U. S. Securities and Exchange Commission
Washington, D. C. 20549
SECOND AMENDMENT TO
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 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 March 31, 2000
----- ----------------------------
Common Stock, no par value 10,597,768
<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 March 31, 2000
Unaudited Consolidated Statement of Operations
for the three months ended
March 31, 1999 and 2000
Unaudited Consolidated Statement of Cash Flow for the three
months ended March 31, 1999 and 2000
Unaudited Consolidated Statement of Shareholders Equity
for the three months ended March 31, 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
BANYAN CORPORATION
CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 1999 & 2000
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED BALANCE SHEET
for the period ending March 31, 2000
unaudited
Mar. 31, 2000
-------------
ASSETS
Current assets
<S> <C>
Cash $ 65,650
Accounts receivable 132,224
Inventory 57,402
Trading securities 3,591,341
Prepaid expenses 300
-----------------
Total current assets 3,846,917
-----------------
Fixed assets
Furniture and fixtures 29,500
Equipment and tooling 17,214
-----------------
46,714
less accumulated depreciation (21,144)
-----------------
25,570
-----------------
Other assets
Trademarks and licenses, net of accumulated
amortization of $64,484 20,571
Goodwill, net of accumulated amorization of $18,885 207,722
Other 1,100
-----------------
229,393
-----------------
Total Assets $ 4,101,880
=================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 145,120
Accrued salaries and related exp. 50,881
Accrued interest 238,384
Other 3,750
Notes payable 212,234
-----------------
Total current 650,369
liabilties
-----------------
Total Liabilities 650,369
-----------------
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
Common stock, Class A: no par value;
50,000,000 shares authorized;
10,597,768 issued and outstanding 3,442,556
Accumulated deficit (325,951)
-----------------
Total Stockholders' Deficit 3,451,511
-----------------
Total Liabilities and Stockholders' Deficit $ 4,101,880
=================
=================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
For The First Quarter Ended March 31, 2000
unaudited
Common Stock Preferred Stock Stock-
Class A Class A Accum. holders'
Shares Amount Shares Amount Deficit Deficit
<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
Net gain (loss) for the quarter
ended March 31, 2000 1,367,159 1,367,159
--------------- ----------------------------- --------------- ------------------- ----------------
Balances at December 31, 1998 10,597,768 $3,442,556 187,190 $ 334,906 $ ( 325,951) $ 3,451,511
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
For The Three Months Ended March 31, 1999 and 2000
unaudited
1999 2000
---------------- ----------------
<S> <C> <C>
Sales, net $ 31,037 $ 167,551
Cost of sales 20,133 49,125
---------------- ----------------
Gross margin 10,904 118,426
Research & development
- -
Selling, general and administrative expenses 67,196 278,226
Loss from operations (56,292) (159,800)
Other income (expense)
Interest income 12,714
Interest expense (2,797) (5,700)
Gain (loss) on sale of assets 27,988
Unrealized gain (loss) on securities 1,416,957
Recovery of note receivable 75,000
Equity income of Anything Internet Corporation (33,500)
---------------- ----------------
Income (loss) before provision for income taxes (92,589) 1,367,159
Provision for income tax
- -
---------------- ----------------
Net income (loss) $ (92,589) $ 1,367,159
================ ================
Net income (loss) per share
Basic $ (0.01) $ 0.13
================ ================
Fully diluted $ (0.01) $ 0.13
================ ================
Weighted average number of
common shares outstanding 9,296,903 10,597,768
================ ================
The accompanying notes are an integral part of the
consolidated financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For The Three Months Ended March 31, 1999 and 2000
unaudited
1999 2000
---------------- -----------------
Cash Flows From Operating Activities:
<S> <C> <C>
Net income (loss) $ (92,589) $ 1,367,159
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Depreciation and amortization 3,121 15,925
Sales of trading securities 217,718
Unrealized gain on trading (1,416,957)
securities
Loss in Anything Internet Corporation 33,500
Accounts receivable (13,326) (85,350)
Inventory and prepaid expenses 9,579
Deposits (819) 796
Accounts payable and accrued expenses (5,089)
5,144
---------------- -----------------
Net cash provided by (used for)
operating activities (64,969) (103,781)
---------------- -----------------
Cash Flows From Investing Activities:
Fixed assets $ (878) (10,554)
---------------- -----------------
Net cash provided by (used for)
investing activities (878) (10,554)
---------------- -----------------
(Continued On Following Page)
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
BANYAN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS For The Three Months
Ended March 31, 1999 and 2000
unaudited
(Continued From Previous Page)
1999 2000
---------------- -----------------
---------------- -----------------
Cash Flows From Financing Activities:
Payments on notes payable (60,000)
Proceeds from issuance of common stock 50,000
---------------- -----------------
---------------- -----------------
Net cash provided by (used for)
financing 50,000 (60,000)
activities
---------------- -----------------
---------------- -----------------
Net Increase (Decrease) In Cash (15,847) 33,227
Cash At The Beginning Of The Period 30,256 32,423
---------------- -----------------
---------------- -----------------
Cash At The End Of The Period $ 14,409 $ 65,650
================ =================
================ =================
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 first quarter of 1999 and 2000 for interest and income
taxes: Interest expense paid in the first quarter, 2000 was
$2,499. No interest was paid in the same period in 1999 and no
income taxes were paid during these periods.
