UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10 - QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) of THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) of THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from _______ to _______
Commission File Number 1-9043
BANYAN HOTEL INVESTMENT FUND
(Exact name of Registrant as specified in its charter)
Delaware 36-3361229
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Penn Plaza, Suite 1531, New York, N.Y. 10119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (212) 736-7880
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 Exchange Act of 1934
during the preceding 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 |X| No |_|
Shares of common stock outstanding as of August 1, 1997, 12,403,565
Transitional Small Business Disclosure Format. Yes |_| No |X|
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BANYAN HOTEL INVESTMENT FUND
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
---- ----
ASSETS
Cash and Cash Equivalents $ 342,517 $ 414,935
Investment Securities - At Market 857,250 864,000
Interest Receivable on Cash
and Cash Equivalents, Investment
Securities and Mortgages 8,691 8,318
Mortgages Receivable - Related Party 106,189 106,189
- Other 456,092 480,517
Prepaid Insurance 7,283 6,290
Other Assets 4,437 4,437
------------ ------------
Total Assets $ 1,782,459 $ 1,884,686
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts Payable and Accrued
Expenses $ 27,615 $ 81,854
Commitments and Contingencies -- --
------------ ------------
Stockholders' Equity
Shares of Common Stock $ 0.01
Par Value, 20,000,000 shares
Authorized, 12,403,565 shares
Issued $ 87,477,847 $ 87,477,847
Accumulated Deficit (85,680,465) (85,639,396)
Treasury Stock, at Cost, for 32,757
Shares of Common Stock (8,189) (8,189)
Unrealized loss on Investment Sec. (34,349) (27,430)
------------ ------------
Total Stockholders' Equity $ 1,754,844 $ 1,802,832
------------ ------------
Total Liabilities & Stockholders'
Equity $ 1,782,459 $ 1,884,686
============ ============
Book Value per Share of Common Stock
(12,403,565 shares outstanding) $ 0.14 $ 0.15
============ ============
The accompanying notes are an integral part of the financial statements
2
<PAGE>
BANYAN HOTEL INVESTMENT FUND
STATEMENTS OF INCOME AND EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30,1997 AND 1996
(UNAUDITED)
1997 1996
INCOME
Interest Income on Cash and Cash
Equivalents $ 8,064 $ 10,953
Interest Income on Mortgages Receivable 32,119 31,018
Interest Income on Investment Securities 32,792 32,792
--------- ---------
Total Income $ 72,975 $ 74,763
--------- ---------
EXPENSES
Stockholder Expenses $ 4,214 $ 10,740
Other Professional Fees 22,622 3,716
General and Administrative 87,208 86,456
--------- ---------
Total Other Expenses $ 114,044 $ 100,912
(Recovery of) Class Action
Settlement Costs and Expenses -- (2,669)
--------- ---------
Total Expenses $ 114,044 $ 98,243
--------- ---------
Net Income (Loss) $ (41,069) $ (23,480)
========= =========
Net Income (Loss) Per Share of
Common Stock Based on Shares
Outstanding of 12,403,565 $ (0.00) $ (0.00)
========= =========
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
BANYAN HOTEL INVESTMENT FUND
STATEMENTS OF INCOME AND EXPENSES
FOR THE THREE MONTHS ENDED JUNE 30,1997 AND 1996
(UNAUDITED)
1997 1996
INCOME
Interest Income on Cash and
Cash Equivalents $ 3,830 $ 4,611
Interest Income on Mortgages Receivable 15,913 17,198
Interest Income on Investment
Securities 16,396 16,936
-------- --------
Total Income $ 36,139 $ 38,205
-------- --------
EXPENSES
Stockholders' Expenses $ 2,145 $ 4,991
Other Professional Fees 21,443 1,169
General and Administrative 42,017 48,518
-------- --------
Total Other Expenses $ 65,605 $ 54,678
(Recovery of) Class action Settlement
Costs and Expenses -- (2,669)
-------- --------
Total Expenses $ 65,605 $ 52,009
-------- --------
Net Income (Loss) $(29,466) $(13,804)
======== ========
Net Income (Loss) Per Share
of Common Stock Based on
12,403,565 Shares Outstanding $ (0.00) $ (0.00)
======== ========
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
BANYAN HOTEL INVESTMENT FUND
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Accumulated Treasury Unrealized Total
