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
--------------------- ----------------------
June 30, 1997 33-10236
BAYWOOD INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 77-0125664
(state or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
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 June 30, 1997, there were 17,498,115 shares of Baywood International, Inc.
common stock, $.001 par value outstanding.
<PAGE>
BAYWOOD INTERNATIONAL, INC.
INDEX
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Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheet as of June 30, 1997 3
Statements of Operations for the three and six months ended June 30,
1997 and 1996 4
Statements of Cash Flows for the three and six months ended June 30,
1997 and 1996 5
Statement of Information Furnished 6
Item 2 - Management's Discussion and Analysis or Plan of Operation 7-10
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 11
Item 2 - Changes in Securities 11
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURES 14
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<PAGE>
BAYWOOD INTERNATIONAL, INC.
<TABLE>
<CAPTION>
BALANCE SHEET
-------------
June 30, 1997
<S> <C>
ASSETS
------
CURRENT ASSETS
Cash and equivalents $ 448,326
Accounts receivable 274,745
Inventories 99,785
Interest receivable 14,993
Deferred income taxes 150,000
Prepaid expenses and other current assets 26,524
-----------
Total current assets 1,014,373
-----------
PROPERTY & EQUIPMENT
Furniture, fixtures, computers and equipment
(net of accumulated depreciation of $93,891) 28,388
-----------
OTHER ASSETS
Note receivable - related party
(net of allowance of $73,466) 73,425
Contracts & marketing rights
(net of accumulated amortization of $65,062) 89,838
Formulas & product lines
(net of accumulated amortization of $65,062) 89,838
-----------
Total other assets 253,101
-----------
Total assets $ 1,295,862
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 200,914
Sales commissions payable 32,844
Accrued liabilities 7,076
-----------
Total current liabilities 240,834
-----------
REDEEMABLE PREFERRED STOCK - $1 par and redemption value 800,000
-----------
STOCKHOLDERS' EQUITY
Preferred Stock, $1 par value,
10,000,000 shares authorized 35,000
Common stock, $.001 par value, 50,000,000
shares authorized, 17,498,115 shares
issued and outstanding 17,498
Additional paid-in capital 5,414,139
Accumulated deficit (5,211,609)
-----------
Total stockholders' equity 255,028
===========
Total liabilities and stockholders' equity $ 1,295,862
===========
</TABLE>
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<PAGE>
BAYWOOD INTERNATIONAL, INC.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
------------------------
3 Months Ended June 30, 6 Months Ended June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 782,118 $ 1,229,343 $ 1,297,489 $ 2,013,870
COST OF SALES 489,694 746,312 790,846 1,218,544
------------ ------------ ------------ ------------
Gross profit 292,424 483,031 506,643 795,326
------------ ------------ ------------ ------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Marketing expenses 94,277 144,521 149,580 278,813
General and administrative expenses 121,312 152,041 341,352 256,780
Depreciation and amortization 12,685 12,909 25,371 25,819
------------ ------------ ------------ ------------
Total selling, general and administrative expenses 228,274 309,471 516,303 561,412
------------ ------------ ------------ ------------
Operating profit (loss) 64,150 173,560 (9,660) 233,914
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 7,223 5,710 14,597 9,850
Miscellaneous expense -- (1,011) -- (1,086)
Miscellaneous income 6,333 71,083 6,615 88,121
Interest expense -- (6,720) (222) (28,438)
------------ ------------ ------------ ------------
Total other income 13,556 69,062 20,990 68,447
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 77,706 242,622 11,330 302,361
PROVISION FOR INCOME TAXES (26,000) -- -- --
------------ ------------ ------------ ------------
NET INCOME $ 51,706 $ 242,622 $ 11,330 $ 302,361
============ ============ ============ ============
NET INCOME PER
COMMON AND EQUIVALENT SHARE: $ 0.003 $ 0.015 $ 0.001 $ 0.020
============ ============ ============ ============
WEIGHTED AVERAGE OF COMMON SHARES
AND EQUIVALENTS OUTSTANDING 18,333,115 16,315,642 18,333,115 15,488,555
============ ============ ============ ============
</TABLE>
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<PAGE>
BAYWOOD INTERNATIONAL, INC.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
------------------------
