As of March 31, 1999, there were 9,650,219 shares
of Class A Common Stock and no shares of Class B Common Stock issued and
outstanding. There were 187,190 shares of Class A Preferred Stock and no shares
of Class B Preferred Stock issued and outstanding.
CLASS A COMMON STOCK
The Company's Articles of Incorporation, as amended, authorize the issuance
of up to 50,000,000 shares of Class A Common Stock, no par value. Each holder
of record of Class A Common Stock is entitled to one vote for each share held on
all matters properly submitted to the shareholders for their vote. Cumulative
voting is not authorized by the Articles of Incorporation.
Holders of outstanding Class A Common Stock are entitled to those dividends
declared by the Board of Directors out of legally available funds, and, in the
event of liquidation, dissolution or winding up of the affairs of the Company,
holders are entitled to receive ratably the net assets of the Company available
to the shareholders. Holders of outstanding Class A Common Stock have no
preemptive, conversion or redemptive rights. All of the issued and outstanding
shares of Class A Common Stock are, and all unissued shares of Class A Common
Stock when offered and sold will be, duly authorized, validly issued, fully paid
and non-assessable. To the extent that additional shares of Class A Common
Stock are issued, the relative interests of the then existing shareholders may
be diluted.
CLASS B COMMON STOCK
The Company's Articles of Incorporation, as amended, authorize the issuance
of up to 10,000,000 shares of Class B Common Stock, no par value. Each holder
of record of Class B Common Stock is entitled to one vote for each share held on
23
<PAGE>
all matters properly submitted to the shareholders for their vote. Cumulative
voting is not authorized by the Articles of Incorporation.
Holders of outstanding Class B Common Stock are entitled to those dividends
declared by the Board of Directors out of legally available funds, and, in the
event of liquidation, dissolution or winding up of the affairs of the Company,
holders are entitled to receive ratably the net assets of the Company available
to the shareholders. Holders of outstanding Class B Common Stock have no
preemptive, conversion or redemptive rights. All of the issued and outstanding
shares of Class B Common Stock are, and all unissued shares of Class B Common
Stock when offered and sold will be, duly authorized, validly issued, fully paid
and non-assessable. To the extent that additional shares of Class B Common
Stock are issued, the relative interests of the then existing shareholders may
be diluted.
CLASS A PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of up to
10,000,000 shares of Class A Preferred Stock, no par value per share. The Board
of Directors may divide the Preferred Stock into classes and to fix and
determine the relative rights and preferences of the shares of any such class in
respect to, among other things, (a) the number of shares to constitute such
series and the distinctive designations thereof; (b) the rate and preference of
dividends, if any, the time of payment of dividends, whether dividends are
cumulative and the date from which any dividend shall accrue; (c) whether the
shares may be redeemed and, if so, the redemption price and the terms and
conditions of redemption; (d) the liquidation preferences payable on the shares
in the event of involuntary or voluntary liquidation; (e) sinking fund or other
provisions, if any, for redemption or purchase of the shares; (f) the terms and
conditions by which the shares may be converted, if the shares of any series are
issued with the privilege of conversion; (g) voting rights, if any and (h) any
other relative rights and preferences of shares of such series, including,
without limitation, any restriction on an increase in the number of shares in
any series theretofore authorized and any limitation or restriction of rights or
powers to which shares of any future series shall be subject.
The Class A Preferred Stock has identical voting rights to the Company's
Common Stock. The Company has the right to redeem each share of Class A
Preferred Stock, upon not less than 60 days prior written notice, at a
redemption price of $2.75 per share. Each share of Class A Preferred Stock is
convertible into one share of Class A Common Stock at any time prior to
redemption upon notice to the Company. Upon dissolution, liquidation and
winding up of the Company, holders of Class A Preferred Shares shall be entitled
to receive, out of the net assets of the Company, the amount of $2.75 per share,
and upon receiving that amount, shall not be entitled to participate further in
any remaining assets of the Company. Holders of Class A Preferred Shares have
no preemptive or other rights to purchase any other securities issued by the
Company. As of March 31, 1999 the Company had 187,000 shares of Class A
Preferred Stock issued and outstanding; no other classes of Preferred Stock are
currently issued or outstanding.
24
<PAGE>
CLASS B PREFERRED STOCK
A total of 500,000 shares have been designated as Class B Preferred Stock,
and no other rights or preferences have yet been designated. There are no shares
of Class B Preferred Stock issued or outstanding as of the date of this filing
and management has no plan to issue any Class B Preferred Stock in the
foreseeable future.
ANTI-TAKEOVER; "POISON PILL" PROVISIONS
Article 4.2 of the Amended Articles of Amendment, filed with the Oregon
Secretary of State on December 29, 1995, empowers the Board of Directors to
prescribe the classes, number of each class, voting powers, designations,
preferences, limitations, restrictions and relative rights of each class without
obtaining prior shareholder approval. In theory, the Company could issue a
series of Preferred Stock with privileges that could effectively prevent a
takeover of the Company, even if such a takeover were in the best interest of
the Company's shareholders.
DIVIDEND POLICY
Holders of Common Stock are entitled to dividends in the discretion of the
Board of Directors and payment thereof will depend upon, among other things, the
Company's earnings, its capital requirements and its overall financial
condition. The Company has not paid any cash dividends on its Common Stock
since inception and intends to follow a policy of retaining any earnings to
finance the development and growth of its business. Accordingly, it does not
anticipate the payment of cash dividends in the foreseeable future.
TRANSFER AGENT
The Company has engaged OTR/California Stock Transfer and Registrar to act
as its transfer agent for its Common Stock. The Company acts as transfer agent
for all of its other securities.
INTEREST OF NAMED EXPERTS AND COUNSEL
The financial statements of the Company at December 31, 1998, included in
this Disclosure Statement, have been audited by Ronald R. Chadwick, P.C. as
indicated in their report with respect thereto and are included herein in
reliance upon authority of said firm as experts in giving said reports.
25
<PAGE>
PART II
- -------
Item 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Market for Common Stock
The Company's Common Stock is quoted on the OTC Bulletin Board under the
symbol "BANY." The following table sets forth the high and low bid prices as
reported by the National Association of Securities Dealers (NASD) for the
periods ending March 31, 1999 and prior. These quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commissions, and may not reflect
actual transactions. As of July 27, 1999 there were exactly 400 shareholders of
Common Stock and 18 shareholders of the non-trading Preferred Class 'A'
Stock.
<TABLE>
<CAPTION>
High Low
----- ----
1999
- ----
<S> <C> <C>
First Quarter $ 1.50 $0.57
1998
- ----
Fourth Quarter 0.92 0.35
Third Quarter 0.56 0.22
Second Quarter 0.40 0.16
First Quarter 0.35 0.14
1997
- ----
Fourth Quarter 0.50 0.18
Third Quarter 0.86 0.20
Second Quarter 1.00 0.16
</TABLE>
Dividends
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain all available funds and any
future earnings of its business for use in the operation of its business and
does not anticipate paying any cash dividends in the foreseeable future. The
declaration, payment and amount of future dividends, if any, will depend upon
the future earnings, results of operations, financial position and capital
requirements of the Company, among other factors, and will be at the sole
discretion of the Board of Directors.
Item 2. LEGAL PROCEEDINGS
The are no material legal proceedings pending or, to the Company's
knowledge, threatened against the Company.
26
<PAGE>
Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
On February 18, 1999, the Company engaged Ronald R. Chadwick, Certified
Public Accountants as its public accountants to handle all aspects of its SEC
reporting requirements.
Prior to engaging DWP, the Company used J. Paul Kenote, CPA, P.C. as its
independent public accountants. J. Paul Kenote resigned as the Company's
auditor when it discontinued conducting SEC audits altogether in January 1999 to
focus solely on performing IRS tax work. The Company had no disagreements with
J. Paul Kenote at the time of their resignation, and there were no adverse
opinions issued about the Company.
Item 4. RECENT SALES OF UNREGISTERED SECURITIES
On May 17, 1996, the Company issued 2,250,000 shares of its common stock to
a Business Development Company for consideration of a $1,000,000 promissory
note. Each share of common stock was valued at $0.46178. This issuance was a
transaction exempt from registration under Section 4(2) of the Securities Act
and Regulation D, Rule 504 thereunder as a transaction not involving a public
offering. Subsequently, only $75,000 was received and the balance of the unpaid
shares were returned and canceled.
On September 5, 1996, the Company issued 2,000 shares of its common stock
to an employee of DoubleCase Corporation as a bonus. The then market price for
the Company's common stock was $5.75 a share. This transaction was exempt from
registration under Section 4(2) of the Securities Act and Rule 144 thereunder.
Stock issued under these exemptions carries certain resale restrictions and the
stock certificates bear restrictive legends.