Shares Amount Deficit Stock Loss
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stockholders' Equity
(Deficit) Dec. 31, 1996 12,403,565 $87,477,847 $(85,639,396) $(8,189) $(27,430) $1,802,832
Net Loss -- -- $ (41,069) -- -- $ (41,069)
Market Adjustment
June 30, 1997 -- -- -- -- $ (6,919) $ (6,919)
-----------------------------------------------------------------------------
Balance June 30, 1997 12,403,565 $87,477,847 $(85,680,465) $(8,189) $(34,349) $1,754,844
=============================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
BANYAN HOTEL INVESTMENT FUND
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
1997 1996
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET INCOME (LOSS) $ (41,069) $ (23,480)
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided by
(used in) Operating Activities:
Amortization of Premium or Discount
on Investment Securities (167) (166)
Net Change in:
Interest Receivable on Cash
and Cash Equivalents and
Investment Securities (375) (1,178)
Prepaid Insurance and Expenses (993) (9,618)
Other Assets -- 1,810
Accounts Payable and
Accrued Expenses (54,239) (18,023)
--------- ---------
Net Cash Used in Operating Activities $ (96,843) $ (50,655)
--------- ---------
CASH FLOW FROM INVESTING
ACTIVITIES:
Investment in Mortgages - Net of
Amortization Received 24,425 (238,113)
--------- ---------
Net (Decrease) increase in Cash
and Cash Equivalents $ (72,418) $(288,768)
Cash and Cash Equivalents at
Beginning of Period 414,935 736,897
--------- ---------
Cash and Cash Equivalents at End
of Period $ 342,517 $ 448,129
========= =========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
BANYAN HOTEL INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
Readers of this quarterly report should refer to the Banyan Hotel
Investment Fund's (the "Fund's") audited financial statements for the year ended
December 31, 1996, as certain footnote disclosures which would substantially
duplicate those contained in such audited statements have been omitted from this
report.
1. FINANCIAL STATEMENT PRESENTATION
The accompanying financial statements include the accounts of the Fund and
its wholly owned subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation. In the opinion of management, all adjustments
necessary for a fair presentation have been made to the accompanying financial
statements as of June 30, 1997 and for the three months ended June 30, 1997 and
1996. These adjustments made to the financial statements, as presented, are all
of a normal recurring nature to the fund unless otherwise indicated.
2. TRANSACTIONS WITH AFFILIATES
Effective February 15, 1995 the Fund began renting space from an
affiliated company. Rent paid to the affiliate amounted to $14,193 during the
first half of 1996. The lease expired July 31, 1996.
During 1996, the Fund reimbursed an affiliated company $20,082 for Health
insurance premiums paid on behalf of the Fund. During the first half of 1997
this reimbursement amounted to $9,797.
3. MORTGAGE LOANS RECEIVABLE
In May, 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards NO. 114, Accounting by Creditors for Impairment
of a Loan ("FAS 114"). Effective January 1, 1995, in accordance with FAS 114,
the Fund has reclassified Mortgage Loans in Substantive Foreclosure to Mortgage
Loans Receivable with an appropriate allowance for loan losses determined based
on consideration of the fair value of the collateral of discounted future cash
flows to be received.
On October 10, 1995, the Fund made a first mortgage loan in the amount of
$375,000 which is secured by a commercial property in New York City, as well as
by a personal guaranty of one of the principals of the borrower. The loan calls
for interest of 12% per annum with monthly payments based on a ten (10) year
amortization schedule and a balloon payment of the total balance in five (5)
years.
On February 13, 1996, the Fund made a first mortgage loan in the amount of
$150,000 which is secured by a commercial property in New York City. The loan
represents less than 17% of the appraised value of the property, bears interest
at the rate of 10% per annum and calls for monthly payments on a five year
self-liquidating basis.
