UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
--------------------- ----------------------
September 30, 1996 33-10236
BAYWOOD INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
<TABLE>
<CAPTION>
Nevada 77-0125664
<S> <C>
(state or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
</TABLE>
14950 North 83rd Place, Suite 1
Scottsdale, Arizona 85260
(Address of principal office) (Zip code)
Registrant's telephone number, including area code: (602)951-3956
Securities registered pursuant to Section 12(b) of
the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
$.001 par value common stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
--- ---
As of September 30 1996, there were 17,593,115 shares of Baywood
International, Inc. common stock,
$.001 par value outstanding.
<PAGE>
BAYWOOD INTERNATIONAL, INC.
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheet as of September 30, 1996 3
Statements of Operations for the three and nine months ended September
30, 1996 and 1995 4
Statements of Cash Flows for the three and nine months ended September
30, 1996 and 1995 5
Statement of Information Furnished 6
Footnotes to the Financial Statements 7
Item 2 - Management's Discussion and Analysis or Plan of Operation 8-11
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
-2-
<PAGE>
BAYWOOD INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
BALANCE SHEET
-------------
ASSETS
------
September 30, 1996
------------------
CURRENT ASSETS UNAUDITED
Cash $ 215,638
Accounts receivable (net of allowance) 164,875
Inventories (net of reserve) 158,279
Current portion of related party receivable 13,260
Interest receivable 22,060
Prepaid expenses and other current assets 24,676
-----------
Total current assets 598,788
-----------
PROPERTY & EQUIPMENT
Furniture, fixtures, computers and equipment
(net of accumulated depreciation of $78,962) 43,317
-----------
OTHER ASSETS
Long-term related party receivable 146,891
Contracts & marketing rights
(net of accumulated amortization of $53,444) 101,456
Formulas & product lines
(net of accumulated amortization of $53,444) 101,456
-----------
Total other assets 349,803
-----------
Total assets $ 991,908
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 251,906
-----------
Total current liabilities 251,906
-----------
REDEEMABLE PREFERRED STOCK 800,000
STOCKHOLDERS' EQUITY
Preferred Stock, $1 par value,
10,000,000 shares authorized, 835,000
shares issued and outstanding 35,000
Common stock, $.001 par value, 50,000,000
shares authorized, 17,593,115 shares
issued and outstanding 17,593
Additional paid-in capital 5,615,684
Treasury stock at cost (62,500)
Accumulated deficit (5,665,775)
-----------
Total stockholders' equity 740,002
-----------
Total liabilities and stockholders' equity $ 991,908
===========
-3-
<PAGE>
BAYWOOD INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
------------------------
UNAUDITED
<TABLE>
<CAPTION>
3 months ended September 30, 9 months ended September 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
(as restated) (as restated)
<S> <C> <C> <C> <C>
NET SALES $ 431,893 $ 429,209 $ 2,445,763 $ 1,167,853
COST OF SALES 233,569 294,555 1,452,113 755,990
------------ ------------ ------------ ------------
Gross profit 198,324 134,654 993,650 411,863
------------ ------------ ------------ ------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Marketing expenses 125,106 198,227 403,920 645,255
General and administrative expenses 175,135 319,947 431,915 996,589
Depreciation and amortization 12,657 13,772 38,476 41,034
------------ ------------ ------------ ------------
Total selling, general and administrative expenses 312,898 531,946 874,311 1,682,878
------------ ------------ ------------ ------------
Operating profit (loss) (114,574) (397,292) 119,339 (1,271,015)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income 7,300 3,917 17,150 12,597
Miscellaneous expense -- -- (1,086) --
Miscellaneous income 9,116 16,289 97,238 16,553
Interest expense (148) (73,775) (28,586) (293,128)
------------ ------------ ------------ ------------
Total other income (expense) 16,268 (53,569) 84,716 (263,978)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (98,306) (450,861) 204,055 (1,534,993)
PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (98,306) (450,861) 204,055 (1,534,993)
EXTRAORDINARY GAIN:
EXTINGUISHMENT OF DEBT -- -- -- 76,742
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (98,306) $ (450,861) $ 204,055 $ (1,458,251)