On the same date the Company was obligated to issue 1,037,500 of its common
stock to the Business Development Company which purchased shares on May 17,
1996, to reestablish it to "pre-split" total shares. The Company received no
consideration for the issuance of these shares. This issuance was a transaction
exempt from registration under Section 4(2) of the Securities Act and Regulation
D, Rule 504 thereunder as a transaction not involving a public offering.
Also on September 5, 1996, the Company exchanged 857,143 shares of its
common stock for 109,689 preferred shares of Colonial Funds Ltd. This share
exchange transaction was valued at $142,898. This transaction was exempt from
registration under Section 4(2) of the Securities Act and Rule 144 thereunder.
Stock issued under these exemptions carries certain resale restrictions and the
stock certificates bear restrictive legends. Subsequently, this transaction was
reversed and all shares were returned to the original issuers.
On the same date the Company was obligated to issue 10,097 shares of its
common stock to a shareholder who had acquired shares in the Company when it was
named Interactive Data Vision. As a result in a change of transfer agents in
the early 1990's, this shareholder's record was lost by the transfer agent
27
<PAGE>
although his ownership was authenticated. The Company received no consideration
for the issuance of these shares. This issuance was a transaction exempt from
registration under Section 4(2) of the Securities Act and Regulation D, Rule 504
thereunder as a transaction not involving a public offering.
Additionally, on September 5, 1996, the Company issued 57,217 shares of its
common stock, distributed pro rata, to the original DoubleCase shareholders who
exchanged their DoubleCase shares for shares in the Company in October, 1995.
This was a result of the above referenced Interactive Data Vision shareholder
who produced an authentic share certificate which was not represented on the
Company stock ledger at the time of the exchange. The share exchange ratio
required the Company to then issue the above referenced shares to the original
DoubleCase shareholders. The Company received no consideration for the issuance
of these shares. This issuance was a transaction exempt from registration under
Section 4(2) of the Securities Act and Regulation D, Rule 504 thereunder as a
transaction not involving a public offering.
On September 5, 1996, the Company entered into a contract for services from
an investor relations company. The Company issued 45,000 shares of its common
stock for said services valued at $6,250. This transaction was exempt from
registration under Section 4(2) of the Securities Act and Rule 144 thereunder.
Stock issued under these exemptions carries certain resale restrictions and the
stock certificates bear restrictive legends.
On September 26, 1996, the Company issued 73,651 shares of its common stock
to pre-takeover Interactive Data Vision Shareholders in exchange for debt
totaling $202,540. These shares were issued and priced pursuant to the Share
Exchange Agreement between DoubleCase Corporation and Interactive Data Vision
(IDV) of October 27, 1995, for the conversion of IDV debt to equity. This
transaction was exempt from registration under Section 4(2) of the Securities
Act and Rule 144 thereunder. Stock issued under these exemptions carries
certain resale restrictions and the stock certificates bear restrictive
legends.
On November 5, 1996, the Company retired and cancelled 807,500 shares of
its common stock. Said shares were issued on May 17 and September 5, 1996, to a
Business Development Company who failed to pay the remaining principal balance
of their promissory note. These shares that were retired were valued at
$925,000
On November 15, 1996, the Company issued 125,000 shares of its common stock
to a consultant who exercised his option to purchases said shares for $0.10 per
share. The Option was granted the consultant for management consulting services
rendered. This issuance was a transaction exempt from registration under Section
4(2) of the Securities Act and Regulation D, Rule 504 thereunder as a
transaction not involving a public offering.
On December 5, 1996, the Company was obligated to issue, pursuant to an
Agreement entered into on September 5, 1996, with an investor relations company,
10,000 shares of its common stock. Although the Company received no monetary
consideration for the transaction, the market value of the Company's common
28
<PAGE>
stock on December 5, 1996 was $0.16 per share. This issuance was a transaction
exempt from registration under Section 4(2) of the Securities Act and Regulation
D, Rule 504 thereunder as a transaction not involving a public offering.
On December 6, 1996, the Company was obligated to issue 18,224 shares of
common stock to the Business Development Company under the Subscription
Agreement of May 17, 1996. The price per share was established on May 17, 1996.
This issuance was a transaction exempt from registration under Section 4(2) of
the Securities Act and Regulation D, Rule 504 thereunder as a transaction not
involving a public offering.
On December 12, 1996, the Company offered, to shareholders of record as of
December 9, 1996 (the Rights Record Date), Rights to purchase additional shares
of Class A Common Stock for each share held as of the Rights Record Date, at a
price of $0.005 per Right. Each holder of Class A Common Stock as of the Rights
Record Date was entitled to subscribe for one Series A Right and One Series B
Right for each share of Class A Common Stock held as of the Rights Record Date.
Rights were subscribed for and exercised only in pairs of one Series A Right and
one Series B Right for each share of Class A Common Stock held as of the Rights
Record Date. Each Right entitled the holder to purchase one share of Class A
Common Stock at an exercise price of $0.125 per share. Each Series A Right
could be exercised to purchase one share of Class A Common Stock issued without
a restrictive legend. Each Series B Right could be exercised to purchase one
share of Class A Common Stock which was non-transferable for a period of two
years after issuance. The Rights were exercisable in a series of cumulating
portions commencing January 27, 1997 and continuing through January 23, 1998,
unless called for earlier redemption by the Company. The Rights were not
subject to adjustment in either the exercise price or the number of shares for
which they were exercised as a result of the 1-for-20 reverse stock split
adopted by the Company as of December 10, 1996. The Rights were offered on a
"best efforts" basis by the Company through its officers and directors. The
Rights Offering closed on January 24, 1997, with a total of 2,449,609 Rights
Pairs subscribed and issued. Throughout the course of 1997 a total of 1,378,120
shares were issued in cumulating portions for net consideration of $134,803.
The Rights and securities were offered without registration under the Securities
Act of 1933, as amended, and were offered in reliance upon the exemptions from
registration provided by Rule 504 of Regulation D as a transaction not involving
a public offering.
Also on December 12, 1996, the Company escrowed 800,000 shares of its
common stock to the name of First National Bank as escrow agent for a proposed
private placement offering exempt from registration under Section 4(2) of the
Securities Act and Regulation D, Rule 504 thereunder as a transaction not
involving a public offering. The private placement offering did not occur and
said shares were returned to the Company from escrow and were cancelled and
retired on November 26, 1997.
On February 3, 1997, the Company issued 10,000 shares of its common stock
to a public and investor relations company as retainer for service to be
rendered. Said shares were valued at $0.20 per share. This issuance was a
transaction exempt from registration under Section 4(2) of the Securities Act
and Regulation D, Rule 504 thereunder as a transaction not involving a public
offering.
29
<PAGE>
On February 10, 1997, the Company issued 2 shares of its common stock to
the Depository Trust Company resulting from balance differences arising from
fractional rounding of shares during the reverse split December 10, 1996. The
Company received no consideration for these shares. The securities were offered
without registration under the Securities Act of 1933, as amended, and were
offered in reliance upon the exemptions from registration provided by Rule 504
of Regulation D.
On February 10, 1997, the Company issued 1,100,000 shares of its common
stock to a Business Development Company for a promissory note of $330,000.
Subsequently, the Company received consideration on this note totaling $60,000.
With the note in default and deemed uncollectable the Company attempted to
recover the shares issued but was unsuccessful. The securities were offered
without registration under the Securities Act of 1933, as amended, and were
offered in reliance upon the exemptions from registration provided by Rule 504
of Regulation D.
On June 16, 1997, the Company issued 100,000 shares of its common stock for
entering into an agreement with a public and investor relations company as a fee
for service to be rendered. Said shares were valued at $0.15625 per share. This
issuance was a transaction exempt from registration under Section 4(2) of the
Securities Act and Regulation D, Rule 504 thereunder as a transaction not
involving a public offering.
On June 30, 1997, the Company issued 95,500 shares of its common stock to
two non-affiliated individuals who had performed services or loaned the Company
funds. The cumulative value of said shares was $0.18465 per share. The
securities were offered without registration under the Securities Act of 1933,
as amended, and were offered in reliance upon the exemptions from registration
provided by Rule 504 of Regulation D.
Also on June 30, 1997, the Company issued 50,000 shares of its common stock
as severance pay to an employee. The shares were valued at $0.20. The
securities were offered without registration under the Securities Act of 1933,
as amended, and were offered in reliance upon the exemptions from registration
provided by Rule 504 of Regulation D.
On July 1, 1997, the Company issued a cumulative total of 694,736 shares
of its common stock pro rated among the members of the Board of Director of
Banyan Corporation and its wholly owned subsidiary, DoubleCase Corporation, for
their services rendered to date. Said shares were valued at $0.267 per share.
This transaction was exempt from registration under Section 4(2) of the
Securities Act and Rule 144 thereunder. Stock issued under these exemptions
carries certain resale restrictions and the stock certificates bear restrictive
legends.