7
<PAGE>
BANYAN HOTEL INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
3. MORTGAGE LOANS RECEIVABLE (CONTINUED)
On February 29, 1996, the Fund made a first mortgage loan in the
approximate amount of $106,000, which is secured by an industrial property in
Lake Worth, Florida. The property securing the mortgage is controlled by Harvey
Polly, who has personally guaranteed the mortgage. The loan calls for 10%
interest per annum, payable monthly, with a balloon payment of principal after
five years.
This carrying amount of the above three mortgage loans approximates their
fair values.
4. INVESTMENT IN PARTNERSHIP
In 1991, in connection with a release from liability related to a loan
made by the Fund, the Fund acquired a 50% limited partnership interest in the
partnership which owns the Santa Barbara Biltmore Resort. The Fund did not
record losses related to its interest in the Santa Barbara Biltmore during 1997
and 1996 since the carrying value of the partnership interest was reduced to
zero as of December, 1992, and the Fund has no obligation to make additional
capital contributions to, or pay the liabilities of, the partnership.
5. INVESTMENT SECURITIES
The Fund's investment securities portfolio at June 30, 1997 is as follows:
Amortized Cost
Net of
Principal Estimated
Paydowns Market Value
Title of Each Issue Received at June 30,
and Name of Issuer June 30, 1997 1997(2)
Federal National
Mortgage Assn.(1)
7.25%, 3/1/93-5/25/22 $ 891,598 $ 857,250
--------- ---------
$ 891,598 $ 857,250
========= =========
(1) The Guaranteed Remic Pass-Through Certificates are guaranteed as to timely
payment of principal and interest by the Federal National Mortgage
Association. The maturity of the principal of the above investment
securities is dependent upon the repayments of the underlying U.S. Agency
sponsored mortgages. The rate of repayment is dependent upon the current
market level of interest rates on mortgage loans as it relates to the
interest rates of the mortgages underlying each REMIC security. The stated
maturity of these investment securities, under the market conditions of
the second quarter of 1997, is expected to be from February 25, 2005 to
February 25, 2011. These expectations may change as interest rates on
mortgage loans change.
8
<PAGE>
BANYAN HOTEL INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
5. INVESTNEBT SECURITIES (CONTINUED)
(2) The Fund has recorded a market adjustment of $34,348 representing
unrealized losses on its investment securities based on current market
values at June 30, 1997.
6. RECOVERY OF LOSSES ON MORTGAGE LOANS, NOTES, INTEREST RECEIVABLES AND
CLASS ACTION COSTS AND EXPENSES
During the first six months of 1996, the Fund received a cash distribution
of $4,270 related to its interest in a liquidating trust established for the
benefit of the previously unsecured creditors of VMS Realty Partners and its
affiliates ("VMS"). For the period ended June 30, 1996, the Fund recorded a
recovery of $2,669 of losses on mortgage loans, notes and interest receivable on
its consolidated statement of income and expenses related to the distribution
received from the liquidating trust. The $2,669 net recovery recorded in 1996
represents the $4,270 distribution received net of an estimated $1,601 due to
the Class Action Settlement Fund for the Fund's share of amounts due per the
terms of the previously settled VMS securities litigation. At June 30, 1997, the
Fund has a total liability to the Class Action Settlement of $332.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
Banyan Hotel Investment Fund (the "Fund"), was formed to make mortgage
loans to affiliates of VMS Realty Partners, ("VMS"), secured by hotel and resort
properties. The Fund has been adversely affected as a result of the non-payment
of amounts due from these borrowers on mortgage loans and notes receivable. As a
result of these defaults, the Fund suspended distributions to shareholders.
In early 1990, the Fund implemented a business plan focused on
preservation of its assets and managing its properties acquired through
foreclosure until they could be disposed of in an orderly manner (the "Principal
Recovery Plan").