============ ============ ============ ============
INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Before extraordinary item $ (0.006) $ (0.028) $ 0.011 $ (0.098)
Extraordinary item -- -- -- 0.005
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (0.006) $ (0.028) $ 0.011 $ (0.093)
============ ============ ============ ============
INCOME (LOSS) PER COMMON SHARE -
ASSUMING FULL DILUTION:
Before extraordinary item $ (0.006) $ (0.028) $ 0.011 $ (0.098)
Extraordinary item -- -- -- 0.005
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (0.006) $ (0.028) $ 0.011 $ (0.093)
============ ============ ============ ============
WEIGHTED AVERAGE OF COMMON SHARES
OUTSTANDING 17,433,794 13,398,240 16,134,453 12,964,030
============ ============ ============ ============
</TABLE>
-4-
<PAGE>
BAYWOOD INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
------------------------
UNAUDITED
<TABLE>
<CAPTION>
3 months ended September 30,
1996 1995
----------- -----------
OPERATING ACTIVITIES: (as restated)
<S> <C> <C>
Net income (loss) $ (98,306) $ (450,861)
Adjustments to reconcile net income (loss) to cash used in
operating activities:
Depreciation and amortization 12,658 13,772
Issuance of common stock as payment for services performed 26,000 72,800
Extraordinary gain on extinguishment of debt -- --
Loss on sale of computers and equipment -- --
Inventory writedown for samples and shrinkage 16,732 13,716
Common stock accrued for interest on notes payable -- --
Common stock issued as part of debt conversion expense -- --
Common stock issued as payment for interest on notes -- 14,000
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 136,852 121,218
(Increase) in interest receivable (5,545) 14,076
(Increase) decrease in inventory 2,971 (13,875)
(Increase) decrease in prepaid expenses (12,719) (45,545)
Increase (decrease) in interest payable -- 149,721
(Decrease) in customer deposits -- --
Increase (decrease) in accounts payable and accrued liabilities (251,809) (346,515)
----------- -----------
Net cash (used) provided in operating activities (173,166) (457,493)
----------- -----------
INVESTING ACTIVITIES:
Sale of computers and equipment -- --
Purchase of furniture, computers and equipment (560) (2,449)
Decrease in note receivable 5,000 16,896
----------- -----------
Net cash (used) provided by investing activities 4,440 14,447
----------- -----------
FINANCING ACTIVITIES:
Issuance of common and preferred stock for cash -- 512,222
Fees paid in connection with offering of common and preferred stock -- --
Purchase of treasury stock -- --
Proceeds from notes payable -- --
Principal payments on notes payable -- (50,000)
----------- -----------
Net cash provided by financing activities -- 462,222
----------- -----------
CASH (USED) PROVIDED DURING PERIOD (168,726) 19,176
CASH, BEGINNING OF PERIOD 384,364 63,886
=========== ===========
CASH, END OF PERIOD $ 215,638 $ 83,062
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ --
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of notes payable with common stock $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
9 months ended September 30,
1996 1995
----------- -----------
OPERATING ACTIVITIES: (as restated)
<S> <C> <C>
Net income (loss) $ 204,055 $(1,458,251)
Adjustments to reconcile net income (loss) to cash used in
operating activities:
Depreciation and amortization 38,476 41,034
Issuance of common stock as payment for services performed 26,000 541,199
Extraordinary gain on extinguishment of debt -- (76,742)
Loss on sale of computers and equipment 1,062 --
Inventory writedown for samples and shrinkage 36,443 13,716
Common stock accrued for interest on notes payable 8,603 --
Common stock issued as part of debt conversion expense -- 33,222
Common stock issued as payment for interest on notes -- 165,756
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (130,088) (8,378)
(Increase) in interest receivable (13,802) 4,973
(Increase) decrease in inventory 35,930 (213,657)
(Increase) decrease in prepaid expenses (21,554) (46,667)
Increase (decrease) in interest payable (23,496) 189,354
(Decrease) in customer deposits (16,140) --
Increase (decrease) in accounts payable and accrued liabilities (327,640) (71,755)
----------- -----------
Net cash (used) provided in operating activities (182,151) (886,196)
----------- -----------
INVESTING ACTIVITIES:
Sale of computers and equipment 1,280 --
Purchase of furniture, computers and equipment (1,571) (4,449)