On August 26, 1997, the Company issued 495,000 shares of its common stock
on a promissory note totaling $75,000 to an unaffiliated investor. The
securities were offered without registration under the Securities Act of 1933,
as amended, and were offered in reliance upon the exemptions from registration
provided by Rule 504 of Regulation D. No consideration was ever received on the
30
<PAGE>
note and the shares were subsequently recovered by the Company, cancelled and
retired on November 17, 1997.
On August 27, 1997, the Company issued 250,000 shares of its common stock
to an unaffiliated investor for $0.192 per share. The securities were offered
without registration under the Securities Act of 1933, as amended, and were
offered in reliance upon the exemptions from registration provided by Rule 504
of Regulation D.
On October 23, 1997, the Company issued 31,100 shares of its common stock
to satisfy debt owed a non-affiliated vendor of $11,247. The securities were
offered without registration under the Securities Act of 1933, as amended, and
were offered in reliance upon the exemptions from registration provided by Rule
504 of Regulation D.
On November 7, 1997, the Company issued 130,000 shares of its common stock
for $0.2577 per share to a non-affiliated investor. The securities were offered
without registration under the Securities Act of 1933, as amended, and were
offered in reliance upon the exemptions from registration provided by Rule 504
of Regulation D.
On November 11, 1997, the Company issued 344,000 shares of its common stock
for net consideration of $66,327 to a non-affiliated investor. The securities
were offered without registration under the Securities Act of 1933, as amended,
and were offered in reliance upon the exemptions from registration provided by
Rule 504 of Regulation D.
On December 1, 1997, the Company issued 143,000 shares of its common stock
to a non-affiliated investor for a promissory note of $40,000. The note has
subsequently been extended and remains unpaid. The Company has received 60,000
shares of Oxford Knight International, Inc. (OTCBB: "OKTI"), without
restriction, as a "fee" for extending the note. The securities were offered
without registration under the Securities Act of 1933, as amended, and were
offered in reliance upon the exemptions from registration provided by Rule 504
of Regulation D.
On January 23, 1998, the Company issued 2,632,802 shares of its
common stock to Rightsholders who subscribed to the last opportunity to exercise
their Rights obtained from the Rights Offering of December 12, 1996. The
Company received net consideration of $220,805. The securities were offered
without registration under the Securities Act of 1933, as amended, and were
offered in reliance upon the exemptions from registration provided by Rule 504
of Regulation D.
On February 4, 1998, the Company issued 172,200 shares of its common stock
to a non-affiliated management consulting firm for expenses and fees valued at
$29,123. The securities were offered without registration under the Securities
Act of 1933, as amended, and were offered in reliance upon the exemptions from
registration provided by Rule 504 of Regulation D.
On February 13, 1998, the Company issued 50,000 shares of its common stock
as severance pay to an employee. This was valued at $7,500. This transaction
31
<PAGE>
was exempt from registration under Section 4(2) of the Securities Act and Rule
144 thereunder. Stock issued under these exemptions carries certain resale
restrictions and the stock certificates bear restrictive legends.
On February 13, 1998, the Company entered into a contractual relationship
with a non-affiliated investor relation firm. Developmental, start-up and
renewal fees were compensated for by the issuance of a cumulative total of
200,000 shares of the Company's common stock valued at $29,375 issued: 125,000
shares on February 3, 1998; 25,000 shares issued July 13, 1998; and 50,000
shares issued July 29, 1998. Additionally, the Company issued warrants for:
100,000 shares at $0.16 for 180 days; 200,000 shares at $0.20 for 60 days;
200,000 shares at $0.225 for 180 days; 200,000 shares at $0.30 for 180 days;
115,000 shares at $0.35 for 180 days and 200,000 shares at $0.50 for one year.
The warrants and securities were offered without registration under the
Securities Act of 1933, as amended, and were offered in reliance upon the
exemptions from registration provided by Rule 504 of Regulation D.
On March 19, 1998, the non-affiliated investor relations firm exercised
70,000 shares of their 200,000, $0.20 warrant. The Company received $14,000 and
issued 70,000 shares of common stock. The securities were offered without
registration under the Securities Act of 1933, as amended, and were offered in
reliance upon the exemptions from registration provided by Rule 504 of
Regulation D thereunder as a transaction not involving a public offering.
On April 1, 1998, the non-affiliated investor relations firm exercised the
balance of their $0.20 warrant, 130,000 shares. The Company received $26,000
and issued 130,000 shares of common stock. The securities were offered without
registration under the Securities Act of 1933, as amended, and were offered in
reliance upon the exemptions from registration provided by Rule 504 of
Regulation D thereunder as a transaction not involving a public offering.
On June 23, 1998, the non-affiliated investor relations firm exercised
their $0.16 warrant for 100,000 shares. The Company received $16,000 and issued
100,000 shares of common stock. The securities were offered without registration
under the Securities Act of 1933, as amended, and were offered in reliance upon
the exemptions from registration provided by Rule 504 of Regulation D thereunder
as a transaction not involving a public offering.
On July 2, 1998, the non-affiliated investor relations firm exercised
100,000 shares of their 200,000, $0.225 warrant. The Company received $22,500
and issued 100,000 shares of common stock. The securities were offered without
registration under the Securities Act of 1933, as amended, and were offered in
reliance upon the exemptions from registration provided by Rule 504 of
Regulation D thereunder as a transaction not involving a public offering.
On July 13, 1998, the non-affiliated investor relations firm exercised the
balance of 100,000 shares of their 200,000, $0.225 warrant. The Company
received $22,500 and issued 100,000 shares of common stock. The securities were
offered without registration under the Securities Act of 1933, as amended, and
were offered in reliance upon the exemptions from registration provided by Rule
504 of Regulation D thereunder as a transaction not involving a public
offering.
32
<PAGE>
On July 23, 1998, the non-affiliated investor relations firm exercised
100,000 shares of their 200,000, $0.30 warrant. The Company received $30,000
and issued 100,000 shares of common stock. The securities were offered without
registration under the Securities Act of 1933, as amended, and were offered in
reliance upon the exemptions from registration provided by Rule 504 of
Regulation D thereunder as a transaction not involving a public offering.
On July 27, 1998, the non-affiliated investor relations firm exercised the
balance of 100,000 shares of their 200,000, $0.30 warrant. The Company received
$30,000 and issued 100,000 shares of common stock. The securities were offered
without registration under the Securities Act of 1933, as amended, and were
offered in reliance upon the exemptions from registration provided by Rule 504
of Regulation D thereunder as a transaction not involving a public offering.
On July 31, 1998, the non-affiliated investor relations firm exercised
115,000 shares of their 115,000, $0.35 warrant. The Company received $40,000
and issued 115,000 shares of common stock. The securities were offered without
registration under the Securities Act of 1933, as amended, and were offered in
reliance upon the exemptions from registration provided by Rule 504 of
Regulation D thereunder as a transaction not involving a public offering.
On August 2, 1998, the Company issued a cumulative total of 180,000 shares
of its common stock pro rated among the members of the Board of Director of
Banyan Corporation and its wholly owned subsidiary, DoubleCase Corporation, for
their services rendered through 1998. Said shares were valued at $0.20 per
share. This transaction was exempt from registration under Section 4(2) of the
Securities Act and Rule 144 thereunder. Stock issued under these exemptions
carries certain resale restrictions and the stock certificates bear restrictive
legends.
Also on August 2, 1998, the Company issued a cumulative total of 45,070
shares of its common stock to three employees as severance. This transaction
was valued at $4,654. Of the securities were offered, 21,070 were offered
without registration under the Securities Act of 1933, as amended, and were
offered in reliance upon the exemptions from registration provided by Rule 504
of Regulation D thereunder as a transaction not involving a public offering.
The balance of this transaction, 24,000 shares, were offered exempt from
registration under Section 4(2) of the Securities Act and Rule 144 thereunder.
Stock issued under these exemptions carries certain resale restrictions and the
stock certificates bear restrictive legends
On August 2, 1998, the Company entered into a long-term agreement for the
provision of management consulting and investor relations services to the
Company. For said services, the Company issued 300,000 shares of its common
stock, valued at $45,000. Additionally, the Company issued the following
options to purchase the Company's common stock: 100,000 shares at $0.40; 100,000
shares at $0.80 and 100,000 shares at $1.20. All of the stated options expire
July 31, 2001. The securities and options were offered without registration
under the Securities Act of 1933, as amended, and were offered in reliance upon
the exemptions from registration provided by Rule 504 of Regulation D thereunder
as a transaction not involving a public offering.