On January 28, 1992, the Board of Directors of the Fund authorized the
preparation of a formal plan of liquidation which was subsequently adopted on
April 7, 1992 (the "Plan"). The Plan contemplated the Fund liquidating its
assets and distributing the proceeds to its stockholders. The Fund estimated
that its liquidation value was between $.15 and $.20 per share. After the
adoption of the Plan, Management of the Fund completed the workout of
liquidation of certain assets and considered alternatives to the announced plan
of liquidation which could provide greater stockholder value, including a number
of unsolicited proposals from various third parties. Based upon Management's
review of these various proposals, the Board of Directors resolved that one
proposal was in the best interest of the Fund and its stockholders because it
allowed every stockholder an opportunity to sell his shares at an amount in
excess of the projected liquidation value. The Board of Directors, by unanimous
written consent dated June 15, 1994, authorized the Fund to execute and deliver
a non-binding letter of intent with Mr. Harvey Polly.
On August 3, 1994 the Fund entered into a Purchase Agreement (the
"Purchase Agreement") with Mr. Polly providing, among other things, for an all
cash tender offer, under which Mr. Polly agreed to offer to purchase 100% of the
shares of common stock of the Fund for $0.35 per share. The Purchase Agreement
was subsequently amended on November 4, 1994, December 19, 1994 and February 15,
1995. The Purchase Agreement provided, among other things, for the following
events to occur at or before closing: (i) the resignation of the current
officers and directors; (ii) the purchase by the Fund of "run-off" directors'
and officers' liability insurance coverage for the current officers and
directors; (iii) the termination of the employment contract of Leonard G. Levine
and payment of the severence compensation associated therewith; (iv) the
termination of the Administrative Services Agreement with Banyan Management
Corp. and payment of the termination fee associated therewith; and (v) the
assignment by the Fund of its ownership interest in Banyan Management Corp.
On February 15, 1995, a change in control of the Fund occurred pursuant to
the closing of the sale of shares of common stock in the Fund to Mr. Polly per
the terms of the Purchase Agreement. Mr. Polly's tender offer, which commenced
on December 28, 1994, concluded on
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
January 26, 1995, and resulted in the tender to Mr. Polly of 1,288,217 shares of
common stock, or 12.5% of the Fund's then outstanding shares of common stock,
for a cash price of $0.35 per share. Subsequent to the closing of the tender
offer, the terms of the Purchase Agreement also required Mr. Polly to purchase
from the Fund a number of shares sufficient to allow Mr. Polly to own, by virtue
of the combination of the shares acquired pursuant to the tender offer and the
shares purchased directly from the Fund, not less than 3,335,000 shares and not
more than 40% of the shares of common stock of the Fund after giving effect to
the shares issued in connection with the Purchase. On February 15, 1995, per the
Purchase Agreement, Mr. Polly purchased 2,047,766 newly issued shares of common
stock of the Fund for a cash price of $0.22 per share. Upon the acquisition of
the aforesaid shares from the Fund, when combined with the shares of common
stock previously owned and acquired pursuant to the tender offer, Mr. Polly is
the beneficial owner of 3,335,983 shares, or approximately 27% of the Fund's
outstanding voting shares of common stock.
Upon the closing of the sale of shares of common stock of the Fund on
February 15, 1995, the Purchase Agreement provided for the resignation of the
Fund's then current directors and officers. Accordingly, all of the then current
directors and officers resigned and were replaced with Mr. Polly's designees.
Subsequent to the resignation of the directors and officers of the Fund, no
further arrangements or understandings existed among the Fund and its officers
and directors. On February 15, 1995, Messrs. Leo Yarfitz, Morton I. Kalb, Willis
Ryckman and Harvey Polly were appointed as new Directors of the Fund. In
addition, the new Directors appointed Mr. Harvey Polly as President and Chief
Executive Officer. Mr. Morton I. Kalb as Vice President and Chief Financial
Officer, Ms. Celia Zisfein as Secretary and Mr. William L. Weiss as Assistant
Secretary. Effective February 15, 1995, the address of the Fund's principal
executive office is One Penn Plaza, Suite 1531, New York, New York 10119.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash equivalents consist of cash and short-term investments. The
Fund's cash and cash equivalents balance at June 30, 1997 and December 31, 1996
was $342,517 and $414,935 respectively. This decrease in cash and cash
equivalents is due primarily to a reduction of approximately $54,239 in accounts
payable. At June 30, 1997 and December 31, 1996, the Fund also held investment
securities with a carrying value of $857,250 and $864,000, respectively.