Decrease in note receivable 5,000 16,896
----------- -----------
Net cash (used) provided by investing activities 4,709 12,447
----------- -----------
FINANCING ACTIVITIES:
Issuance of common and preferred stock for cash 800,000 734,444
Fees paid in connection with offering of common and preferred stock (82,629) --
Purchase of treasury stock -- (62,500)
Proceeds from notes payable 50,000 480,000
Principal payments on notes payable (482,000) (450,000)
----------- -----------
Net cash provided by financing activities 285,371 701,944
----------- -----------
CASH (USED) PROVIDED DURING PERIOD 107,929 (171,805)
CASH, BEGINNING OF PERIOD 107,709 254,867
=========== ===========
CASH, END OF PERIOD $ 215,638 $ 83,062
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 38,126 $ 61,200
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of notes payable with common stock $ -- $ 450,000
</TABLE>
The Company issued 90,000 common shares as payment for $126,780 of accrued
interest on notes payable in the three and nine months ended September 30, 1996.
-5-
<PAGE>
BAYWOOD INTERNATIONAL, INC.
Statement of Information Furnished
The accompanying financial statements have been prepared in accordance
with Form 10-QSB instructions and in the opinion of management contain all
adjustments (consisting of only normal and recurring accruals) necessary to
present fairly the financial position as of September 30, 1996 and the results
of operations for the three and nine months ended September 30, 1996 and 1995
and the cash flows for the three and nine months ended September 30, 1996 and
1995. These results have been determined on the basis of generally accepted
accounting principles and practices applied consistently with those used in the
preparation of the Company's 1995 Annual Report on Form 10-KSB.
Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that the accompanying
financial statements be read in conjunction with the financial statements and
notes thereto incorporated by reference in the Company's 1995 Annual Report on
Form 10-KSB.
-6-
<PAGE>
BAYWOOD INTERNATIONAL, INC.
Footnotes to the Financial Statements
A reclassification of $648,429 has been made in the prior period
between the accumulated deficit and additional paid-in-capital accounts to
conform with the current period presentation reflecting the proper presentation
of some prior period write-downs for appropriate original valuation and
subsequent impairment valuation.
-7-
<PAGE>
BAYWOOD INTERNATIONAL, INC.
Item 2 - Management's Discussion and Analysis or Plan of Operation
- ------------------------------------------------------------------
General
Since inception, the Company has directed most of its efforts on
international business and has established distribution or registration of its
products into network marketing, retail or wholesale companies in the Pacific
Rim and Europe. Products that are not necessarily new to the market such as aloe
based products, bee pollen, royal jelly and propolis are the types that have
generated particular interest mostly in the Pacific Rim. Most of the Company's
sales are generated from the Pacific Rim. Establishing distribution domestically
into chain drug stores, grocery chains, network marketing companies and
warehouse distributors in the United States is a major part of the Company's
marketing strategy. The Company feels that the domestic market is potentially
very lucrative and although the Company views this market as very challenging
due to its competitive nature, it feels confident it can open distribution with
new, natural products for different applications.
The Company concentrates on increasing profits by expanding sales
volume while containing or reducing costs since growth opportunities in the
Company's markets are driven by volume increases rather than price increases.
The Company's cost reduction efforts will be driven by economies of scale and
out-sourcing of components of the production items supplied to the manufacturer,
such as packaging, labels and labor. Given the nature of the Company as a sales
and marketing organization, recent cost reduction efforts during 1996 have
focused on eliminating any unproductive overhead and bringing fixed operating
expenses to minimum necessary levels. The Company is continually focusing on new
and innovative products to establish widespread distribution domestically and to
consistently provide overseas customers with leading products.