33
<PAGE>
On August 2, 1998, the Company mistakenly issued 205,000 shares of its
common stock in exchange for 1,000,000 shares of Anything Internet Corporation
common stock. This exchange was to be for 200,000 shares of the Company's
common stock. The Company is recovering the 5,000 shares and will retire said
5,000 shares upon their return. Using equity accounting, this transaction was
valued at $86,629.00. The 1,000,000 shares the Company received from Anything,
Inc. were issued without registration under the Securities Act of 1933, as
amended, and were offered in reliance upon the exemptions from registration
provided by Rule 504 of Regulation D thereunder as a transaction not involving a
public offering. Additionally, the Company issued the following options to
purchase the Company's common stock: 100,000 shares at $0.50 originally expiring
February 28, 1998, but extended on February 18, 1999, to expire August 31, 1999;
100,000 shares at $1.00, expiring on August 31, 1999; and 100,000 shares at
$2.00 expiring August 31, 2000. This transaction was exempt from registration
under Section 4(2) of the Securities Act and Rule 144 thereunder. Stock issued
under these exemptions carries certain resale restrictions and the stock
certificates bear restrictive legends.
On December 4, 1998, the Company issued 200,000 shares of its common stock
as a result of a warrant to purchase 200,000 at $0.50, issued February 13, 1998,
was presented for exercise. Upon receipt of $100,000, the Company issued said
shares. The securities were offered without registration under the Securities
Act of 1933, as amended, and were offered in reliance upon the exemptions from
registration provided by Rule 504 of Regulation D thereunder as a transaction
not involving a public offering.
On December 29, 1998, the Company issued 62,500 shares of its common stock
as a result of an option to purchase 100,000 at $0.40, issued August 2, 1998,
was presented for partial exercise. Upon receipt of $25,000, the Company issued
62,500 shares. There remains 37,500 shares to purchase the Company's common
stock at $0.40 on this option. The securities were offered without registration
under the Securities Act of 1933, as amended, and were offered in reliance upon
the exemptions from registration provided by Rule 504 of Regulation D thereunder
as a transaction not involving a public offering.
On January 15, 1999, the Company offered to exchange certain shares of its
common stock that had been previously issued pursuant to the exercise of Rights
which required the subscriber to hold said shares of common stock for a period
of two years even though said shares were issued under Regulation D, 504. Said
shares were offered to be exchanged for shares that had no holding period
restriction. This exchange was offered to all holders of said shares. Any
shareholder which participated in the exchange agreed to the terms of the
exchange; one of which is that each holder would receive back 66.6% of the total
number of shares submitted to the company for exchange. The exchange offer
expired February 28, 1999. There were 141,985 shares presented for exchange.
All 141,985 shares were cancelled and retired and 94,657 shares of the Company's
common stock were issued in exchange. The securities were offered without
registration under the Securities Act of 1933, as amended, and were offered in
reliance upon the exemptions from registration provided by Rule 504 of
Regulation D thereunder as a transaction not involving a public offering.
34
<PAGE>
On February 19, 1999, the Company issued 111,472 shares of its common stock
at $0.897 per share and the proceeds from the sale were used for working
capital. Said shares were issued to a non-affiliate. The securities were
offered without registration under the Securities Act of 1933, as amended, and
were offered in reliance upon the exemptions from registration provided by Rule
504 of Regulation D thereunder as a transaction not involving a public offering
and an accredited investor.
On March 26, 1999, the Company issued 150,376 shares of its common stock at
$0.665 per share and the proceeds from the sale were used for working capital.
Said shares were issued to a non-affiliate. The securities were offered without
registration under the Securities Act of 1933, as amended, and were offered in
reliance upon the exemptions from registration provided by Rule 504 of
Regulation D thereunder as a transaction not involving a public offering and an
accredited investor.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company, through Article VI of its Bylaws, grants indemnification to
the Company's officers and directors, present and former, for expenses incurred
by them in connection with any proceeding that they are involved in by reason of
their being or having been an officer or director of the Company. The person
being indemnified must have acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Company.
Insofar as indemnification for liability arising under the Securities Act
may be permitted to directors or officers the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director or officer of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director or officer in connection with the securities being registered, the
Company will, unless in the opinion of its legal counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
35
<PAGE>
FINANCIAL STATEMENTS
- --------------------
AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998
CONTENTS
Independent Auditor's Report on
the Consolidated Financial Statements 37
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet 38
Consolidated Statement of Operations 40
Consolidated Statement of Stockholders' Deficit 41
Consolidated Statement of Cash Flows 43
Notes to Consolidated Financial Statements 44
36
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Banyan Corporation
Colorado Springs, Colorado
I have audited the accompanying consolidated balance sheet of Banyan Corporation
as of December 31, 1998 and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit. The consolidated statements of operations, stockholders' equity and
cash flows of Banyan Corporation for the year ended December 31, 1997 were
audited by other auditors whose report dated October 8, 1998 expressed an
unqualified opinion on those matters.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Banyan Corporation at December 31,
1998 and the results of its operations and its cash flows for the year ended
December 31, 1998 in conformity with generally accepted accounting principles.
/s/ Ronald R. Chadwick, P.C.
RONALD R. CHADWICK, P.C.
Aurora, Colorado
April 18, 199
37
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
COSOLIDATED BALANCE SHEET
(audited)
December 31, 1998
ASSETS
Current assets:
<S> <C>
Cash $ 30,256
Accounts receivable 47,495
Inventory 42,956
Prepaid expenses 4,914
---------
125,621
---------
Furniture and fixtures:
Office furniture and equipment 11,043
Equipment and tooling 5,648
Less accumulated depreciation (16,105)
---------
586
---------
Other assets:
Development costs 25,519
Trademarks and licenses, net of
Accumulated amortization of $49,828 35,227
Investment in Anything Internet Corp. 47,039
Other 4,700
---------
112,485
---------
$238,692
=========
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED BALANCE SHEET
(audited)
December 31, 1998
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
<S> <C>
Accounts payable $ 83,705
Accrued salaries and related expenses 85,553
Accrued interest 222,242
Notes payable 105,234
------------
496,734
------------
Stockholders' equity:
Preferred stock, Class A, no par value;
500,000 shares authorized;
187,190 issued and outstanding 334,906
Common stock, Class A, no par value;
50,000,000 shares authorized;
9,292,699 issued and outstanding 2,906,117
Common stock subscribed (143,000) 40,000
Stock subscription receivable (40,000)
Accumulated deficit (3,499,065)
------------
(258,042)
------------
$ 238,692
============
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(audited)
- Fiscal Years Ending -
December 31, December 31,
1998 1997
------------ -------------
<S> <C> <C>
Sales $ 206,467 $ 247,773
Cost of sales 69,006 116,152
------------ -------------
Gross profit 137,461 131,621
Selling, general and
administrative expenses 576,639 667,941
Loss from operations (439,178) (536,320)
Other income (expense):
Interest expense (22,913) (52,843)
Gain on sale of assets 3,449 -
Equity loss in
Anything Internet Corp. (39,590) -
Provision for income taxes - -
Net loss for the period (498,232) (589,163)
============ =============
Net income (loss) per share
(basic and fully diluted) ($0.06) ($0.25)
============ =============
Weighted average number of
common shares outstanding 8,359,433 2,409,898
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(audited)
For The Years Ended December 31, 1997 and 1998
Common Stock, Preferred Stock, Stock
Class A Class A Subscrip
----------------------- ------------------------ tion Accumulated Stock-holders'
Shares Amount Shares Amount Received Deficit Equity
---------- ----------- ---------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1996 246,669 $1,532,243 187,190 $ 334,906 $ - ($2,411,670) ($544,521)
Issuance of
shares pursuant
to rights
offering 1,378,120 134,803 134,803
Issuance of stock
for services 1,854,738 197,500 197,500
Sales of common
stock 1,319,000 223,454 223,454
Conversion of
debt to equity 126,600 29,710 29,710
Cancellation of
shares due to
default under
terms of
subscription
agreement (495,000) -
Common Stock
subscribed 40,000 (40,000) -
Net gain (loss)
for the year
ended December
31, 1997 (589,163) (589,163)
---------- ----------- ---------- ----------- -------------- ------------ ----------
Balances as of
December 31, 1997 4,430,127 $2,157,710 187,190 $ 334,906 ($40,000) ($3,000,833) ($548,217)
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(audited)
For The Years Ended December 31, 1997 and 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of
shares pursuant
to rights
offering 2,632,802 220,805 220,805
Issuance of stock
for services 952,270 154,973 154,973
Sales of common
stock 1,077,500 326,000 326,000
Stock issued for
equity investment 200,000 86,629 86,629
Net gain (loss)
for the year
ended December
31, 1998 (498,232) (498,232)
---------- ----------- ---------- ----------- ------------- ------------ ----------
Balances as of
December 31, 1998 9,292,699 $2,946,117 187,190 $ 334,906 ($40,000) ($3,499,065) ($258,042)
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(audited)
- For the Years Ended -
December 31, December 31,
1997 1998
---------- -----------
<S> <C> <C>
Cash flows from operating
activities:
Net operating deficit ($589,163) ($498,232)
Adjustments to
Reconcile net loss to
net cash provided:
Depreciation and
Mortgage expense 15,373 15,909
Loss in Anything Internet
Corporation - 39,590
Compensatory stock
Issuances - 154,973
Net changes in
operating assets
and liabilities:
Accounts receivable (39,330) 5,486
Inventory and prepaid
Expenses 28,244 (26,274)
Deposits - 4,319
Accounts payable
and accrued 47,621 (57,404)
expenses ---------- -----------
Net cash used by
Operations (537,255) (361,633)
---------- -----------
Cash flows from investing
activities:
Securities (16,329) 12,729
Net cash used by ---------- -----------
Investing activities (16,329) 12,729
Cash flow from financing
activities:
Receipts from notes payable - 5,000
Payments on notes payable (30,213) (76,640)
Proceeds from issuance of
Common stock 585,467 447,239
Net cash provided by ---------- -----------
financing activities 555,254 375,599
Net increase (decrease)
in cash 1,670 26,695
Cash at beginning of the
Period 1,891 3,561
---------- -----------
Cash at end of the period $ 3,561 $ 30,256
========== ===========
</TABLE>
43
<PAGE>
Schedule of Non-Cash Investing and Financing Activities:
- --------------------------------------------------------------
During the year ended December 31, 1997, the Company issued 1,981,338 common
shares for services valued at $197,500 and cancellation of indebtedness for
$29,712.