The accompanying notes are an integral part of the
consolidated financial statements.
F-5
</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.
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 December 31, 1999 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 gain in the first quarter, 2000 of $27,988 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 $1,419,525 unrealized gain for the first
quarter 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 March 31, 2000 the Company did not have any unused federal net operating loss
carryforwards. 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:
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000 _
<S> <C> <C>
Deferred tax liability - $ -
Deferred tax asset arising from:
Net operating loss carryforwards 513,700 -
Temporary timing differences on 932,419 1,465,540
unrealized gains
-------------- --------------
1,446,119 1,465,540
Valuation allowance (1,446,119) (1,465,540)
------------- -------------
Net Deferred Taxes $ - $ -
============= ==============
Income taxes at Federal and state statutory rates are reconciled to the
Company's actual income taxes as follows:
December 31, March 31,
1999 2000
----------------- ----------------
Tax at federal statutory rate (34%) $628,372 $ 464,834
State income tax (5%) 92,408 68,358
Increase (decrease) in valuation allowance 211,639 19,421
Temporary timing difference on unrealized gains (932,419) (552,613)
----------- -----------
$( -) $( -)
============== ==============
</TABLE>
The net change in the first quarter, 2000 in the total valuation allowance was a
decrease of $19,421.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 6. NOTES PAYABLE
At March 31, 2000 the Company had the following notes payable outstanding:
Balances at
Dec. 31,
1999
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 3,500
Total related party notes payable 188,734
Note payable, unsecured, interest
at 9% per annum, maturing
November 1, 2000 23,500
-----------
Total notes payable (all current) $ 212,234
=========
The schedule of maturities by fiscal year for all notes outstanding is as
follows:
Years ending December 31,
2000 $ 117,000
2001 95,234
-----------
Total $ 212,234
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 March 31, 2000, 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 December 31, 1999 and March 31, 2000 had 50,000,000 shares of
authorized Class A common stock, no par value, with 10,597,768 and 10,597,768
shares issued and outstanding respectively.
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:
<TABLE>
3 months ending
1999 March 31, 2000
---- --------------
<S> <C> <C>
Net income (loss) As reported $ 1,848,152 $ 1,367,159
Pro forma $ 1,841,328 $ 1,360,335
Basic and fully diluted As reported $.19 $ .13
earnings per share
Pro forma $.19 $ .13
</TABLE>
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
Corporation 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 March 31, 2000, and changes during the years ending on those dates is
presented below: <TABLE>
December 31, 1999 March 31, 2000
Weighted Ave. Weighted Ave.
Options Shares Exercise Price Shares Exercise Price
Outstanding at
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
<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 0.76 546,423 $ 1.03
The following table summarizes information about stock options outstanding at
March 31, 2000.
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 0.76 546,423 $ 1.03
</TABLE>
NOTE 8. CONTINGENCIES
An 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.