Results of Operations
Net sales for the three and nine months ended September 30, 1996 were
$431,893 and $2,445,763, respectively, compared to net sales of $429,209 and
$1,167,853 for the same period last year, an approximate increase of 1% and
109.4%, respectively. The decrease in sales for the three months ended September
30, 1996 over the first two quarters of 1996 is due to reduced volumes of
nutrition and dietary product sold. In the second quarter, one customer
accelerated orders that would have been shipped in the third quarter. The
Company anticipates these orders will resume in the fourth quarter of 1996. The
increase in net sales for the nine months is mainly attributable to higher
volumes of aloe based product both in the nutrition and dietary and beauty and
hygiene lines sold to one major customer in the Pacific Rim in comparison to the
same period last year. This customer accounted for 89.4% of net sales for the
nine months. International sales for the nine months ended September 30, 1996
represented 97.6% of the Company's sales compared to 71.3% for the same period
last year. Distribution of the nutrition and dietary line remains as the main
source of revenue for the first nine months of 1996, accounting for 80.5% of net
sales. Sales of the beauty and hygiene line accounted for 18.9% of net sales for
the same period. Due to high demand in the industry for nutrition and dietary
products both domestically and internationally for health and well being, the
Company anticipates this line to be the primary foundation for revenue growth
and profitability in the future.
-8-
<PAGE>
BAYWOOD INTERNATIONAL, INC.
The Company's gross profit margin for the nine months ended September
30, 1996 was 40.6% compared to 35.3% for the same period last year, an increase
of 5.3%. Factors in the increase were higher volumes of aloe based product both
in the nutrition and dietary and beauty and hygiene lines sold in the Pacific
Rim in the three months ended September 30, 1996 compared to lower volumes of a
mix of products with lower gross margins during the same period last year.
Selling, general and administrative expenses for the three and nine
months ended September 30, 1996 were $312,898 or 72.5% of net sales and $874,311
or 35.8% of net sales, respectively, compared to $531,946 or 124% of net sales
and $1,682,878 or 144.1% of net sales, respectively, for the same periods last
year. This represents an overall decrease of 48.1%. This decrease is primarily
due to significant expenses incurred in the first nine months of 1995 for
consulting fees for which the Company incurred substantially less recurring
expense for the first nine months of 1996. Sales commissions of $229,218 were
the largest portion of selling, general and administrative expenses,
representing 9.4% of net sales. Sales commissions as a percentage of net sales
increased slightly due to higher commissions on sales of beauty and hygiene
products compared to the first six months of 1996. In addition to higher
volumes, the Company initiated certain cost reduction programs which have been
instrumental in the decrease in general and administrative expenses for the
first, second and third quarters of 1996.
Net loss before income taxes and extraordinary item for the three
months ended September 30, 1996 was $(98,306) or $(.006) per share compared to a
loss of $(450,861) or $(.028) per share for the same period last year. Net
income before income taxes and extraordinary item for the nine months ended
September 30, 1996 was $204,055 or $.011 per share compared to $(1,458,251) or
$(.098) per share for the same period in 1995. An extraordinary gain of $76,742
was recorded in the first nine months of 1995 for extinguishment of debt through
the issuance of common stock. There were no extraordinary gains or losses for
the nine months ended September 30, 1996.
Net income tax for the three and nine months ended September 30, 1996
was zero. A current income tax benefit and provision of $(38,000) and $63,000
for the three and nine months ended September 30, 1996, respectively, was offset
by an equal deferred income tax benefit and provision representing the
offsetting valuation allowance and utilization of operating loss carryforwards.
Other Information
Interest expense for the three and nine months ended September 30, 1996
was $148 and $28,586, respectively, compared to $73,775 and $293,128,
respectively, for the same periods last year. The overall decrease is due to the
value of common stock issued or to be issued as part of interest for inducements
to third parties to lend to the Company during 1995. The overall reduction
during the nine months ended September 30, 1996 in notes payable which involve
equity inducements has decreased interest expense for 1996. The $126,780 of
interest payable that accounted for the remaining value of stock to be issued as
part of interest on notes payable as of June 30, 1996 was paid in the third
quarter with the issuance of common stock. The balance of notes payable and
interest payable at September 30, 1996 was zero.
