U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission File No. 0-26065
BANYAN CORPORATION
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(Exact name of Registrant as specified in its charter)
Oregon 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)
(719) 531-5535
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
------- -------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at January 10, 2000
----- ----------------------------
Common Stock, no par value 10,031,101
<PAGE>
Transitional Small Business Disclosure Form (check one):
Yes No X
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BANYAN CORPORATION
TABLE OF CONTENTS
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements, Unaudited
Unaudited Consolidated Balance Sheets
at September 30, 1999
Unaudited Consolidated Statement of Operations
for the three months ended
September 30, 1999 and 1998
Unaudited Consolidated Statement of Cash Flow for the
three months ended September 30, 1999 and 1998
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or
Plan of Operation
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibits
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED BALANCE SHEET
UNAUDITED
as of as of
September 30, 1999 June 30, 1999
------------- ------------
ASSETS
Current assets
<S> <C> <C>
Cash and marketable securities $28,872 $16,838
Accounts receivable 75,078 68,371
Inventory 36,976 44,127
Prepaid expenses 7,261 7,261
-------------------------------------------------------
148,187 136,597
Fixed Assets
Furniture and fixtures 11,921 11,921
Equipment and tooling 15,648 7,594
-------------------------------------------------------
27,569 19,515
Less: Accumulated depreciation 17,175 16,485
-------------------------------------------------------
10,394 3,030
Other assets
Trademarks and licenses, net of accumulated 26,434 29,365
amortization of $58,621 and $55,690, respectively
Investment in Anything Internet Corporation 36,948
Other 7,200 4,700
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-------------------------------------------------------
33,634 71,013
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$192,215 $210,640
=======================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $121,893 $86,311
Accrued salaries and related expenses 38,026 38,076
Accrued interest 230,692 227,847
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390,611 352,234
Notes payable 105,234 105,234
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495,845 457,468
Stockholders' deficit
Preferred stock, Class A: no par value;
500,000 shares authorized; 187,190 issued and outstanding;
callable at $2.75 per share and convertible 334,906 334,906
Common stock, Class A: no par value;
50,000,000 shares authorized;
9,879,746 and 9,691,804 issued and outstanding 3,327,598 3,202,597
Common stock subscribed (146,357 and 334,299 share 42,233 167,233
respectively)
Stock subscription receivable (42,233) (167,233)
Accumulated deficit (3,966,134) (3,784,331)
-------------------------------------------------------
-------------------------------------------------------
(303,630) (246,828)
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$192,215 $210,640
=======================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
UNAUDITED
for the nine months ended September 30, 1999
Common Stock Preferred Stock Stock Common Stock Subscribed
Class A Class A Subscription Accumulated Stockholders'
Shares Amount Shares Amount Receivable Shares Amount Deficit Deficit
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1998 9,292,699 $2,922,795 187,190 $334,906 ($40,000) 143,000 $40,000 ($3,541,262 ($283,561)
Sales of common stock 634,375 404,803 404,803
Common stock subscribed (2,233) 3,357 2,233
Common stock shares cancelled (47,328)
Net gain (loss) for the year
ended September 30, 1999 (424,872) (424,872)
Balances at September 30,1999 9,879,746 $3,327,598 187,190 $334,906 ($42,233) 146,357 $42,233 ($3,966,134)($303,630)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
for the three months ended for the nine months ended
September 30,1999 September 30,1998 September 30, 1999 September 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales, net $52,156 $60,882 $116,497 $161,237
Cost of sales 18,191 25,758 43,121 73,491
---------------------------------------------------------------------------
Gross margin 33,965 35,124 73,376 87,746
Selling, general and administrative expenses 171,658 98,663 367,156 299,933
---------------------------------------------------------------------------
Loss from operations (137,693) (63,539) (293,780) (212,187)
Other income (expense)
Interest expense, net (7,163) (3,342) (12,767) (19,851)
(Loss) on sale of assets (236)
Equity loss of Anything Internet Corporation (36,948) (118,325)
---------------------------------------------------------------------------
Income (loss) before provision for income taxes (181,804) (66,881) (424,872) (232,274)
Provision for income taxes - - - -
---------------------------------------------------------------------------
Net income (loss) ($181,804) ($66,881) ($424,872) ($232,274)
========================================================================
Net income (loss) per share
(Basic and fully diluted) ($0.02) ($0.01) ($0.04) ($0.03)
========================================================================
Weighted average number of
common shares outstanding 9,785,775 8,407,664 9,586,223 6,730,163
========================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
for the three months ended for the nine months ended
September 30,1999 September 30,1998 September 30, 1999 September 30, 1998
------------- ------------- ------------- -------------
