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, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
-------------- ------------------
Commission File No. 0-26065
BANYAN CORPORATION
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Oregon 84-1346327
------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
4740 Forge Rd., Bldg. 112, Colorado Springs, Colorado 80907
------------------------------------------------------------
(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 September 30, 2000
----- ----------------------------
Common Stock, no par value 9,509,068
<PAGE>
Transitional Small Business Disclosure Form (check one):
Yes No X
-------- --------
BANYAN CORPORATION
TABLE OF CONTENTS
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements, Unaudited
Unaudited Consolidated Balance Sheets
at September 30, 2000
Unaudited Consolidated Statement of Operations
for the three months ended
September 30, 1999 and 2000
Unaudited Consolidated Statement of Cash Flow for the
three months ended September 30, 1999 and 2000
Unaudited Consolidated Statement of Shareholders Equity
for the three months ended September 30, 2000
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
<PAGE>
INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors
Banyan Corporation
Colorado Springs, Colorado
I have review the accompanying consolidated balance sheet of Banyan Corporation
as of September 30, 2000, and the related consolidated statements of operations
and cash flows for the three months and nine months ended September 30, 1999 and
2000, and the related consolidated statement of stockholders' equity for the
nine months ended September 30, 2000. These financial statements are the
responsibility of the management of Banyan Corporation.
I conducted my review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying financial statements for them to be in conformity with
generally accepted accounting principles.
/s/ Ronald R. Chadwick, P.C.
RONALD R. CHADWICK, P.C.
Aurora, Colorado
October 30, 2000
<PAGE>
BANYAN CORPORATION
CONSOLIDATED
FINANCIAL STATEMENTS
September 30, 1999 & 2000
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED BALANCE SHEET
September 30, 2000
unaudited
ASSETS
Current assets
<S> <C>
Cash
$ 18,094
Accounts receivable
111,764
Inventory
93,872
Trading securities 1,907,671
Prepaid expenses
13,514
---------------
Total current assets 2,144,915
---------------
Fixed assets
Furniture and fixtures
34,415
Equipment and tooling
17,214
---------------
51,629
less accumulated depreciation
(18,095)
---------------
33,534
---------------
Other assets
Trademarks and licenses, net of accumulated
amortization of $70,346
14,709
Goodwill, net of accumulated amorization of $41,545
185,062
Other
1,100
---------------
200,871
---------------
Total Assets $ 2,379,320
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 237,823
Accrued salaries and related exp.
75,733
Accrued interest
254,746
Accrued other expenses
152,615
Notes payable
382,734
---------------
Total current liabilties 1,103,651
---------------
Total Liabilities 1,103,651
---------------
Stockholders' Equity
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
Common stock, Class A: no par value;
50,000,000 shares authorized;
9,509,068 issued and outstanding 3,326,436
Accumulated deficit (2,385,673)
---------------
Total Stockholders' Equity 1,275,669
---------------
Total Liabilities and Stockholders' Equity $ 2,379,320
===============
</TABLE>
See Accountant's Review Report
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For The Nine Months Ended September 30, 2000
unaudited
Common Stock Preferred Stock Stock-
Class A Class A Accum. holders'
Shares Amount Shares Amount Deficit Equity
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1999 10,597,768 $3,442,556 187,190 $ 334,906 $ (1,693,110) $ 2,084,352
Shares purchased and
retired (1,088,700) (116,120) $ (116,120)
Net gain (loss) for the nine
months ended Sept. 30, 2000 (692,563) (692,563)
-------------- ------------ --------- ---------- --------------- --------------
Balances at September 30, 2000 9,509,068 $3,326,436 187,190 $ 334,906 $ (2,385,673) $ 1,275,669
</TABLE>
See Accountant's Review Report
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
unaudited
for the three months ended for the nine months ended
Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Sales, net $ 139,642 $ 52,156 $ 400,697 $ 116,497
Cost of sales 95,891 18,191 170,512 43,121
----------------- ------------------ -------------- ------------------
Gross margin 43,751 33,965 230,185 73,376
Research & development - - - -
Selling, general and administrative expenses 438,729 171,658 964,658 367,156
----------------- ------------------ -------------- ------------------