Total miscellaneous income for the nine months ended September 30, 1996
as compared to the same period last year increased from $16,553 to $97,238. The
increase of $80,685 is mainly due to
-9-
<PAGE>
BAYWOOD INTERNATIONAL, INC.
benefits recognized from settlements of amounts payable from 1995.
The majority of the Company's interest revenue was generated by the
interest due from contracts with the sale of the right to distribute and use the
products in the Aurore-B Line to Royal Products, Inc.
(See "Item 5 - Other Information").
Capital Expenditures
During the three months ended September 30, 1996, the Company had not
incurred material expenditures for property and equipment.
Liquidity and Capital Resources
As of the nine months ended September 30, 1996, the Company had
$598,788 in current assets of which $215,638 or 36% was cash. Total current
liabilities for the same period totalled $251,906. This represents a ratio of
current assets to current liabilities of 1.45 and 2.38 for the six and nine
months ended June 30, 1996 and September 30, 1996, respectively. Trade accounts
payable remained in good standing due to good relations, credit terms and
payment histories with major suppliers and vendors. The Company believes that as
it increases its sales volume, liquidity will improve greatly. Sales terms
generally include a 50% deposit at the time of the order and the balance prior
to shipment.
On April 11, 1996, the Company issued 1,466,147 common shares,
representing 10% of the outstanding shares of the Company as of December 31,
1995, and 800,000 preferred shares for $800,000, in a private placement to Linda
Lee, an independent investor and citizen of Hong Kong. The funds under this
private placement were received by the Company on May 2, 1996. The rights and
limitations of the preferred shares held by Lee include the right to convert the
preferred shares to common stock or redeem the shares for cash on April 11,
1997, provided that certain conditions are met regarding the average share price
of the Company's common shares. These funds were used to pay off notes payable
and reduce accounts payable. The balance of notes payable at the beginning of
1996 was $482,000. As of September 30, 1996, the balance of notes payable was
zero.
The Company neither anticipates any significant capital expenditures
nor are material capital expenditures required to meet expected growth in 1996.
The Company may require additional capital and may attempt to raise
capital through the sale of preferred and common stock and through private
placements in the short and long term. The Company may continue to obtain
financing through loans.
As a result of the discussion in "Item 5 - Other Information", the
Company may be required to establish a reserve for a substantial portion of its
note receivable from Royal. This could adversely affect income in the fourth
quarter of 1996 for the remaining balance of the note.
-10-
<PAGE>
BAYWOOD INTERNATIONAL, INC.
Factors That May Affect Future Results
The Company believes that results of operations in any quarterly period
may be impacted by factors such as delays in the shipment of new or existing
products, difficulty in the manufacturer acquiring critical product components
of acceptable quality and in required quantity, timing of product introductions,
increased competitions, the effect of announcements and marketing efforts of new
competitive products, a slower growth rate in the Company's target markets, lack
of market acceptance of new products and adverse changes in economic conditions
in any of the countries in which the company does business. Specifically, the
timing of registration of new or existing products in different countries in
which the Company is doing business or may do business could delay orders. Also,
the significant portion of sales and net income contributed by international
operations, specifically by one customer, could affect the Company's results of
operations and financial condition in a particular quarter. Due to the factors
noted above, the Company's future earnings and stock price may be subject to
significant volatility. Any shortfall in revenues or earnings from levels
expected by the investing public or securities analysts could have an immediate
and significant adverse effect on the trading price of the Company's common
stock.
-11-
<PAGE>
BAYWOOD INTERNATIONAL, INC.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
-----------------
A lawsuit was filed against the Company in Nevada state court by
Pershing Products, Inc. on or about September 17, 1996 seeking to enjoin the
Company's manufacturing, marketing and sales of LDL Tab(TM) and damages. The
Company successfully defeated two attempts by Pershing to obtain a restraining
order in Nevada. In addition, on September 13, 1996, the Company filed an action
against Pershing in federal court in Arizona to recover the Company's payments
under an Exclusive Licensing Agreement related to the LDL Tab(TM) product and to
obtain other damages and relief.