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income (loss) ($181,804) ($66,881) ($424,872) ($232,274)
Adjustments to reconcile net income to
net cash provided by (used for)
operating activities:
Depreciation and amortization 3,622 5,706 13,578 12,168
Loss in Anything Internet Corporation 36,948 118,325
Accounts receivable (6,707) (68,057) (27,583) (46,294)
Inventory, prepaid expenses and deposits 4,652 (16,520) 1,132 (21,414)
Accounts payable and accrued expenses 38,376 (6,001) (889) (10,169)
Net cash provided by (used for)
---------- ---------- ---------- -----------
operating activities (104,913) (151,753) (320,309) (297,983)
-----------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 125,001 145,000 404,803 436,678
Purchase of fixed assets (8,054) (10,878) (2,000)
Sale of fixed assets 2,535
Sales of marketable security 16,329
Increase in investment in Anything Internet Corporation (75,000)
Payments of notes payable (160,051)
Net cash provided by (used for)
---------- ---------- ---------- -----------
financing activities 116,947 145,000 318,925 293,491
-----------------------------------------------------------------------------------------
Net increase (decrease) in cash 12,034 (6,753) (1,384) (4,492)
Cash at the beginning of the period 16,838 5,822 30,256 3,561
-----------------------------------------------------------------------------------------
Cash at the end of the period $28,872 ($931) $28,872 ($931)
=========================================================================================
</TABLE>
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of the
information and disclosures required by generally accepted accounting principles
for complete financial statements. All adjustments which are, in the opinion of
management, necessary for a fair presentation of the results of operations for
the interim periods have been made and are of a recurring nature unless
otherwise disclosed herein. The results of operations for such interim periods
are not necessarily indicative of operations for a full year.
NOTE 2. 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.
Unaudited financial statements
The financial statements for the period ending September 30, 1999 and the
accompanying footnotes have not been audited. Adjustments have been made that,
in the opinion of management, are necessary in order to make these financial
statements not misleading.
Principles of consolidation
The accompanying consolidated financial statements include the accounts of
Banyan Corporation and its wholly owned subsidiary, DoubleCase Corporation. All
intercompany 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 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.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- Continued
NOTE 2. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
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.
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 September 30, 1999 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 one customer accounted 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 a
customer.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 2. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
AICPA Statement of Position 98-5
Effective January 1, 1999 the Company has adopted the AICPA Statement of
Position ("SOP") 98-5, which requires nongovernmental 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.
Financial instruments
The carrying value of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable, and long term debt,
as reported in the accompanying balance sheet, approximates fair market value.
NOTE 3. 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 by Banyan at cost of $106,629. 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.
NOTE 4. 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 year ended
December 31, 1998 and the nine months ended September 30, 1999 was $33,017 and
$11,249 respectively.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
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 $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 a 100% valuation allowance. The
Company accounts for income taxes pursuant to SFAS 109. The components of the
Company's deferred tax assets and liabilities are as follows:
September 30, December 31,
1999 1998
Deferred tax liability $ - $ -
Deferred tax asset arising from:
Net operating loss carryforwards 1,328,343 1,235,776
--------- ---------
1,328,343 1,235,776
Valuation allowance (1,328,343) (1,235,776)
Net Deferred Taxes $ - $ -
Income taxes at Federal and state statutory rates are reconciled to the
Company's actual income tax as follows:
Nine months Year ended
ended Sept. 30, December 31,
1999 1998
Current:
Federal (34%) $ - $ -
State (5%) $ - $ -
Deferred:
Federal (34%) (144,457) (168,269)
State (5%) (21,244) ( 24,746)
Valuation allowance 165,701 193,015
----------------- -------
$ - $ -
----------------- ---------------
The net change in the nine months, 1999 in the total valuation
allowance was $165,701.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 6. NOTES PAYABLE
At September 30, 1999 the Company had the following notes payable
outstanding:
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
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 September 30, 1999, the fair value of the notes payable
approximated the amount recorded in the financial statements.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 7. STOCKHOLDERS' EQUITY
Common stock
The Company as of September 30, 1999 and December 31, 1998 had 50,000,000
shares of authorized Class A common stock, no par value, with 9,879,746 and
9,292,699 shares issued and outstanding respectively.