Loss from operations (394,978) (137,693) (734,473) (293,780)
Other income (expense)
Interest income 93 - 12,874 -
Interest expense (15,290) (7,163) (27,703) (12,767)
Gain (loss) on sale of assets 43,202 - (11,793) -
Unrealized gain (loss) on securities 326,807 - 133,532 -
Recovery of note receivable - - 75,000 -
Settlement of lawsuit - - (140,000) -
Equity income of Anything Internet
Corporation - (36,948) - (118,325)
----------------- ------------------ -------------- ------------------
Income (loss) before provision for income (40,166) (181,804) (692,563) (424,872)
taxes
Provision for income tax - - - -
----------------- ------------------ -------------- ------------------
Net income (loss) $ (40,166) $ (181,804) $ (692,563) $ (424,872)
================= ================== ============== ==================
Net income (loss) per share
Basic $ (0.00) $ (0.02) $ (0.07) $ (0.04)
================= ================== ================== ==================
Fully diluted $ (0.00) $ (0.02) $ (0.07) $ (0.04)
================= ================== ================== ==================
Weighted average number of
common shares outstanding 10,361,094 9,785,775 10,518,301 9,586,223
================= ================== ================== ==================
See Accountant's Review Report
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
unaudited
for the three months ended for the nine months ended
Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999
----------------- ---------------- ----------------- ------------------
Cash Flows From Operating Activities:
<S> <C> <C> <C> <C>
Net income (loss) $ (40,166) $ (181,803) $ (692,563) $ (424,872)
Adjustments to reconcile net income to
net cash provided by (used for)
operating activities:
Depreciation and amortization 18,296 3,622 50,398 13,578
Sales of trading securities 509,580 903,057
Purchases of trading securities (285,094) (285,094)
Unrealized (gain) loss on trading securities (326,807) - (133,532) -
Loss in Anything Internet Corporation - 36,948 - 118,325
Accounts receivable (4,433) (6,707) (64,890) (27,583)
Inventory and prepaid expenses 3,021 4,651 (40,105) 1,132
Deposits - - 796 -
Accounts payable and accrued expenses 91,921 38,376 277,693 (889)
---------------- ---------------- ----------------- ------------------
Net cash provided by (used for)
operating activities (33,682) (104,913) 15,760 (320,309)
---------------- ---------------- ----------------- ------------------
Cash Flows From Investing Activities:
Increase in investment in Anything
Internet Corporation $ - - - (75,000)
Fixed assets $ (8,856) (8,054) (24,469) (10,878)
---------------- ---------------- ----------------- ------------------
Net cash provided by (used for)
investing activities (8,856) (8,054) (24,469) (85,878)
---------------- ---------------- ----------------- ------------------
Cash Flows From Financing Activities:
Proceeds from borrowings $ 170,500 170,500
Payments on notes payable - - (60,000) -
Purchase of common stock (116,120) 125,001 (116,120) 404,803
Proceeds from issuance of common stock - - - -
---------------- ---------------- ----------------- ------------------
Net cash provided by (used for)
financing activities 54,380 125,001 (5,620) 404,803
---------------- ---------------- ----------------- ------------------
Net Increase (Decrease) In Cash 11,842 12,034 (14,329) (1,384)
Cash At The Beginning Of The Period 6,252 16,838 32,423 30,256
---------------- ---------------- ----------------- ------------------
Cash At The End Of The Period $ 18,094 $ 28,872 $ 18,094 $ 28,872
================ ================ ================= ==================
Schedule Of Non-Cash Investing And Financing Activities
No non-cash investing and financing activities occurred during the
first quarter of 1999 and 2000.
Supplemental Disclosure
Cash paid in the first nine months of 1999 and 2000 for interest and
income taxes: Interest expense paid in the first nine months of of
2000 was $2,627. No interest was paid in the same period in 1999 and
no income taxes were paid during these periods.
See Accountant's Review Report
</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 and soft
carrying cases for portable notebook computers and data storage devices, and
provides website services to e-tailers. The Company's principal markets consist
of wholesale and retail sellers of computers and related devices throughout the
United States and e-tailers..
Principles of consolidation
The accompanying consolidated financial statements include the accounts of
Banyan Corporation and its wholly owned subsidiaries. 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, goodwill 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. At September 30, 2000 the Company had no balance in its
allowance for doubtful accounts.