Item 2 - Changes in Securities
---------------------
None
Item 3 - Defaults upon Senior Securities
-------------------------------
None
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On August 29, 1996 the Company held its Annual Meeting of Stockholders
(the "Annual Meeting"). The following matters were voted on at the Annual
Meeting:
1. The directors of the Company were all elected by the following
votes:
NAME VOTES FOR WITHHELD
---- --------- --------
Harvey Turner 14,849,780 288,800
John Shannon 14,827,920 309,660
Georgia Aadland 14,827,920 310,660
Karl Rullich 14,855,780 282,800
Stephen Kuehn 14,855,780 282,800
Glen Holt 14,851,930 286,650
Dr. Michael Shapiro 14,878,780 259,800
William Brin 14,851,780 242,600
2. The appointment of King, Weber & Associates, P.C. as the
Company's independent auditors for the fiscal year ending December 31, 1996 was
ratified by the following votes:
VOTES FOR VOTES AGAINST ABSTAIN
---------- ------------- -------
14,711,321 125,604 70,195
-12-
<PAGE>
BAYWOOD INTERNATIONAL, INC.
3. The 1996 Incentive Stock Option Plan was approved with the
following votes:
VOTES FOR VOTES AGAINST ABSTAIN
---------- ------------- -------
14,398,486 411,259 81,105
4. The Stock Option Agreement with Mr. Harvey Turner was approved
with the following votes:
VOTES FOR VOTES AGAINST ABSTAIN
---------- ------------- -------
14,121,362 432,383 138,815
The foregoing matters are described in detail in the
Registrant's definitive proxy statement dated August 1, 1996, for the Annual
Meeting of Stockholder's held on August 29, 1996.
Item 5 - Other Information
-----------------
Under the terms of a January 8, 1993 agreement between the Company and
Royal Products, Inc. ("Royal") for the sale to Royal of certain sales and
distribution rights relating to the Aurore-B beauty and hygiene line, Royal is
obligated to make annual payments to the Company including principal and
interest on July 1st of each year after July 1, 1993. Royal defaulted on the
agreement by failing to make its July 1, 1996 payment. On September 25, 1996, in
response to the Company's demands, Royal and the Company entered a Payment
Agreement to extend the payment date to October 25, 1996. The Payment Agreement
provided that the delinquent payment amount would be increased to reflect an
interest penalty and that Royal would immediately pay $5,000 against principal
and deliver shares of the Company's common stock as collateral for the remainder
of the delinquent amount. Royal paid the $5,000 on September 25, 1996 and
delivered certificates for shares of the Company's common stock as collateral,
but failed to make any payment on October 25, 1996. Upon Royal's failure to meet
the Payment Arrangement terms, the Company executed on the collateral by
cancelling the shares of common stock and returning them to treasury.
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
None
-13-
<PAGE>
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.
BAYWOOD INTERNATIONAL, INC.
(Registrant)
/s/ Harvey Turner Date: November 13, 1996
- ----------------------------------
Harvey Turner
Chairman of the Board,
President & C.E.O.
/s/ Neil Reithinger Date: November 13, 1996
- ----------------------------------
Neil Reithinger
Chief Financial Officer,
Secretary & Treasurer
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 806175
<NAME> Baywood International, Inc.
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 215,638
<SECURITIES> 0
<RECEIVABLES> 164,875
<ALLOWANCES> 0
<INVENTORY> 158,279
<CURRENT-ASSETS> 598,788
<PP&E> 122,279
<DEPRECIATION> 78,962
<TOTAL-ASSETS> 991,908
<CURRENT-LIABILITIES> 251,906
<BONDS> 0
0
835,000
<COMMON> 17,593
<OTHER-SE> (112,591)
<TOTAL-LIABILITY-AND-EQUITY> 991,908
<SALES> 2,445,763
<TOTAL-REVENUES> 2,445,763
<CGS> 1,452,113
<TOTAL-COSTS> 874,311
<OTHER-EXPENSES> (113,302)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,586
<INCOME-PRETAX> 204,055
<INCOME-TAX> 0
<INCOME-CONTINUING> 204,055
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 204,055
<EPS-PRIMARY> 0.011
<EPS-DILUTED> 0.011
</TABLE>