3 Months Ended June 30, 6 Months Ended June 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 51,706 $ 242,622 $ 11,330 $ 302,361
Adjustments to reconcile net income
to cash used in operating activities:
Depreciation and amortization 12,686 12,909 25,372 25,819
Loss on sale of computers and equipment -- 1,062 -- 1,062
Inventory write-down for samples and shrinkage 12,000 19,711 12,000 19,711
Common stock accrued for interest on notes payable -- 686 -- 8,603
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 283,704 (114,979) 229,081 (266,940)
(Increase) in interest receivable (3,672) (4,129) (7,345) (8,257)
(Increase) decrease in inventory (36,253) 40,268 (29,374) 32,959
(Increase) decrease in prepaid expenses 19,614 (6,439) (20,268) (8,835)
(Decrease) in interest payable -- (13,297) -- (23,496)
(Decrease) in customer deposits -- -- -- (16,140)
(Decrease) in accounts payable and accrued liabilities (50,276) (77,492) (541,422) (75,832)
--------- --------- --------- ---------
Net cash (used) by operating activities 289,509 100,922 (320,626) (8,985)
--------- --------- --------- ---------
INVESTING ACTIVITIES:
Sale of computers and equipment -- 1,280 -- 1,280
Purchase of furniture, computers and equipment -- -- -- (1,011)
--------- --------- --------- ---------
Net cash (used) by investing activities -- 1,280 -- 269
--------- --------- --------- ---------
FINANCING ACTIVITIES:
Issuance of common and preferred stock for cash -- 800,000 -- 800,000
Fees paid in connection with offering of common and preferred stock -- (82,629) -- (82,629)
Proceeds from notes payable -- -- -- 50,000
Principal payments on notes payable -- (482,000) -- (482,000)
--------- --------- --------- ---------
Net cash provided by financing activities -- 235,371 -- 285,371
--------- --------- --------- ---------
CASH AND EQUIVALENTS (USED) DURING PERIOD 289,509 337,573 (320,626) 276,655
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 158,817 46,791 768,952 107,709
========= ========= ========= =========
CASH AND EQUIVALENTS, END OF PERIOD $ 448,326 $ 384,364 $ 448,326 $ 384,364
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ 14,126 $ -- $ 38,126
</TABLE>
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<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 June 30, 1997 and the results of
operations for the three and six months ended June 30, 1997 and 1996 and the
cash flows for the three and six months ended June 30, 1997 and 1996. 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 1996 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 1996 Annual Report on
Form 10-KSB.
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<PAGE>
BAYWOOD INTERNATIONAL, INC.
Item 2 - Management's Discussion and Analysis or Plan of Operation
- ------------------------------------------------------------------
General
Baywood International, Inc. develops and markets consumer health
products in nutrition, dietary and skin care. The Company markets products under
its own brand labels and also private labels products for its customers by
designating products with individual store or entity names. The Company creates
distinct formulas with unique packaging and either produces a product to the
customer's specifications or actually researches and develops a product for the
customer. The Company also has available existing formulas, packaging designs,
finished products and brand names for the customer to choose from to market,
license or customize further, with emphasis on pure and natural ingredients.
Nutrition and dietary 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. Skin care products
such as cleansers, toners, lift powder, activator and creams have also generated
much interest in the Pacific Rim countries.
Since its inception, the Company has directed most of its sales efforts
toward international markets and has established either distribution or
registration of its products into companies in the Pacific Rim Countries (China,
Malaysia, Hong Kong, Taiwan, Indonesia and Korea) as well as Europe (Italy,
Germany, Austria, England and Switzerland). Most of the Company's sales are
generated from the Pacific Rim. Establishing distribution into health food
stores, chain drug stores, grocery chains, network marketing companies in the
United States is also part of the Company's marketing strategy.
The Company operates in one industry segment which is consumer products
in the health and beauty industry. Due to the nature of the products, production
processes, markets and marketing methods, the Company considers its business to
operate in one industry segment.