Revenue recognition
Revenue is recognized by the Company for its carrying case business when a
product is shipped to a customer. For web page design, revenues are recognized
when services have been successfully completed.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 2. ORGANIZATION, OPERATIONS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued):
Trading securities
The Company's investment securities are held principally for the purpose of
short term sales and have been classifies as trading securities.
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 value.
NOTE 3. ACQUISITIONS
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 Company
recognized a loss in the first six months of 2000 of $54,995 from the sale of
Anything Internet Corporation shares. In December, 1999 the Company's ownership
interest in Anything Internet Corporation fell below 20%, and it ceased
accounting for its investment under the equity method. The Company then reported
the remaining interest in Anything Internet Corporation at fair market value as
trading securities, as required under FASB 115. The Company values its
investment in these securities at fair market value at the end of each reporting
period and as a result recognized a $133,532 unrealized gain for the first nine
months of 2000.
On November 1, 1999 the Company acquired the assets of Showcase Technologies,
LLC in a transaction accounted for as a purchase. The purchase price was
$259,315, and goodwill of $226,607 was recorded on the transaction. Results of
operations from the acquisition have been consolidated from November 1, 1999
forward.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 4. LEASE COMMITMENTS
The Company has leased office and warehouse space at various sites through
October, 2002. Lease expense incurred for the years ended December 31, 1998 and
1999 was $33,017 and $13,525 respectively. The remaining minimum future rental
payments through 2002 are approximately $59,000.
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 September 30, 2000 the Company had approximately $2,000,000 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:
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
<S> <C> <C>
Deferred tax liability $ - $ -
Deferred tax asset arising from:
Net operating loss carryforwards 513,700 783,799
Temporary timing differences on
unrealized gains 932,419 984,496
-------------- ---------------
1,446,119 1,768,295
Valuation allowance (1,446,119) (1,768,295)
------------- ---------------
Net Deferred Taxes $ - $ -
============= ================
Income taxes at Federal and state statutory rates are reconciled to the Company's actual income taxes as follows:
December 31, September 30,
1999 2000
----------------- ----------------
Tax at federal statutory rate (34%) $628,372 $(235,471)
State income tax (5%) 92,408 (34,628)
Increase (decrease) in valuation allowance 211,639 322,176
Temporary timing differences on unrealized
(gains) and losses (932,419) (52,077)
---------- ------------
$( -) $( -)
============== ==============
</TABLE>
The net change in the first quarter, 2000 in the total valuation allowance was a
decrease of $179,058.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 6. NOTES PAYABLE
At September 30, 2000 the Company had the following notes payable outstanding:
Balances at
Sept. 30, 2000
Related party notes payable,
unsecured, interest from 6% to 12% per annum,
maturing April 1, 2001 $ 38,647
Related party notes payable,
secured by Company assets, Interest at 10% per
annum, maturing from
November 1, 2000 to April 1, 2001. 66,587
Related party note payable, secured by gross revenues,
interest at 6% per annum, maturing November 1, 2000 80,000
Other related party notes 11,500
Total related party notes payable 196,734
Note payable, unsecured, interest at 20% per annum,
payable in common stock of
Anything Internet Corporation, maturing on
January 31, 2001 162,500
Note payable, unsecured, interest
at 9% per annum, maturing
November 1, 2000 23,500
-----------
Total notes payable (all current) $ 382,734
=========
The schedule of maturities by fiscal year for all notes outstanding is as
follows:
Years ending December 31,
2000 $ 117,000
2001 265,734
Total $ 382,734
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, 2000, the fair value of the notes payable
approximated $404,610.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 7. STOCKHOLDERS' EQUITY
Common stock
The Company as of December 31, 1999 and September 30, 2000 had 50,000,000 shares
of authorized Class A common stock, no par value, with 10,597,768 and 9,509,068
shares issued and outstanding respectively. On September 11, 2000, the Company
purchased 1,088,700 shares of its common stock from one party for $116,120. This
stock was immediately retired.
Preferred stock
The Company as of December 31, 1999 and March 31, 2000 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
At March 31, 1999, the Company had stock options outstanding from stock option
awards and from an incentive stock option plan, which are described below.
Non-employee stock options
The Company accounts for non-employee stock options under SFAS 123, whereby
options costs are recorded based at the fair value of the consideration received
or the fair value of the equity instruments issued, whichever is more reliably
measurable.