Preferred stock
The Company as of September 30, 1999 and December 31, 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
As of September 30, 1999, the Company had stock options outstanding from
stock option awards and from an incentive stock option plan, which are described
below. The Company applies APB Opinion 25 and related interpretations in
accounting for stock options. Accordingly, no compensation cost has been
recognized for its stock options, nor was any compensation cost charged against
income under its stock options in 1998 or 1999. Had compensation cost for the
Company's stock option awards and incentive stock option plan been determined
based on the fair market value at the grant dates for awards under the stock
option grants and incentive stock option plan consistent with the method of FASB
Statement 123, the Company's net income and earning per share would have been
reduced to pro forma amounts indicated below:
For the nine months
1998 1999
------ ----
Net income (loss) As reported $(494,910) $(424,873)
Pro forma $(497,023) $(424,873)
Basic and fully diluted As reported $(0.06) $(0.03)
Earnings per share
Pro forma $(0.06) $(0.03)
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 7. STOCKHOLDERS'EQUITY (Continued)
Stock options awards
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:
Amount Price/share Expiration date
------ ----------- ---------------
100,000 shares $ 0.50 August 31, 2000(1)
100,000 shares $ 1.00 August 31, 2000(1)
100,000 shares $ 2.00 August 31, 2001(1)
37,500 shares $ 0.40 August 1, 2001
100,000 shares $ 0.80 August 1, 2001
100,000 shares $ 1.20 August 1, 2001
(1) On November 9, 1999, the expiration dates of the stock options noted were
extended by one year to the current dates at a board of directors meeting.
The stock options granted to non-employees were issued pursuant to a
consulting agreement with no stated fee amount. The Company believes the value
of the consulting work performed approximates the fair market value of the
options granted (approximately $2,000)
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 June 30, 1999, at an exercise price of $0.05 per
share.
A summary of the status of the Company's stock options as of
September 30, 1999, and changes during the year ending on that
date is presented below:
September 30, 1999
Weighted Ave
Shares Exercise Price
Options
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 $ 0.0038
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 7. STOCKHOLDERS'EQUITY (Continued)
The following table summarizes information about stock options
outstanding at September 30, 1999.
<TABLE>
<CAPTION>
Options Outstanding Options
Exercisable
Number Weighted Ave. Number
Range of Outstanding Remaining Weighted Ave. Exercisable Weighted Ave.
Exercise Prices at 9/30/99 Contractual Life Exercise Price at 9/30/99 Exercise 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
stockholders 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 8. CONTINGENCIES
The Company's Chairman, President and Chief Executive Officer, Cameron
Yost, was recently convicted in the U.S. District Court for the Southern
District of New York for violations of United States Code Title 15, Section 78;
Title 17, Sections 240.10b-5; and Title 18, Sections 2, 371, 1343 and 1346 in
connection with the common stock of Banyan Corporation. Sentencing is expected
to take place in the current fiscal quarter. The conviction, and any sentencing,
could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Nine Months Ending September 30, 1999 Compared to Nine Months Ending
September 30, 1998
Net sales for the nine months ended September 30, 1999 were $116,497 down 27.7%
for the same period in 1998. This decline in sales was caused by the continuing
impact of reduced advertising expenditures. Also contributing to this reduction
is the need to modernize the DoubleCase product line. Without a strong
advertising presence in the market and without a more modern product line, the
Company will continue to experience sales declines as new customers will not be
attracted to buy product. The net loss for the nine month period in 1999 of
$424,872 was 82.9% greater than for the same period in 1998. The increased loss
was primarily caused by increased operating expenses and the Company's share of
the equity loss in Anything Internet Corporation as explain below.
Gross margins for the nine month period continued to improve over the same
period in 1998. Margins were 63.0% compared with 54.4% last year. This
improvement reflects the impact of management's continuing effort to reduce
costs wherever possible. Selling, general and administrative expenses increased
sharply from $299,933 in 1998 to $367,156 in 1999. The increased expenditures
were primarily caused by an increase in professional expenses of $56,502 needed
to comply with certain governmental regulations and other legal matters.