Results of Operations
Net sales for the three and six months ended June 30, 1997 were
$782,118 and $1,297,489, respectively, compared to net sales of $1,229,343 and
$2,013,870 for the same period last year, a decrease of $447,225 or 36.4% and
$716,381 or 35.6%, respectively. Total gross sales for the six months ended of
$1,324,689 were reduced by a $27,200 return of merchandise in the second quarter
ended June 30, 1997. This amount was reserved in the first quarter ended March
31, 1997. The decrease in net sales for the three months ended June 30, 1997
compared to the same period in 1996 is mainly due to reduced volumes of
nutritional product sold, particularly to the Company's primary customer in the
Pacific Rim. This customer accounted for $754,790 or 93.3% and $1,257,984 or 95%
of gross sales, respectively, for the three and six months ended June 30, 1997.
International sales for the three and six months ended June 30, 1997 represented
98.2% and 98.4%, respectively, of the Company's gross sales compared to 97.3%
and 97.6% for the same period last year. Distribution of the nutrition and
dietary line remains as the main source of revenue for the first six months of
1997, accounting for 99.8% of gross sales. Distribution of the beauty and
hygiene line accounted for less than 1% of gross sales for the six months ended
June 30, 1997. Sales of product in the beauty and hygiene line had surged
significantly in the fourth quarter of 1996, particularly to the Company's
primary customer in the Pacific Rim. The Company believes that the decrease in
sales in the first six months of 1997 does not indicate a decrease in the demand
for the products, but rather represents fluctuations in the timing of orders
during a particular quarter. The Company is continually focused on building a
broader customer base so that its
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<PAGE>
BAYWOOD INTERNATIONAL, INC.
reliance on its major customer is lessened and so that the volatility of sales
from quarter to quarter is decreased. This focus on broadening the customer base
is accomplished through the introduction of other new products into current
distribution channels, the continued support through advertising and promotion
of existing products and the acquisition of other companies in the industry that
have established lines of complementary products and new areas of distribution.
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.
The Company's gross profit margin for the three and six months ended
June 30, 1997 was 37.4% and 39.1%, respectively, compared to 39.3% and 39.5% for
the same period last year, an overall decrease of less than 1% for the six
months. Gross margins on lower volumes of aloe based product in the nutrition
and dietary line sold in the Pacific Rim in the six months ended June 30, 1997
compared to higher volumes of a mix of products with slightly higher gross
margins in the same period last year were the reasons for the decrease.
Selling, general and administrative expenses for the three months ended
June 30, 1997 were $228,274 or 29.2% of net sales compared to $309,471 or 25.2%
of net sales for the same period last year. This represents an overall increase
of 4% on net sales. Legal Fees of $89,285 were the largest portion of selling,
general and administrative expenses for the six months ended June 30, 1997,
representing 6.9% of net sales. Sales commissions as a percentage of net sales
decreased slightly due to lower commission rates negotiated by the Company
compared to the first six months of 1996.
Net income before income taxes for the three and six months ended June
30, 1997 was $51,706 or $.003 per share and $11,330 or $.001 per share,
respectively, compared to net income of $242,622 or $.015 per share and $302,361
or $.020 per share for the same period last year.
The provision for income taxes for the three and six months ended June
30, 1997 was $26,000 and zero, respectively. A current income tax provision of
$26,000 for the three months ended June 30, 1997 was offset by an equal current
income tax benefit in the three months ended March 31, 1997. Management
anticipates no net income tax provision for the 1997 fiscal year due to the
utilization of operating loss carryforwards and an offsetting reduction of the
related valuation allowance.
Other Information
Interest expense for the three and six months ended June 30, 1997 was
zero and $222, respectively, compared to $6,720 and $28,438 for the same period
last year. The decrease is due to the payoff of notes payable in the second
quarter of 1996.
Total miscellaneous income for the three and six months ended June 30,
1997 as compared to the same period last year decreased from $71,083 to $6,333.
The decrease of $64,750 is mainly due to benefits recognized in the first six
months of 1996 from settlements of amounts payable from 1995.
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. and from interest earned on the Company's
invested cash balance.
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<PAGE>
BAYWOOD INTERNATIONAL, INC.
Capital Expenditures
During the three months ended June 30, 1997, the Company had not
incurred material expenditures for property and equipment.
Liquidity and Capital Resources
As of the three months ended June 30, 1997, the Company had $1,014,373
in current assets of which $448,326 or 44.2% was cash and equivalents. Total
current liabilities for the same period totalled $240,834. This represents a
ratio of current assets to current liabilities of 4.2 for the six months ended
June 30, 1997. Trade accounts payable remained in good standing due to good
relations, credit terms and payment histories with major suppliers and vendors.