During the year ended December 31, 1998, the Company issued 200,000 common
shares to purchase an equity interest in Anything Internet Corporation valued at
$86,629, and issued 1,187,190 common shares for $99,566 in debt cancellation.
Supplemental Disclosure:
- -------------------------
Cash paid in 1997 and 1998 for interest and income taxes: None.
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(audited)
For the year ended December 31, 1998
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Banyan Corporation ("Banyan", the "Company"), was incorporated in the State of
Oregon on June 13, 1978. The Company manufactures and distributes hard carrying
cases for portable notebook computers and data storage devices. The Company's
principal markets consist of wholesale and retail sellers of computers and
related devices throughout the United States.
Principles of consolidation
- -----------------------------
The accompanying consolidated financial statements include the accounts of
Banyan Corporation and its wholly owned subsidiary, DoubleCase Corporation. All
inter-company accounts and transactions have been eliminated in consolidation.
Use of estimates
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
44
<PAGE>
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Income tax
- -----------
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss
carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
Cash and cash equivalents
- ----------------------------
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
Net income (loss) per share
- -------------------------------
The net income (loss) per share is computed by dividing the net income (loss) by
the weighted average number of shares of common outstanding. Warrants, stock
options, and common stock issuable upon conversion of the Company's preferred
stock are not included in the computation if the effect of such inclusion would
be anti-dilutive and would increase the earnings or decrease loss per share.
Inventory
- ---------
Inventory consists of raw materials and consigned finished goods. Inventories
are valued at the lower of cost or market using the first-in, first-out (FIFO)
method.
Property and equipment
- ------------------------
Property and equipment are recorded at cost and depreciated under accelerated
methods over an estimated life of five to seven years.
Other assets
- --------------
Product licenses and trademarks are recorded at cost and amortized based on the
straight line method over five to ten years.
45
<PAGE>
Accounts receivable
- --------------------
The Company reviews accounts receivable periodically for collectibility and
establishes an allowance for doubtful accounts and records bad debt expense when
deemed necessary. As of December 31, 1998, the balance in allowance for
doubtful accounts was $1,424.
Products and services, geographic areas and major customers
- ------------------------------------------------------------------
All Company sales were derived from a similar product line and were to external
customers. The Company sells to domestic, Canadian and European customers, and
had no one major customer accounting for over 10% of its sales. The Company's
long-term assets are all held domestically.
Revenue Recognition
- --------------------
Revenue is recognized by the Company when a product is shipped to a customer.
AICPA Statement of Position 98-5
- ------------------------------------
Effective January 1, 1999, the Company has adopted the AICPA Statement of
Position ("SOP") 98-5, which requires non-governmental entities to expense
startup costs as incurred. The adoption by the Company of SOP 98-5 is not
expected to have a material impact on the Company's financial statements.
NOTE 2. EQUITY INVESTMENT
On August 22, 1998 Banyan Corporation purchased 1,000,000 common shares of
Anything Internet Corporation, a marketer of wholesale and retail products over
the Internet, in exchange for 200,000 common shares of Banyan. The purchase
represented 35.7% of the outstanding common stock of Anything Internet
Corporation, and was recorded for valuation purposes by Banyan at $86,629.
Banyan's net equity in the investment was $49,485, resulting in a differential
between cost and equity of $37,144. This difference is amortized over a five
year period on a straight line basis, with accumulated amortization netted
against the Company's investment balance. At December 31, 1998, Anything
Internet Corporation had 200,000 common stock purchase warrants outstanding
which, if exercised by the holders, would reduce Banyan's common stock ownership
in Anything Internet Corporation to approximately 24%. As of December 31, 1998,
Banyan owned 26% of the outstanding common stock of Anything Internet
Corporation, and accounts for its investment under the equity method.
A pro forma statement of operations for the year ended December 31, 1998,
showing Banyan Corporation and Anything Internet Corporation combined, along
with the audited financial statements of Anything Internet Corporation as of and
46
<PAGE>
for the year ended December 31, 1998 are included as part of these Notes to
Consolidated Financial Statements, beginning on page 52.
NOTE 3. LEASE COMMITMENT
Effective May 1, 1998, DoubleCase Corporation entered into a lease agreement for
office and warehouse space; the lease agreement is for a period of twelve months
and can be renewed for an additional twelve months at the then current monthly
rental rate plus 3%. Lease expense incurred for the years ended December 31,
1997 and 1998 was $37,766 and $33,017, respectively. The remaining minimum
future rental payment, all in 1999, is $4,420.
NOTE 4. INCOME TAXES
Deferred income taxes arise from the temporary differences between financial
statement and income tax recognition of net operating losses. These loss
carryovers are limited under the Internal Revenue Code should a significant
change in ownership occur.
At December 31, 1998 the Company had approximately $3,000,000 of unused federal
net operating loss carryforwards, which begin to expire in the year 2005. A
deferred tax asset has been offset by 100% valuation allowance. The Company
accounts for income tax assets and liabilities as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1997 1998
-------------- --------------
<S> <C> <C>
Deferred tax liability $ - $ -
Deferred tax asset arising from:
Net operating loss carryforwards 1,041,465 1,235,776
-------------- --------------
1,041,465 1,235,776
Valuation allowance (1,041,465) (1,235,776)
-------------- --------------
Net Deferred Taxes $ - $ -
The income tax (benefit) consists
of the following:
Current:
Federal $ - $ -
State - -
-------------- --------------
Deferred: ($200,315) ($169,388)
Federal (29,485) (24,912)
State -------------- --------------
($229,800) ($194,311)
</TABLE>
47
<PAGE>
No difference exists between these amounts and amounts computed at federal and
state statutory rates. The net change in 1998 in the total valuation allowance
was $194,311.
NOTE 5. NOTES PAYABLE
At December 31, 1998, the Company had the following notes payable outstanding:
<TABLE>
<CAPTION>
Balances at
December 31,
1998
-------------
<S> <C>
Related party notes payable,
Unsecured, interest from 6% to 12%
per annum, maturing April 1, 2000 $ 38,647
Related party note payable,
Secured by all inventory, furniture,
equipment, and accounts receivable,
interest at 10% per annum, maturing
April 1, 2000 66,587
Total notes payable 105,234
Less current portion ( -)
Long term notes payable $ 105,234
</TABLE>
The schedule of maturities by fiscal year for all notes outstanding is as
follows:
Years ending December 31,
1999 $ -
2000 105,234
--------
Total $105,234
The fair value of the Company's long-term notes payable is estimated based on
the current rates offered to the Company for debt of the same remaining
maturity. At December 31, 1998, the fair value of the notes payable
approximated the amount recorded in the financial statements.
48
<PAGE>
NOTE 6. STOCKHOLDERS' EQUITY
Common stock
- -------------
The Company as of December 31, 1997 and 1998 had 50,000,000 shares of authorized
Class A common stock, no par value, with 4,573,127 and 9,292,699 shares issued
and outstanding respectively.
Preferred stock
- ---------------
The Company as of December 31, 1997 and 1998 had 500,000 shares of authorized
Class A preferred stock, no par value, with 187,190 shares issued and
outstanding at each date. The Company has the right at any time, to call any or
all preferred Class A shares at a price of $2.75 per share. Each Class A
preferred share is convertible by the record owner into one share of the
Company's Class A common stock at any time prior to redemption upon notice to
the Company.