In July, 1998, the Company granted stock options, exercisable immediately, to a
consulting company as compensation for services, to purchase common shares of
Banyan Corporation as follows:
Amount Price/share Expiration date
37,500 shares $ 0.40 August 1, 2001
100,000 shares $ 0.80 August 1, 2001
100,000 shares $ 1.20 August 1, 2001
The stock options granted were issued pursuant to a consulting agreement with no
stated fee amount. The Company incurred and has accrued no material compensation
expense under these options.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 7. STOCKHOLDERS' EQUITY (Continued):
Employee stock options
The Company applies APB Opinion 25 and related Interpretations in accounting for
employee stock options. Accordingly, no compensation cost has been recognized
for its employee stock options, nor was any compensation cost charged against
income under its employee stock options in 1998 or 1999. Had compensation cost
for the Company's employee stock option awards and incentive stock option plan
been determined based on the fair 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 earnings per share would
have been reduced to the pro forma amounts indicated below:
6 months ending
1999 June 30, 2000
---- -------------
Net income (loss) As reported $ 1,848,152 $ (692,563)
Pro forma $ 1,841,328 $ (697,681)
Basic and fully diluted As reported $.19 $ (.07)
earnings per share
Pro forma $.19 $ (.07)
In August, 1998, the Company granted stock options, exercisable immediately, to
certain officers of Anything Internet Corporation, to purchase common shares of
Banyan Corporation as follows:
Amount Price/share Expiration date
100,000 shares $ 0.50 August 31, 2000
100,000 shares $ 1.00 August 31, 2000
100,000 shares $ 2.00 August 31, 2000
These options were issued as part of the purchase price paid by Banyan C
orporation to acquire a 35.7% interest in Anything Internet Corporation.
In November, 1999 the Company granted 235,000 stock options to an employee, with
135,000 options exercisable on November 1, 2000 and for three years thereafter,
and 100,000 options exercisable on November 1, 2001 and for three years
thereafter, with all options being exercisable at $ 0.12 per share.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 7. STOCKHOLDERS' EQUITY (Continued):
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 8,923 being
exercisable) on December 31, 1999, at an exercise price of $0.05 per share.
A summary of the status of the Company's stock options as of December 31, 1999
and September 30, 2000, and changes during the years ending on those dates is
presented below:
December 31, 1999 September 30, 2000
Weighted Ave. Weighted Ave.
Options Shares Exercise Price Shares Exercise Price
Outstanding at
beginning of period 548,654 $ 0.05 548,654 $ 0.05
Granted 235,000 $ 0.12 235,000 $ 0.12
Exercised
Forfeited
------------- -------------
Outstanding at
end of period 783,654 $ 0.76 783,654 $ 0.76
======= =======
Options exercisable
at period end 546,423 546,423
Weighted average fair
value of options
granted during the
the period $ 0.03 $ 0.03
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 7. STOCKHOLDERS' EQUITY (Continued)
The following table summarizes information about stock options
outstanding at December 31, 1999.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Number Weighted Ave. Number
Range of Outstanding Remaining Weighted Ave. Exercisable Weighted Ave.
Exercise Prices at 12/31/99 Contractual Life Exercise Price at 12/31/99 Exercise Price
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.05 - $2.00 783,654 24.66 months $ 0.76 546,423 $ 1.03
The following table summarizes information about stock options outstanding at
September 30, 2000.
Options Outstanding Options Exercisable
Number Weighted Ave. Number
Range of Outstanding Remaining Weighted Ave. Exercisable Weighted Ave.
Exercise Prices at 9/30/00 Contractual Life Exercise Price at 9/30/00 Exercise Price
--------------- ---------- ---------------- -------------- ---------- --------------
$ 0.05 - $2.00 783,654 18.66 months $ 0.76 546,423 $ 1.03
</TABLE>
NOTE 8. CONTINGENCIES
A former officer of the Company was convicted in 1999 in U.S. District Court,
Southern District of New York for certain 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 undertakings is unknown at
the present time.