The Company has agreed with its major suppliers on discounts of 1% to 2% of cost
of goods with early payment within 10 to 15 days. The Company recognized $14,101
of discounts under these agreements in the six months ended June 30, 1997. 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. Recently, due to good relations with overseas
customers, the Company has shipped on credit.
The Company neither anticipates any significant capital expenditures
nor are material capital expenditures required to meet expected growth in 1997.
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<PAGE>
BAYWOOD INTERNATIONAL, INC.
"CAUTION REGARDING FORWARD-LOOKING STATEMENTS"
CERTAIN STATEMENTS CONTAINED IN THIS REPORT THAT ARE NOT RELATED TO
HISTORICAL RESULTS, INCLUDING, WITHOUT LIMITATIONS, STATEMENTS REGARDING THE
COMPANY'S BUSINESS STRATEGY AND OBJECTIVES AND FUTURE FINANCIAL POSITION, ARE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT AND SECTION 21E OF THE EXCHANGE ACT AND INVOLVE RISKS AND UNCERTAINTIES.
ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS ON WHICH THESE
FORWARD-LOOKING STATEMENTS ARE BASED ARE REASONABLE, THERE CAN BE NO ASSURANCE
THAT SUCH ASSUMPTIONS WILL PROVE TO BE ACCURATE AND ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO,
THOSE SET FORTH IN THE FOLLOWING SECTION, AS WELL AS THOSE DISCUSSED ELSEWHERE
IN THIS REPORT. ALL FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT ARE
QUALIFIED IN THEIR ENTIRETY BY THIS CAUTIONARY STATEMENT.
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 materially 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.
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<PAGE>
BAYWOOD INTERNATIONAL, INC.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
-----------------
The Company previously disclosed under Item 3 of its Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1996, that the
Company is a defendant in a Nevada state court action filed in September 1996 by
Pershing Products, Inc. The Company also disclosed that it had filed a related
proceeding against Pershing and Dr. Jackie See in Federal District Court in
Arizona and that it had moved to dismiss the Nevada lawsuit in favor of the
Company's Arizona action. The Company has entered into a preliminary agreement
with Pershing and Dr. See, which would settle both the Nevada State Court and
Arizona Federal District Court actions. The Company is currently in the process
of finalizing the terms of the settlement agreement. As of the date of this
filing, final settlement documents have not been signed.
The Company previously disclosed under Item 3 of its Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1996, that former
director and officer Georgia Aadland filed a demand for arbitration against the
Company with the American Arbitration Association on March 3, 1997. The Company
also previously disclosed under Item 1 of its Quarterly Report on Form 10-QSB
for the for the quarter ended March 31, 1997, that John Shannon filed a demand
for arbitration against the Company with the American Arbitration Association on
April 15, 1997. The Company has filed motions in Arizona Superior Court seeking
stays of each of the arbitrations, pending the Superior Court's resolution of
the arbitrability of Mr. Shannon's and Ms. Aadland's claims against the Company.
Under the terms of a January 8, 1993 agreement between the
Company and Royal Products, Inc. for the Company's sale to Royal of certain
sales and distribution rights relating to the Aurore-B beauty and hygiene line,
Royal is obligated to make annual principal and interest payments to the Company
on July 1 of each year. John Shannon is a director, officer and seventy percent
(70%) shareholder of royal. As previously disclosed under Item 12 of the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1996, the Company was previously forced to take collection action against Royal
when it failed to make its July 1, 1996 payment. Royal has again defaulted on
the agreement by failing to make its July 1, 1997 payment. On July 22, 1997, the
Company filed a lawsuit against Royal in Arizona Superior Court, seeking payment
of the installment that was due on July 1, 1997 of $32,500 plus attorneys' fees.
Royal has not yet answered the Company's complaint.
On June 2, 1997, the Company filed a lawsuit in Federal
District Court in Arizona against John and Darlene Shannon for recovery of
"short swing" profits pursuant to Section 16(b) of the Securities Exchange Act
of 1934, as amended. The action alleges sales and purchases of Company
securities by the Shannons (or their affiliates) within six (6) month periods
while Mr. Shannon was a director or officer of the Company or a greater than ten
percent (10.0%) beneficial owner of the Company's shares. The action seeks
disgorgement of short-swing profits, interest from the time the profits were
realized, post-judgment interest and the Company's costs and attorneys' fees.