Stock options
- -------------
In July and August, 1998, the Company granted stock options, exercisable
immediately, to certain officers of Anything Internet Corporation and to a
consulting company as compensation for services, to purchase common shares of
Banyan Corporation as follows:
<TABLE>
<CAPTION>
Amount Price/share Expiration Date
- -------------- ------------ ------------------
<C> <C> <S>
100,000 shares $ 0.50 August 31, 1999
100,000 shares $ 1.00 August 31, 1999
100,000 shares $ 2.00 August 31, 2000
37,500 shares $ 0.40 August 1, 2001
100,000 shares $ 0.80 August 1, 2001
100,000 shares $ 1.20 August 1, 2001
</TABLE>
The Company accounts for the fair value of its option grants in accordance with
SFAS 123. The Company has set no specific limits on the amount of options it
may issue for services, and the maximum term of any one of the options is three
years. The fair value of each option is estimated on the date of grant using
the Black Scholes option pricing model with the following weighted average
assumptions used for grants in 1998: no dividend yield, expected volatility of
215%, risk free rate of 5%, and an expected life of 2.26 years. The Company
recorded $2,066 in compensation expense under these grants in 1998
49
<PAGE>
Incentive stock option plan
- ------------------------------
As part of an overall executive compensation program, the Company has adopted a
tax qualified incentive stock option plan. The plan which is set to expire
September 18, 2005 unless extended by the directors, allows eligible employees
to receive options to acquire Class A common stock of the Company at a price
equivalent to 95% of the fair market value of the stock on the date the option
is granted. Each option granted will become exercisable over a ten year period
unless the optionee owns 10% or more of the stock of the Company, in which case
the option is exercisable over a five year period. The ability to exercise the
options vests at a rate of 20% per year. As of October 10, 1996, 105,345 shares
of Class A common stock of the Company have been reserved for sale through the
plan. Options to acquire 11,154 shares were outstanding (with 6,692 being
exercisable)on December 31, 1998 at an exercise price of $0.05 per share. The
fair value of each option is estimated on the date of grant using the Black
Scholes option pricing model with the following weighted average assumptions
used for grants in 1995: no dividend yield, expected volatility 263%, risk free
rate of 5%, and an expected life of 5 years. The Company recorded $1,256 in
compensation expense under these grants in 1998. The plan provides that the
number of shares issuable upon exercise as well as the exercise price will not
be adjusted for any post offering split or any other change in the overall
capitalization of the Company.
A summary of the status of the Company's stock options as of December 31, 1998,
and changes during the year ending on that date is presented below:
<TABLE>
<CAPTION>
December 31, 1998
-------------------------------
Weighted Avg.
Options Shares Exercise Price
------- -------------- ---------------
<S> <C> <C>
Outstanding at beginning of period 11,154 $ 0.05
Granted 537,500 $ 1.05
Exercised - -
Forfeited - -
-------------- ---------------
Outstanding at end of period 548,654 $ 1.05
Options exercisable at period end 544,192
Weighted average fair value of
Options granted during the
Period $ 0.95
</TABLE>
50
<PAGE>
The following table summarizes information about stock options outstanding at
December 31, 1998.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- ---------------------------
Weighted
Avg.
Range of Number Remaining Weighted Number Weighted Avg.
Exercise Outstanding Contractual Avg. Exercisable Exercise
Prices At 12/31/98 Life Exercise Price at 12/31/98 Price
- ----------- ----------- ------------ --------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
0.05-$2.00 548,654 19.54 months $ 1.05 544,192 $ 1.04
</TABLE>
Stock rights offering
- -----------------------
On November 15, 1996, the board of directors approved a rights offering to
shareholders of record on December 6, 1996. Each right allowed a shareholder to
acquire two shares of common stock for $0.125 per share. The terms of the
offering provided that the number of shares issuable upon exercise as well as
the exercise price would not be adjusted for any post offering stock splits or
any other change in the overall capitalization of the Company. The rights were
offered for $0.01 per right. Of the 2,449,609 rights that were issued,
2,005,401 were exercised and exchanged for 4,010,802 new shares of Class A
common stock, including 1,378,000 shares in 1997 and 2,632,802 shares in 1998.
NOTE 7. CONTINGENCIES
An officer of the Company is currently under indictment in U.S. District Court,
Southern District of New York for certain alleged securities violations
occurring in 1996. No allegations have been made against the Company. The
eventual effect of these proceedings, if any, on the Company's business
undertaking is unknown at the present time.
51
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION (and Subsidiary)and
ANYTHING INTERNET CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
Banyan Anything Ending
Corporation Int. Corp. Adjustments Balance
----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Sales, net $ 206,467 $ 2,303,692 $ - $2,510,159
Cost of sales 69,006 2,204,755 2,273,761
----------- ------------ ------------
Gross margin 137,461 98,937 236,398
Research and Development
Selling, general and
Administrative expenses 576,639 362,936 939,575
----------- ------------ ------------
(Loss) from operations (439,178) (263,999) (703,177)
Other income (expense)
Interest expense (22,913) (1,312) (24,225)
Gain (loss) on sale
of assets 3,449 3,449
Equity income of
Anything Internet (39,590) 39,590 -
----------- ------------ ------------- ------------
Income (loss) before
provision for income
taxes (498,232) (265,311) (39,590) (723,953)
Provision for income tax - - - -
----------- ------------ ------------- ------------
Net income (loss) ($498,232) (265,311) $ 39,590 ($723,953)
Net income (loss) per
share (basic and fully
diluted) ($0.06) ($0.23)
Weighted average number
of common shares
outstanding 8,359,433 1,144,917
</TABLE>
52
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Anything Internet Corporation
Colorado Springs, Colorado
I have audited the accompanying balance sheet of Anything Internet Corporation
as of December 31, 1998 and the related statements of operations, stockholders'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statement 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.
I believe that my audit provides a reasonable basis for our opinion.
In my opinion, the financial statements referred to above present, in all
material respects, the financial position of Anything Internet Corporation as of
December 31, 1998 and the results of its operations and its cash flows for the
year ended December 31, 1998 in conformity with generally accepted accounting
principles.
/s/ Ronald R. Chadwick, P.C.
RONALD R. CHADWICK, P.C.
Aurora, Colorado
April 18, 1999
53
<PAGE>
<TABLE>
<CAPTION>
ANYTHING INTERNET CORPORATION
BALANCE SHEET
December 31, 1998
ASSETS
<S> <C>
Current assets:
Cash $ 44,597
Accounts receivable 57,970
Inventory 12,244
Prepaid expenses 5,743
Other 4,386
--------
124,940
--------
Fixed assets:
Furniture and equipment 45,996
Less accumulated depreciation 6,629
--------
39,367
--------
Other assets:
Software development costs, net of
Accumulated amortization of $10,372 43,354
Notes receivable 18,023
Deposits 1,380
--------
62,757
--------
$227,064
========
</TABLE>
<TABLE>
<CAPTION>
ANYTHING INTERNET CORPORATION
BALANCE SHEET
December 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities:
Accounts payable $ 97,712
Accrued expenses 25,291
Note payable - line of credit 57,359
----------
180,362
----------
Stockholders' equity:
Common stock, no par value,
50,000,000 shares authorized;
3,003,500 issued and outstanding 323,000
Common stock subscribed (16,500 shares) 16,500
Stock subscription receivable (16,500)
Accumulated deficit (276,298)
----------
46,702
----------
Total Liabilities and Stockholders' Deficit $ 227,064
==========
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
ANYTHING INTERNET CORPORATION
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
<S> <C>
Sales $2,303,692
Cost of sales 2,204,755
-----------
Gross margin 98,937
Research and development -
Selling, general and administrative expenses 362,936
-----------
Loss from operations (263,999)
Other income (expense)
Interest expense (1,312)
-----------
Income (loss) before provision for income taxes (265,311)
Provision for income tax -
-----------
Net income (loss) ($265,311)
===========
Net income (loss) per share
(Basic and fully diluted) ($0.23)
===========
Weighted average number of
Common shares outstanding 1,144,917
===========
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
ANYTHING INTERNET CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Year Ended December 31, 1998
Common Stock Issued
----------------------- Retained Total
Number Amount Deficit Equity
---------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 10,000 $ 18,200 ($10,987) $ 7,213
Compensatory stock issuances 2,320,000 109,400 - -
Conversion of debt to equity 1,950 10,500 - 10,500
Stock retirement and (11,950)
reissuance 500,000 - - -
Sales of common stock 183,500 184,900 - 184,900
Common stock subscribed
(16,500 shares) - 16,500 (16,500) -
Net gain (loss) for the year
ended December 31, 1998 (265,311) (265,311)
---------- ----------- ---------- ---------
Balances at December 31, 1998 3,003,500 $ 339,500 ($16,500) $ 46,702
========== =========== ========== =========
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
ANYTHING INTERNET CORPORATION
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1998
Cash flows from operating activities:
<S> <C>
Net income (loss) ($265,311)
Adjustments to reconcile net income to
net cash provided by (used for) operating activities:
Depreciation and amortization expense 17,001
Compensatory stock issuances 92,800
Accounts receivable (57,970)
Prepaids and other assets (10,129)
Inventory (12,244)
Deposits (1,380)
Accounts payable and accrued expenses 123,003
----------
Net cash provided by (used for) operating activities (114,230)
----------
Cash flows from investing activities:
Acquisition of office equipment (45,997)
Software development costs (37,125)
Note receivable (18,023)
----------
Net cash provided by (used for) investing activities (101,145)
----------
Cash flows from financing activities:
Proceeds from borrowing 67,859
Sale of common stock 184,900
----------
Net cash provided by (used for) financing activities 252,759
----------
Net increase (decrease) in cash 37,384
Cash at beginning of the period 7,213
----------
Cash at end of the period $ 44,597
==========
</TABLE>
Schedule of non-cash investing and financing activities:
During the year ended December 31, 1998, the Company
issued 830 common shares for software development services
valued at $16,600, and 1,950 common shares valued at
$10,500 for debt retirement.