Interest expense declined 36% from the same period last year reflecting the
impact of the conversion of notes payable into common stock through a private
placement offering in 1998.
Also contributing to the increase in the net loss for the nine month period of
1999 compared with the same period in 1998 was the Company's share in the loss
of Anything Internet Corporation. The Company's entire investment has now been
written off, so no more losses will be recorded from losses of Anything
Internet.
Three Months Ending September 30, 1999 Compared to Three Months Ending
September 30, 1998
Sales for the third quarter of 1999 of $52,156 were 14.3% lower than for the
same period in 1998 reflecting the continuing impact of reduced advertising
efforts and the aging of the products sold by the Company. The net loss for the
three month period nearly tripled to $181,804 reflecting increased operating
costs and the equity loss of Anything Internet.
The gross margin in the third quarter, 1999 widened to 65.1% from 57.7% in 1998.
This improvement reflects the Company's efforts to minimize costs wherever
possible. These improvements are not expected to continue as the Company has
realized the full benefits of its efforts.
Selling, general and administrative expenses nearly doubled in the three month
period compared with the same period in 1998. This increase was due to increased
professional service fees of $75,704 reflecting the cost of meeting certain
governmental regulations and ongoing litigation. Also contributing to the
increased loss in 1999 over 1998 was the equity loss in Anything Internet of
$36,948.
Liquidity and Capital Resources
Despite increased losses in the third quarter, 1999, the Company improved its
overall liquidity modestly through receipts of monies due from common stock
subscriptions of $125,001 and by reducing working capital by $36,321. At the end
of September 1999 the Company's cash and marketable securities were $28,872.
During the third quarter the Company acquired tooling for a new product for
$8,054.
The Company expects to fund its operations in the fourth quarter by selling some
stock in Anything Internet Corporation and other unrelated investments. The
Company does not anticipate any difficulties meeting its financial requirements
for the foreseeable future.
Year 2000 Compliance
Many currently installed computer systems and software products are coded to
accept 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 includes 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 such 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 that $15,000.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company has the following pending or threatened litigation:
Paine Webber, Inc. v. Banyan Corp, Case no. CV 99 - 1476 HA in the United States
District Court for the District of Oregon. This is a case brought against the
Company for cancelling shares of stock which Paine Webber subsequently sold. The
Company is and plans to continue to contest this case vigorously. To date the
Company has filed an answer, and has filed a motion for dismissal or
alternatively to lower the amount of the claim allowed. The shares were
cancelled pursuant to what the Company believes to be a valid court order, and
therefore the Company believes that it has a substantial chance of winning this
case upon its merits. The Company believes that the maximum financial exposure
it has is $412,280.
Item 2. Changes in Securities and Use of Proceeds
In the third quarter the Company received $125,001 as payment for common
stock subscribed, but unpaid for, at the end of the quarter ending June 30,
1999. The price of the shares was adjusted for the reduced market value of the
stock in accordance with the purchase and sale agreements. In addition, the
<PAGE>
All shares issued during the quarter ending September 30, 1999, were offered
without registration unbder 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 6. Exhibits and Reports on Form 8-K
(A) Exhibits
--------
27.1 Financial Data Schedule
(B) Reports on Form 8-K
----------------------
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Banyan Corporation
(Registrant)
Dated: January 10, 2000 By: /s/ Cameron Yost
---------------------------
Cameron B. Yost
President and CEO
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
financial statements for the nine month period ended September 30, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001086473
<NAME> Banyan Corporation
<MULTIPLIER> 1
<CURRENCY> $
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 28872
<SECURITIES> 0
<RECEIVABLES> 75078
<ALLOWANCES> 0
<INVENTORY> 36976
<CURRENT-ASSETS> 148187
<PP&E> 27569
<DEPRECIATION> 17175
<TOTAL-ASSETS> 192215
<CURRENT-LIABILITIES> 390611
<BONDS> 0
<COMMON> 3327598
0
334906
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 192215
<SALES> 52156
<TOTAL-REVENUES> 52156
<CGS> 18191
<TOTAL-COSTS> 171658
<OTHER-EXPENSES> 36948
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7163
<INCOME-PRETAX> (181804)
<INCOME-TAX> (181804)
<INCOME-CONTINUING> (181804)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (181804)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