Item 2 - Changes in Securities
---------------------
Pursuant to negotiations with Linda Lee regarding certain
changes to the conversion and redemption rights of her preferred shares (see
Item 5 below and Exhibit 4.3 attached hereto), on May 30, 1997, the Board of
Directors approved the creation and issuance of Class "C" preferred stock,
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<PAGE>
BAYWOOD INTERNATIONAL, INC.
memorialized the previous rights and designations of Class "A" and Class "B"
preferred stock and authorized the filing of Certificates of Designation for
Preferred Shares with the Nevada Secretary of State. The Certificates set forth
the rights and preferences of each class of preferred stock. The Board's actions
were authorized by the Company's Articles of Incorporation and Nevada law and
did not require shareholder approval.
Item 3 - Defaults upon Senior Securities
-------------------------------
None
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5 - Other Information
-----------------
As disclosed in the Company's prior periodic reports, on May
8, 1996, the Company issued 800,000 preferred shares in a private placement to
Linda Lee with the right to convert such shares to common stock or redeem the
shares for cash on May 8, 1997 provided that certain conditions were met
regarding the average share price of the Company's common shares. On May 5,
1997, the Company's management reached a preliminary agreement with Linda Lee's
representative by which the right of redemption will be cancelled and the right
of conversion to common stock deferred until May 8, 1998 and Ms. Lee will
receive a stock dividend of 120,000 additional preferred shares which would also
be available for conversion on May 8, 1998. The deferment transaction is subject
to the negotiation of formal instruments and documents acceptable to Ms. Lee and
the Company's Board of Directors.
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit Number Exhibit Name Method of Filing
- -------------- ------------ ----------------
3.1 Articles of Incorporation, as amended *
3.2 By-Laws **
4.1 Specimen Common Stock Certificate ***
4.2 Description of Common Stock ****
4.3 Certificates of Designation
for Preferred Shares Exhibits filed herewith
27.1 Financial Data Schedule Exhibit filed herewith
* Incorporated by reference to Exhibit 3.1 of annual report on Form
10-KSB (file no. 33-10236) filed on April 18, 1996.
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<PAGE>
BAYWOOD INTERNATIONAL, INC.
** Incorporated by reference to Exhibit 3 of Registration Statement
on Form S-1 (file no. 33-10236) filed on January 27, 1987, and declared
effective on February 14, 1988.
*** Incorporated by reference to Exhibit 1 of Registration Statement
on Form 8-A (File no. 022024) filed on July 2, 1993, and declared effective on
July 9, 1993.
**** Incorporated by reference to page 31 of Registration Statement on
Form S-1 (file no. 33-10236) filed on January 27, 1987, and declared effective
on February 14, 1988.
(b) Reports on Form 8-K
None
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<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: August 8, 1997
- ----------------------------------------
Harvey Turner
Chairman of the Board,
President & C.E.O.
/s/ Neil Reithinger Date: August 8, 1997
- ----------------------------------------
Neil Reithinger
Vice-President, Chief Financial Officer,
Secretary & Treasurer
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FILED
IN THE OFFICE OF THE
SECRETARY OF STATE THE
STATE OF NEVADA
JUL 18, 1997
NO. C4086-86
--------
DEAN HELLER
DEAN HELLER SECRETARY OF STATE
CERTIFICATE OF DESIGNATION FOR
CLASS "A" PREFERRED SHARES
This Certificate sets forth the voting powers, designations,
preferences, limitations, restrictions and relative rights of the Class "A"
Preferred Shares of Baywood International, Inc. ("Baywood") to be issued after
or the ratification of issuance of which is effective after the filing of such
certificate with appropriate state authorities.
1. Conversion Privileges. At the option of the holder thereof
("Shareholder"), the Class A Preferred Shares are convertible at any time into
common stock on the basis of one share of Class A Preferred for one share of
common stock.
2. Redemption. Shareholder shall have no right to redeem the Class A
Preferred Shares.
3. Par Value. The Class A Preferred Shares shall have a par value of $1.00
per share.
4. Distribution of Capital. In the event of dissolution, bankruptcy, or
termination of this corporation, the par value of all the Class A Preferred
Stock shall be paid in full before the common stock or any part thereof or any
dividend thereon is paid.