The Company is currently defending litigation brought by a brokerage firm in
October, 1999, alleging negligence and seeking damages of approximately
$415,000. The outcome of these proceedings is unknown at the present time.
<PAGE>
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 9. 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. Web site services are set up to
guarantee an internet retailer that its web page will appear in the first twenty
selections on at least one of the major search engines. 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 three months ended March 31, 2000 is shown below
(after intercompany eliminations).
<TABLE>
<CAPTION>
Carrying Web Site Consolidated
Cases Design Total
<S> <C> <C> <C>
Unaffiliated Revenue $ 135,436 $ 32,115 $ 167,551
=========== ========== ===========
Operating (loss) $ (84,226) $ (75,574) $ (159,800)
Other income (expenses):
Interest revenue 12,714 12,714
Interest (expense) (5,613) (87) (5,700)
Gain on asset sale 27,988 27,988
Unrealized gain on securities 1,416,957 1,416,957
Recovery of Note Payable 75,000 75,000
------------- ------------- -------------
$1,442,820 $ (75,661) $1,367,159
Income tax expense - - -
----------------- ---------------- -------------
Net income (loss) $1,442,820 $ (75,661) $1,367,159
========== ========== ==========
Identifiable assets $3,951,900 $ 149,980 $4,101,880
========== ========= ==========
</TABLE>
Depreciation and amortization expense from the carrying case segment were $570
and $7,218 respectively. Depreciation and amortization expense from the web site
design segment were $894 and $7,241 respectively. Total expenditures for long
lived assets were $115,523 through the carrying case segment and $148,894
through the web site design segment.
BANYAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 10. 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 3.7% of
revenues ($6,201) were generated internationally, and 96.3% ($161,350)
domestically. The Company's largest customer accounted for approximately 35% of
total revenues ($58,924), all from the carrying case business. No other customer
accounted for over 10% of sales.
Item 2. Management Discussion and Analysis or Plan of Operation
Three Months Ending March 31, 2000 Compared to
Three Months Ending March 31, 1999
Net sales for the three months ending March 31, 2000 were $167,551, an increase
of 440% over the same period in 1999. First quarter sales exceeded all of last
year's sales by $26,375 or almost 19%. The large increase in sales were the
result of improved market conditions for the Company's computer carrying case
products and the continuing introduction of the new internet services product
line.
Gross margins improved from 35% in the first quarter of 1999 to nearly 71% for
the same period in 2000. This improvement was the result of low cost of sales on
our web services product line and volume purchasing of materials for the
computer carrying case product line. Selling, general and administrative
expenses were $278,226 for the first three months of 2000, an increase of
$211,030 over the same period last year. The increase in costs were the result
of the additional costs for the web services product line of $85,692 and
increased legal and accounting expenses of $63,078 necessary to comply with
certain governmental regulations and to meet litigation obligations. The
remainder of the cost increase of $62,260 was needed to support the increase in
sales for the computer carrying case product line.
Additionally, in the first quarter of 2000 the Company realized a net gain of
$27,988 by selling some of the common stock of Anything Internet Corporation and
an unrealized gain primarily on the shares on Anything Internet Corporation held
by the Company of $1,416,957 due to the increase in market value of this stock.
Also during the quarter the Company was repaid the promissory note of $75,000 by
Anything Internet Corporation along with all interest due on this note. Under
generally accepted accounting principles, Banyan had written off this promissory
note using equity accounting methods in 1999.
Liquidity and Capital Resources
During the first quarter of 2000, the Company was able to meet its financial
needs by continuing to sell shares of common stock in Anything Internet
Corporation. By selling these shares, investments in new products were made and
expansion of markets served were continued. The Company was able to collect the
entire amount of a promissory note from Anything, including related interest
due, and in turn repaid a $60,000 loan to a related party during the first
quarter. Because of the rapid increase in sales in the first quarter, trade
accounts receivable increased $85,350 during the quarter. Inventories and
prepaid expenses were reduced during the quarter by $9,579 and accounts payable
and accrued expenses were reduce by $5,089.
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.
<PAGE>
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
<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: October 29, 2000 By: /s/ Larry Stanley
---------------------------
Larry Stanley
President and CEO
<PAGE>