NOTE 9. SETTLEMENT OF LAWSUIT
On June 27, 2000, the Company negotiated an agreement with Paine Webber
Corporation settling a lawsuit filed by Paine Webber Corporation for $405,000,
dealing with the cancellation by Banyan Corporation of certain stock
certificates. To avoid costly litigation, the Company decided to settle this
claim without admitting any wrongdoing. The settlement calls for Banyan to pay
Paine Webber Corporation at total of $140,000; $10,000 on June 27, 2000; six
monthly payments of $3,333 commencing on August 27, 2000; and two final payments
of $55,000 each on January 31, 2001 and February 28, 2001. Interest will not
accrue unless the Company fails to make timely payment.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 10. OPERATIONS OF BUSINESS SEGMENTS,
IN GEOGRAPHIC AREAS, AND MAJOR CUSTOMERS
Business segments
The Company identifies operating segments based on differences in products or
services. The Company operates in two business segments, computer equipment
carrying case sales and web site design and other related services. No
differences exist between measurements of the Company's profits and losses, and
assets, and those of its segments. There have been no changes from prior periods
in measurement methods used to determine reported segment profit or loss, and
the Company makes no asymmetrical accounting allocations to segments. No
material sales transactions have taken place between the segments. Segment
information on an unconsolidated basis for the nine months ended September 30,
2000 is shown below (after intercompany eliminations).
Web Site
Carrying Consolidated
Cases Design Total
Unaffiliated Revenue $ 292,265 $ 108,432 $ 400,697
=========== =========== ===========
Operating (loss) $ (470,220) $(264,253) $ (734,473)
Other income (expenses):
Interest income 12,874 12,874
Interest (expense) (27,299) (404) (27,703)
Loss on asset sale (11,793) (11,793)
Unrealized gain on securities 133,532 133,532
Recovery of Note Payable 75,000 75,000
Settlement of lawsuit (140,000) (140,000)
------------- -------------- -------------
(427,906) (264,657) (692,563)
Income tax expense - - -
------------- -------------- -------------
Net income (loss) $ (427,906) $(264,657) $ (692,563)
=========== ========= ===========
Identifiable assets $2,237,995 $ 141,325 $2,379,320
========== ========= ==========
Depreciation and amortization expense from the carrying case segment were $4,198
and $21,060 respectively. Depreciation and amortization expense from the web
site design segment were $3,416 and $21,724 respectively. Total expenditures for
long lived assets were $116,100 through the carrying case segment and $146,225
through the web site design segment.
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 11. OPERATIONS OF BUSINESS SEGMENTS,
IN GEOGRAPHIC AREAS, AND MAJOR CUSTOMERS (Continued)
Geographic areas and major customers
The Company's long term assets are all held domestically. Approximately 2.4% of
revenues ($9,501) were generated internationally, and 97.6% ($391,196)
domestically. The Company's largest customer accounted for approximately 33.2%
of total revenues ($133,030), all from the carrying case business. No other
customer accounted for over 10% of sales.
<PAGE>
Item 2. Management Discussion and Analysis of Plan of Operation
Nine Months Ending September 30, 2000 Compared to
the Nine Months Ending September 30, 1999
Net sales for the nine-month period ending September 30, 2000 were $400,697, an
increase of 244% over the same period in 1999. Sales for the first three
quarters of 2000 exceed total sales for the year 1999 by $259,521 or 184%. The
large increase in sales were the result of improved market conditions for the
Company's computer carrying case product line and the continuing introduction of
the new internet services product line.
Gross margins declined from 63.0% for the nine-month period in 1999 to 57.4% for
the same period in the year 2000. The margin decrease was primarily caused by
the write off of certain inventories totaling $24,396 acquired when the Company
purchased Showcase Technologies in November, 1999. Selling, general and
administrative expenses increased $597,502 in 2000 to $964,658 compared to 1999.
The increase in these expenses was the result of the Company's continuing
investment in new products ($382,069), the cost of professional services to
comply with certain governmental regulations and to meet continuing litigation
obligations ($175,620). The remaining cost increase of $39,813 resulted from
small cost increases required to operate the business.
Other income, net of other expenses, for the nine-month period totaled $41,910.
As a result of treating its Anything Internet Corporation stock as trading
securities the Company must revalue its investment to current market value at
the end of each calendar quarter. Because of this revaluation the Company
recorded a gain of $133,532 for the first nine months of 2000. The Company also
recorded a gain of $75,000 from the recovery of a note receivable from Anything
Internet Corporation which had been written off in 1999 following equity
accounting rules. Offsetting these gains was a settlement agreement with Paine
Webber, Inc. to end its lawsuit brought against the Company. As part of the
settlement Banyan agreed to pay $140,000 to Paine Webber between July, 2000 and
February, 2001. The Company has not admitted to any wrong doing and only settled
this lawsuit to avoid even costlier litigation expenses. Also the Company
realized a loss of $11,793 from the sale of Anything Internet Corporation stock.