5. Voting Rights. The Shareholder of the Class A Preferred Shares shall
have no voting power.
6. Dividends. The Class A Preferred Shares shall have no preference as to
dividends and assets.
7
<PAGE>
CERTIFICATE OF DESIGNATION FOR
CLASS "B" PREFERRED SHARES
This Certificate sets forth the voting powers, designations,
preferences, limitations, restrictions and relative rights of the 800,000 Class
"B" Preferred Shares of Baywood International, Inc. ("Baywood") the ratification
of issuance of which is effective after the filing of such certificate with
appropriate state authorities. Such shares shall automatically be converted into
Class "C" Preferred Shares upon the effectiveness of the filing of the
certificate for such Class "C" Preferred Shares.
1. Conversion Privileges. At the end of twelve consecutive months after
the date of issuance of the Class "B" Preferred Shares, at the option of the
holder thereof ("Shareholder"), the Class "B" Preferred Shares are convertible
into common stock of Baywood, in an amount equal to the number of the Class "B"
Preferred Shares (800,000) divided by the average share price of Baywood's
common shares for the last three-month period; PROVIDED, however, that the
average price of Baywood's common shares for the previous three months equals or
exceeds $1.00 per share.
2. Redemption. Alternatively, at the end of twelve consecutive months
after the date of issuance of the Class "B" Preferred Shares, the Shareholder
may demand redemption of the Class "B" Preferred Shares by Baywood at an amount
equal to the par value ($1.00) of the Class "B" Preferred Shares, paid to the
Shareholder in cash within thirty (30) days of his written notice of redemption;
PROVIDED, however, that the average price of Baywood's common shares for the
previous three months is less than $1.00 per share. Such redemption may not be
for less than all of the Class "B" Preferred Shares.
3. Par Value. The Class "B" Preferred Shares shall have a par value of
$1.00 per share.
4. Distribution of Capital. In the event of dissolution, bankruptcy, or
termination of this corporation, the par value of all the Class "B" Preferred
Shares shall be paid in full before the common stock or any part thereof or any
dividend thereon is paid.
5. Voting Rights. The Class "B" Preferred Shares shall have no voting
rights.
6. Dividends. The Class "B" Preferred Shares shall be preferred both as to
dividends and assets and shall be entitled to receive out of the surplus or net
profits of the company, in each fiscal year, dividends at such rate or rates, as
shall be determined by the Board of Directors in connection with the issue of
the respective series of said stock and expressed in the stock certificate
therefor, before any dividends shall be paid upon the common stock, but such
dividends shall be noncumulative. No dividends shall be paid, declared, or set
apart for the payment on the common stock of the company, in any fiscal year,
unless the full dividends on the Class "B" Preferred Shares for such year shall
have been paid or provided for.
8
<PAGE>
CERTIFICATE OF DESIGNATION FOR
CLASS "C" PREFERRED SHARES
This Certificate sets forth the voting powers, designations,
preferences, limitations, restrictions and relative rights of the Class "C"
Preferred Shares of Baywood International, Inc. ("Baywood") to be issued after
or the ratification of issuance of which is effective after the filing of such
certificate with appropriate state authorities.
1. Conversion Privileges. On May 8, 1998, at Shareholder's option, the
Class "C" pre-split Preferred Shares are convertible into pre-split or
post-split Common stock of Baywood as follows:
a. Average Price; Reverse Split. "Average Price," as used herein,
shall mean the average share price of Baywood's Common Shares
for the three months prior to May 8, 1998. "Reverse Split"
shall mean the reverse 1 for 2 1/2 split of the Company's
common stock approved by the Company's shareholders on April
10, 1997, but which shall not become effective until the
Company files Articles of Domestication in the Office of the
Arizona Corporation Commission.
b. Average Price Less than $1.00. If the Average Price is less
than $1.00, the Class "C" Preferred Shares shall be
convertible into:
(i) (Pre-Split) that number of pre-split Common Shares which
is equal to the number which results from $920,000 divided by
the Average Price if the Reverse Split is not yet effective;
or
(ii) (Post-Split) that number of post-split Common Shares
which is equal to the number which results from $368,000
divided by the Average Price if the Reverse Split has already
become effective.
c. Average Price of $1.00 or Greater. If the Average Price is
$1.00 or more, the 920,000 pre-split Class "C" Preferred
Shares shall be convertible:
(i) (Pre-Split) on a one-for-one (1:1) basis into pre-split
Common Shares, such that Shareholder shall receive a total of
920,000 Common Shares if the Reverse Split is not yet
effective; or
(ii) (Post-Split) on a one-for-two and one half (1:2 1/2)
basis into post-split Common Shares, such that Shareholder
shall receive a total of 368,000 post-split Common Shares if
the Reverse Split has already become effective.