57
<PAGE>
Supplemental disclosure:
Cash paid in 1998 for interest: $1,312.
ANYTHING INTERNET CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Anything Internet Corporation ("Anything Internet", the "Company"), was
incorporated in the State of Colorado on August 15, 1997. The Company markets
and distributes computers and related accessory products by using the Internet
as the exclusive distribution channel. On August 28, 1998, Anything, Inc.
changed its name to Anything Internet Corporation, which was made effective
through an amendment to its Articles of Incorporation filed with the Secretary
of State of Colorado on August 31, 1998.
Use of estimates
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Income tax
- -----------
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss
carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
Cash and cash equivalents
- ---------------------------
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
58
<PAGE>
Net income (loss) per share
- -------------------------------
The net income (loss) per share is computed by dividing the net income (loss) by
the weighted average number of shares of common outstanding. Warrants, stock
options, and common stock issuable upon conversion of the Company's preferred
stock are not included in the computation if the effect of such inclusion would
be anti-dilutive and would increase the earnings or decrease loss per share.
Inventory
- ---------
Inventory consists of consigned finished goods. Inventories are valued at the
lower of cost or market using the first-in, first-out (FIFO) method.
Property and equipment
- ------------------------
Property and equipment are recorded at cost and depreciated under accelerated
methods over an estimated life of five to seven years.
Software development costs
- ----------------------------
It is the Company's policy to capitalize major software development activities
to reflect the value of the software over its anticipated useful life. The
Company amortizes this software over a three year period from the implementation
of the software.
Accounts receivable
- --------------------
The Company reviews accounts receivable periodically for collectibility and
establishes an allowance for doubtful accounts and records bad debt expense when
deemed necessary.
Products and services, geographic areas, and major customers
- -------------------------------------------------------------------
Company sales were derived from marketing and distributing computers and related
products over the Internet, were to external customers, and were domestic. The
Company had no one major customer accounting for over 10% of its sales. The
Company's long term assets are all held domestically.
Revenue recognition
- --------------------
The Company recognizes revenue when a product is shipped to customers either
from the Company's inventory or when shipped from distributors' warehouses
directly to the customer. The Company assumes title to the product when it is
shipped either to the Company or directly to the Company's customer.
59
<PAGE>
NOTE 2 - RELATED PART TRANSACTIONS:
On December 31, 1998, the Company loaned Robert C. Schick, President, $18,023 at
a rate of 3% per annum. The note matures and is payable in full on December 31,
1999.
NOTE 3 - LEASE COMMITMENT
Effective June 2, 1998, the Company entered into a lease agreement for office
space; the lease agreement is for a period of twelve months and can be renewed
at terms and conditions to be established at expiration date. Lease expense
incurred for the year ended December 31, 1998 was $9,244. The remaining minimum
future rental payment, all in 1999, is $6,400.
NOTE 4 - LINES OF CREDIT
To help finance the cost of inventory, Nations Credit Distribution Finance, Inc.
has extended the Company a credit line not to exceed $35,000. The interest rate
applicable to each transaction depends upon the vendor and the timeliness of
repayment, and ranges from 0% to 18%. The credit line is unsecured.
The Company has also established a $50,000 line of credit with U.S. Bank of
Colorado Springs, Colorado. Payments are due on the 15th of each month and
interest accrues at the rate of 10.45% per annum.
NOTE 5 - INCOME TAXES
Deferred income taxes arise from the temporary differences between financial
statement and income tax recognition of net operating losses. These loss
carryovers are limited under the Internal Revenue Code should a significant
change in ownership occur.
At December 31, 1998 the Company had approximately $275,000 of unused federal
net operating loss carryforwards, which begin to expire in the year 2007. A
deferred tax asset has been offset by 100% valuation allowance. The Company
accounts for taxes pursuant to SFAS 109. The components of the Company's
deferred tax assets and liabilities are as follows:
60
<PAGE>
<TABLE>
<CAPTION>
December 31, December 31,
1997 1998
-------------- --------------
<S> <C> <C>
Deferred tax liability $ - $ -
Deferred tax asset arising from:
Net operating loss carryforwards 10,987 276,298
-------------- --------------
10,987 276,298
Valuation allowance (10,987) (276,298)
-------------- --------------
Net Deferred Taxes $ - $ -
The income tax (benefit) consists
of the following:
Current:
Federal $ - $ -
State - -
-------------- --------------
Deferred: ($3,736) ($90,206)
Federal (549) (13,265)
State -------------- --------------
($4,285) ($103,471)
</TABLE>
No difference exists between these amounts and amounts computed at federal and
state statutory rates. The net change in 1998 in the total valuation allowance
was $103,471.
NOTE 6 - STOCKHOLDERS' EQUITY
Common stock
- ------------
The Company as of December 31, 1998 had 50,000,000 shares of authorized common
stock, no par value, with 3,003,500 shares issued and outstanding.
In May 1998 an officer provided the Company with $1,400 in cash and web page
design and development valued at $16,600. In August 1998 the Company exchanged
1,950 shares of common stock for debt cancellation by an officer in the amount
of $10,500. Later in August 1998, the Company retired all of its 7,750
currently outstanding shares, in addition to 4,200 retired earlier in the year,
in exchange for 500,000 shares of new Class A common shares of Banyan
Corporation valued at $40,000 in exchange for 1,000,000 Class A common shares of
the Company. In addition the Company issued 1,300,000 shares of Class A common
stock for management consulting, legal, and investor relations services valued
at $52,000 to parties unrelated to the Company or Banyan Corporation. In
September 1998 the Company issued to members of its Board of Directors 20,000
shares of Class A common stock for services. Finally, in December 1998 the
Company sold 183,500 shares (200,000 counting subscriptions exercised in January
1999) of Class A common stock in a private placement.
61
<PAGE>
Warrants
- --------
As of December 31, 1998, the Company had 183,500 (200,000 counting subscriptions
exercised in January 1999) Common Stock Purchase Warrants outstanding (the
"Warrants"), issued in conjunction with a private placement completed in
December 1998. Each Warrant entitles the holder to purchase one share of the
Company's Class A common stock at an exercise price of $3.00 per share through
January 15, 2000, at which time the Warrants expire. The Company may redeem the
Warrants at a price of $0.01 per Warrant, at any time through January 15, 2000
upon not less than 30 days, nor more than 60 days prior written notice, provided
that the closing bid quotation for the common stock as reported by any quotation
service on which the common stock is quoted is at least $4.00 for ten
consecutive trading sessions ending on the two days prior to the day on which
notice is given.