Through the sales of this stock the Company was able to finance its product
expansion. Finally, the Company also had $14,829 in interest expense, net of
interest income.
As a result of the increased expenses the Company's net loss before and after
taxes increased from $424,872 in 1999 to $692,563 in 2000.
Liquidity and Capital Resources
During the first nine months of 2000, the Company was able to meet its financial
needs by continuing to sell shares of common stock in Anything Internet
Corporation for a net proceed of $903,057. By selling these shares, investments
in new products were made and the expansion of markets served was continued. The
Company was able to collect the entire amount of a promissory note ($75,000)
from Anything Internet Corporation, including related interest due, and in turn
repaid a $60,000 loan to a related party. Because of the rapid increase in sales
in the first nine months of the year, trade accounts receivable increased
$64,890 during the period. Inventories and prepaid expenses increased during the
six-month period by $40,105 and accounts payable and accrued expenses increased
$277,693 primarily because of the recording of the Paine Webber, Inc. lawsuit
settlement of $140,000 and increased liabilities resulting from increases in
sales and operating levels. In the third quarter the Company borrowed 50,000
common shares of Anything Internet Corporation for five months. At the end of
that period 60,000 shares of the same stock must be repaid. Also during the
third quarter, the Company exchanged 14,530 Class A preferred stock of Anything
Internet Corporation for 36,324 common shares of Anything Internet Corporation.
Finally, in the third quarter the Company settled certain claims by a
shareholder and repurchased all of the common stock of Banyan held by this
individual and affiliated parties in exchange for 24,000 preferred shares of
Anything Internet Corporation.
As indicated in the Company's most recent financial statements available herein,
while operating activities provide some cash flow, the Company continues to be
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 periodic sales of Anything Internet Corporation stock, or by
using this stock as collateral for a working capital loan. As the Company
completes the development of new computer carrying case designs and the
expansion of its internet services products, sales are expected to continue to
improve. Thus, through improved sales coupled with lower cost of sales for new
products, the Company will reduce its dependence on sales of stock and
borrowings. If the Company is unable to meet all of its cash flow requirements
through sales of Anything Internet Corporation stock and collateralized
borrowings, additional funds may be raised through sales of Banyan's common or
preferred stock. If the Company is unable to consummate any of these sales or
borrowings, it will realize significant adverse impacts on its operations.
Three Months Ending September 30, 2000 Compared to
Three Months Ending September 30, 1999
Sales for the three-month period ending September 30, 2000 were $139,642, an
increase of 168% over the same period for 1999. The improvement in sales was the
result of improved market conditions for computer carrying cases and the
continuing introduction of the new internet services product line. Gross margins
for this period of 31.3% were significantly lower that the 65.1% for the same
period last year. This decrease was the result of the write off of inventories
purchased in the acquisition of Showcase Technologies last November.
Selling, general and administrative expenses increased from $171,658 in 1999 to
$438,729 in 2000, an increase of $267,071. As explained for the nine-month
period above, this increase in expense is the result of the continuing
investment in new products and increased costs to support litigation
obligations.
Other income, net of expenses, in the third quarter of 2000 totaled $354,812.
The primary reason for this other income was the unrealized gain on the
Company's investment in Anything Internet Corporation of $326,807. This gain was
caused by the increase in market value of Anything Internet Corporation's common
stock from June 30, 2000 to September 30, 2000. Also contributing to other
income was the realized gain on the sale of Anything Internet Corporation common
and preferred stock of $43,202. Offsetting these gains was interest expense, net
of interest income, of $15,197.
Liquidity and Capital Resources
During the second quarter of 2000 the Company sold Anything Internet Corporation
common and preferred stock for $509,580 in order to fund the continuing product
expansion. Also during the quarter accounts receivable increased $4,433 while
inventory and prepaid expenses decreased $3,021 and accounts payable and accrued
expenses increased $91,921.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
<PAGE>
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: November 9, 2000 By: /s/ Larry Stanley
---------------------------
Larry Stanley
President and CEO
<PAGE>