2. Redemption. Shareholder shall have no right to redeem the Class "C"
Preferred Shares.
9
<PAGE>
3. Par Value. The Class "C" Preferred Shares shall have a par value of
$1.00 per share.
4. Distribution of Capital. In the event of dissolution, bankruptcy, or
termination of this corporation, the par value of all the Class "C" Preferred
Shares shall be paid in full before the Common Stock or any part thereof or any
dividend thereon is paid.
5. Voting Rights. The Shareholder of the Class "C" Preferred Shares shall
have no voting power.
6. Dividends. The Class "C" Preferred Shares shall be preferred both as to
dividends and assets and shall be entitled to receive out of the surplus or net
profits of the Company, in each fiscal year, dividends at such rate or rates, as
shall be determined by the Board of Directors in connection with the issue of
the respective series of said stock and expressed in the stock certificate
therefor, before any dividends shall be paid upon the Common Stock, but such
dividends shall be noncumulative. No dividends shall be paid, declared, or set
apart for the payment on the Common Stock of the Company, in any fiscal year,
unless the full dividends on the Class "C" Preferred Shares for such year shall
have been paid or provided for.
7. No Dilution by Reverse Stock Split. The reverse stock split of the
Company's Common Stock, authorized by the Company's shareholders on April 10,
1997, shall have no effect on the number of Class "C" Preferred Shares issued
and outstanding in the name of the Stockholder, which shall, upon the automatic
conversion of Class "B" Preferred Shares into Class "C" Preferred Shares total
920,000 Class "C" Preferred Shares. The reverse stock split shall also have no
effect on the number of Common Shares into which such Class "C" Preferred Shares
are convertible on May 8, 1998.
10
<PAGE>
The undersigned certify that the attached Certificates of Designation
for Class "A," "B" and "C" Preferred Shares were duly approved by resolution of
the Board of Directors of Baywood International, Inc. pursuant to Article IV of
the corporation's Articles of Incorporation and N.R.S. ss. 78.195 and 78.1955
and that no further shareholder approval or action is necessary. No shares of
each class so designated have been issued or the ratification of issuance by the
Board of directors is not effective until after such Certificates of Designation
have been filed.
/s/ Harvey J. Turner
--------------------------------
Harvey J. Turner, President
/s/ Neil T. Reithinger
--------------------------------
Neil T. Reithinger, Secretary
STATE OF ARIZONA )
) ss.
County of Maricopa )
ON THIS, the 16th day of July, 1997, before me, the undersigned
officer, personally appeared Harvey J. Turner, known to me to be the President
of Baywood International, Inc. and acknowledged that they executed the
certification of the attached Certificates Describing the Rights and
Restrictions of Class "A," "B" and "C" Preferred Shares for the purposes therein
contained on behalf of the corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Stamp
NEIL T. REITHINGER
Notary Public Maricopa Co., AZ
My Comm. Expires Oct 31, 2000
/s/ Neil T. Reithinger
-----------------------------------
Notary Public
STATE OF ARIZONA )
} ss.
County of Maricopa )
ON THIS, the 16th day of July, 1997, before me, the undersigned
officer, personally appeared Neil T. Reithinger, known to me to be the Secretary
of Baywood International, Inc. and acknowledged that he executed the
certification of the attached Certificates Describing the Rights and
Restrictions of Class "A," "B" and "C" Preferred Shares for the purposes therein
contained on behalf of the corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Stamp
OFFICIAL SEAL
JANICE L. INNOCENZI
Notary Public - State of Arizona
Maricopa County
My Comm. Expires Oct 28, 2000
/s/ Janice L. Innocenzi
-----------------------------------
Notary Public
11
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835,000
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