At this time, there are no material commitments for capital expenditures.
The Fund's cash and cash equivalents are sufficient to meet its needs for
anticipated operating expenses. The Fund deems its liquidity to be adequate.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)
As of June 30, 1997, the Fund had an investment of $562,281 (net of
principal payments received) in three mortgages. These mortgage loans are more
fully described in Item 3 on Page 7 of this report.
On June 26, 1996, the Fund received a cash distribution of $4,270 related
to its interest in a liquidating trust established for the benefit of the
previously unsecured creditors of VMS. For the quarter ended June 30, 1996, the
Fund recorded a $2,669 recovery of the provision for loan losses on mortgage
loans, notes and interest receivable on its consolidated statement of income and
expenses related to the distribution received from the liquidating trust. The
$2,669 net recovery recorded in 1996 represents the $4,270 distribution received
net of an estimated $1,601 due to the Class Action Settlement Fund for the
Fund's share of amounts due per the terms of the previously settled VMS
securities litigation.
The Fund's ultimate return of cash to its stockholders is dependent upon,
among other things: (i) the activities undertaken by the Fund; (ii) interest
earned from the investment of cash and cash equivalents and investment
securities; (iii) the Fund's ability to control its operating expenses; and (iv)
possible recoveries from the Santa Barbara Biltmore Hotel, and the liquidating
trust, if any.
RESULTS OF OPERATIONS
Total income for the six months ended June 30, 1997 and 1996 was $72,975
and $74,763 respectively.
Operating expenses for the six months ended June 30,1997 increased by
approximately $15,800 when compared to the same period in 1996. It should be
noted that the 1997 period included $20,000 in legal costs resulting from a now
discontinued acquisition negotiation.
During the period ended June 30, 1996, the Fund recorded a net recovery of
$2,669 from the liquidating trust established for the benefit of unsecured
creditors of VMS Realty Partners.
The above changes for the six months ended June 30, 1997, when compared to
the same period in 1996, resulted in an increase in the net loss to $41,069
($0.00 per share) from $23,480 ($0.00 per share).
On June 30, 1997, the company issued a press release stating that
negotiations to acquire a privately held domestic and international manufacturer
and distributor of toys, hobby and leisure products had been terminated. The
company also announced that it would continue to pursue other acquisitions.
12
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are included with this Report
(b) On January 17, 1995, a current report on Form 8-K was filed under Item 5.
Other information reporting the terms of a Tender Offer of the
Registrant's shares of common stock by Mr. Harvey Polly.
On February 22, 1995, a current report on Form 8-K was filed under Item 6.
Registration of the Registrant's Directors reporting the Resignation of
the Registrant's Directors on February 15, 1995 pursuant to a change in
control of the Registrant.
On February 28, 1995, a current report on Form 8-K was filed under Item 1.
Change in Control of the Registrant reporting a change in control of the
Registrant on February 15, 1995 pursuant to the closing of the sale of
shares of stock in the Registrant to Mr. Harvey Polly.
13
<PAGE>
SIGNATURES
PURSUANT to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BANYAN HOTEL INVESTMENT FUND
/s/ Harvey Polly
By: /a/ Harvey Polly Date: August 1, 1997
Harvey Polly, Director, President
and Chief Executive Officer
/s/ Morton I. Kalb
/a/ Morton I. Kalb Date: August 1, 1997
Morton I. Kalb, Director, Vice Pres.
and Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 342,517
<SECURITIES> 857,250
<RECEIVABLES> 8,691
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,215,741
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,782,459
<CURRENT-LIABILITIES> 27,615
<BONDS> 0
0
0
<COMMON> 87,477,847
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,782,459
<SALES> 0
<TOTAL-REVENUES> 72,975
<CGS> 0
<TOTAL-COSTS> 114,044
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (41,069)
<INCOME-TAX> 0
<INCOME-CONTINUING> (41,069)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41,069)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