62
<PAGE>
UNAUDITED 3-MONTHS INTERIM FINANCIAL STATEMENTS ENDING MARCH 31, 1999
<TABLE>
<CAPTION>
BANYAN CORPORATION
COSOLIDATED BALANCE SHEET
(unaudited)
March 31, 1999
ASSETS
<S> <C>
Current assets:
Cash $ 14,409
Accounts receivable 60,821
Inventory 43,775
Prepaid expenses 4,914
--------
123,919
--------
Furniture and fixtures:
Office furniture and equipment 11,921
Equipment and tooling 5,648
Less accumulated depreciation 16,295
--------
1,274
--------
Other assets:
Development costs 25,519
Trademarks and licenses, net of
Accumulated amortization of $52,759 32,296
Investment in Anything Internet Corp. 35,287
Other 4,700
--------
97,802
--------
$222,995
=========
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED BALANCE SHEET
(unaudited)
March 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities:
Accounts payable $ 82,621
Accrued salaries and related expenses 88,992
Accrued interest 225,031
Notes payable 105,234
------------
501,878
------------
Stockholders' equity:
Preferred stock, Class A, no par value;
500,000 shares authorized;
187,190 issued and outstanding 334,906
Common stock, Class A, no par value;
50,000,000 shares authorized;
9,301,107 issued and outstanding 2,956,117
Common stock subscribed (349,112 shares) 190,000
Stock subscription receivable (190,000)
Accumulated deficit (3,569,906)
------------
(278,883)
------------
$ 222,995
============
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
- Three Months Ending -
March 31, March 31,
1999 1998
---------- -----------
unaudited unaudited
---------- -----------
<S> <C> <C>
Sales $ 31,037 $ 58,486
Cost of sales 20,133 51,409
---------- -----------
Gross profit 10,904 7,077
Selling, general and
administrative expenses 67,196 96,184
Other income (expense):
Interest expense (2,797) (11,726)
Loss on sale of assets - (236)
Equity loss in
Anything Internet Corp. (11,752) -
Net loss for the period (70,841) (101,069)
Provision for income taxes - -
Earnings per share (weighted) ($0.01) ($0.02)
Weighted average number of
common shares outstanding 9,296,903 6,098,128
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
- Three Months Ending -
March 31, March 31,
1999 1998
---------- -----------
unaudited unaudited
---------- -----------
Cash flows from operating
activities:
<S> <C> <C>
Net operating deficit ($70,841) ($101,069)
Adjustments to
Reconcile net loss to
net cash provided:
Depreciation and
Mortgage expense 3,121 3,231
Loss in Anything Internet
Corporation 11,752 -
Accounts receivable (13,326) (384)
Inventory and prepaid
expenses (819) 4,131
Accounts payable
and accrued 5,144 18,785
expenses ---------- -----------
Net cash used by
Operations (64,969) (75,306)
---------- -----------
Cash flow from financing
activities:
Proceeds from issuance of
Common stock 50,000 275,678
Purchase of fixed assets (878) (2,000)
Sale of fixed assets - 535
Increase in notes
Receivable - (10,000)
Repayment of notes payable - (163,083)
Net cash provided by ---------- -----------
Financing activities 49,122 101,130
Net increase (decrease)
in cash (15,847) 25,824
Cash at beginning of the
period 30,256 3,561
---------- -----------
Cash at end of the period $ 14,409 $ 29,385
========== ===========
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(unaudited)
For the three months ending March 31, 1999
Common Stock, Preferred Stock, Stock
Class A Class A Subscrip-
---------------------- ----------------- tion Accumulated Stock-holders'
Shares Amount Shares Amount Received Deficit Equity
---------- ---------- ------- -------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1998 9,292,699 $2,946,117 187,190 $334,906 ($40,000) ($3,499,065) ($258,042)
Common Stock
subscribed 50,000 50,000
(206,112 shares) 55,736 150,000 (150,000)
Common stock
shares cancelled (47,328)
Balances as of
March 31, 1999 9,301,107 $3,146,117 187,190 $334,906 ($190,000) ($3,569,906) ($278,883)
</TABLE>
PART III
- --------
Item 1. INDEX TO EXHIBITS
The following exhibits are filed as a part of this disclosure statement:
Exhibit
Number Description
- ------- -----------
3.1 Articles of Incorporation, filed on June 13, 1978
3.2* Certificate of Incorporation
3.3* Restated Articles of Incorporation, filed on August 25, 1981
3.4* Amended Articles of Amendment, filed on February 29, 1988
3.5* Amended Articles of Amendment, filed December 29, 1995
3.6* By-laws
10.1* Share Exchange Agreement dated February 25, 1988.
10.2* Share Exchange Agreement dated October 27, 1995.
10.3* Lease agreement for 4740 Forge Rd., Bldg. 112, Colorado Springs, CO
80907
10.4* Equity Exchange Agreement between Banyan Corporation and Anything,
Inc. Dated August 19, 1998
16.1 Letter on Change in Certifying Accountants
21.1 List of subsidiaries.
23.1 July 21, 1999 consent letter of Ronald R. Chadwick, P.C.
23.2 J. Paul Kenote, CPA, P.C. opinion letter on October 8, 1998 audit
report
27.1* Financial Data Schedule for fiscal year ending June 30, 1998
27.2* Interim Financial Data Schedule for three-months ending March 31,
1999.
67
<PAGE>
* Incorporated by reference to registration statement on Form 10-SB (No.
000-26065) filed May 14, 1999.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.
BANYAN CORPORATION
(Registrant)
Date: August 12, 1999 By: /s/ Cameron B. Yost
----------------------------
Cameron B. Yost
President, Chairman and
Chief Executive Officer
In accordance with the requirements of the Securities Exchange Act of 1934,
this Disclosure Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Cameron B. Yost President, Chairman and
- ---------------------- Chief Executive Officer August 12, 1999
Cameron B. Yost
/s/ Lloyd K. Parrish Jr.
- ---------------------- Director August 12, 1999
Lloyd K. Parrish Jr.
/s/ Lawarance Stanley
- ---------------------- Secretary and Director August 12, 1999
Lawarance Stanley
</TABLE>
68
<PAGE>
ARTICLES OF INCORPORATION
OF
OMNI-TECH INTERNATIONAL CORPORATION
The undersigned natural person of the age of eighty acting as Incorporator
under the Oregon Business Corporation Act, adopt the following Articles of
Incorporation:
ARTICLE I
The name of this corporation is Omni-Tech International Corporation, and
its duration shall be perpetual.
ARTICLE II
The purpose or purposes for which the Corporation is organized are:
To engage in any lawful activity for which Corporations may be organized
under Chapter 57 of Oregon Revised Statutes; including but not limited to
services and activities In the fields of high technology.
ARTICLE III
The amount of total authorized capital stock of this Corporation is
$50,000.00,.consisting of 5,000,000 shares of common stock having a par value of
$0.01 ( one cent ) per share. This stock is comprised of one series, having no
pre-emptive rights, and each share is entitled to one vote on each matter
submitted to a vote at any meeting of Its shareholders.
ARTICLE IV
The address of the initial registered office of the Corporation is 811 S.W.
6th Avenue, Suite 712 Portland, Oregon 97204 and the name of its initial
registered agent at such address is Gary L. Jordan.
ARTICLE V
The business and affairs of the Corporation shall be managed by a governing
board called the Board of Directors, and the number thereof shall be fixed by
the bylaws of this Corporation, but shall not be less than three.
ARTICLE VI
The number of directors constituting the initial board of directors of the
Corporation is three, and the names and addresses of the persons who are to
serve as directors until the first annual meeting of shareholders or until their
successors are elected and shall qualify are:
<PAGE>
Brian J. Baldwin
6001 140th, N.E. Apt. 357
Redmond, Washington 98052
N. Dean Morgan
1331 Bellefield Park Lane
Belleview, Washington
Gary L. Jordan
811 S. W. 6th Avenue, Suite 712
Portland, Oregon 97204
ARTICLE VII
The Corporation shall indemnify, exonerate, reimburse or defend any present
or former director, officer, employee, affiliate, agent or contractor of this
corporation for expenses, claims, liabilities, indebtedness, penalties, damage
or injury incurred by or caused by them in such capacity except for their own
negligence, knowing unauthorized acts or defalcations not ratified or adopted or
the benefit thereof received by this corporation.
ARTICLE VIII
The name and address of the incorporator is:
Gary L. Jordan
811 S. W. 6th Avenue, Suite 712
Portland, Oregon 97204
I, the undersigned incorporator, declare under penalties of perjury that I
have examined the foregoing and to the best of my knowledge and belief, it is
true, correct and complete.
/s/ Gary L. Jordan
Gary L. Jordan
Dated: June 12, 1978
<PAGE>
LETTER ON CHANGE IN CERTIFYING ACCOUNTANT
July 28, 1999
Banyan Corporation
4740 Forge Rd., Bldg. 112
Colorado Springs, CO 80907
Dear Mr. Yost:
This letter is to confirm that the reason I am no longer the auditor of record
for Banyan Corporation is due to the fact that I have redirected the focus of my
professional practice and as such I no longer perform audits of publicly traded
companies.
Sincerely,
J. PAUL KENOTE, CPA, P.C.
/s/ J. Paul Kenote, CPA
J. Paul Kenote, CPA
<PAGE>
LIST OF SUBSIDIARIES
As of March 31, 1999, Banyan owned:
100% - DoubleCase Corporation
<PAGE>
CONSENT LETTER OF RONALD R. CHADWICK, P.C.
Ronald R. Chadwick, P.C.
Certified Public Accountant
3025 S. Parker Road
Suite 109
Aurora, Colorado 80014
----------------------------
Telephone: (303) 306-1967
Telephone: (303) 306-1944
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I hereby consent to the use in this Form 10-SB filing by Banyan Corporation, of
my report dated April 18, 1999 relating to the consolidated financial statements
of Banyan Corporation which appear in said filing. I also consent to the
reference to my firm under the heading "Experts" in said filing.
/s/ Ronald R. Chadwick, P.C.
RONALD R. CHADWICK, P.C.
Aurora, Colorado
July 21, 1999
<PAGE>
J. PAUL KENOTE, CPA, P.C. OPINION LETTER ON OCTOBER 8, 1998 AUDIT REPORT
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors:
Banyan Corporation and Subsidiary
Colorado Springs, Colorado
We have audited the accompanying consolidated balance sheet of Banyan
Corporation and subsidiary as of December 31, 1997 and 1996 and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the years then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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, these consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Banyan
Corporation and subsidiary at December 31, 1997 and 1996 and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ J. PAUL KENOTE, CPA, P.C.
Portland, Oregon
October 8, 1998
<PAGE>
