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 March 31, 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 jurisdicton of (I.R.S. Employer)
incorporation or organization) Identification Number)
One Penn Plaza, Suite 1531, New York, New York 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 May 5, 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
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
1997 1996
ASSETS
Cash and Cash Equivalents $ 367,842 $ 414,935
Investment Securities 829,125 864,000
Interest Receivable on
Cash and Cash
Equivalents, Mortgages and
Investment Securities 8,822 8,318
Mortgage Loans Receivable 574,661 586,706
Prepaid Insurance 1,573 6,290
Other Assets 4,437 4,437
------------ ------------
Total Assets $ 1,786,460 $ 1,884,686
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Accounts Payable and
Accrued Expense $ 30,190 $ 81,854
============ ============
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 (85,650,999) (85,639,396)
Unrealized Losses on
Investment Securities (62,389) (27,430)
Treasury Stock, At Cost,
for 32,757 Shares of
Common Stock ( 8,189) ( 8,189)
------------ ------------
Total Stockholders'
Equity $ 1,756,270 $ 1,802,832
------------ ------------
2
<PAGE>
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996 (CONTINUED)
(UNAUDITED)
1997 1996
Total Liabilities and
Stockholders' Equity $ 1,786,460 $ 1,884,686
============ ============
Book Value Per Share of
12,403,565 Shares $ 0.14 $ 0.16
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE THREE MONTHS ENDED MARCH 31,1997 AND 1996
(UNAUDITED)
1997 1996
INCOME
Interest Income on Cash
and Cash Equivalents $ 4,234 $ 6,342
Interest Income on
Investment Securities 16,396 16,396
Interest Income on
Mortgages Receivable 16,207 13,820
------------ ----------
Total Income $ 36,837 $ 36,558
------------ ----------
EXPENSES
Stockholder Expenses $ 2,068 $ 5,749
Other Professional Fees 1,179 2,547
General and Administrative 45,193 37,938
------------ ----------
TOTAL EXPENSES 48,440 $ 46,234
------------ ----------
Net Loss $ (11,603) $ (9,676)
============ ==========
Net Loss Per Share of
Common Stock (Based
on Number of Shares Out-
standing of 12,403,565 $ 0.00 $ 0.00
============ ==========
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH, 31, 1997
(UNAUDITED)
Unrealized
Losses on
Shares of Common Stock Investment
Shares Amount Securities
Stockholders
Equity (Deficit)
December 31, 1996 12,403,565 $87,477,847 $ (27,430)
Net Loss --- --- ---
Market Adjustment
March 31, 1997 --- --- ( 34,959)
----------- ----------- -----------
Stockholders'
Equity (Deficit)
March 31, 1997 12,403,565 $87,477,847 $ (62,389)
=========== =========== ============
5
<PAGE>
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 (CONTINUED)
(UNAUDITED)
Accumulated Treasury
Deficit Stock Total
Stockholders'
Equity (Deficit) $ (85,639,396) $ (8,189) $ 1,802,832
Net Loss (11,603) --- (11,603)
Market Adjustment
March 31, 1997 --- --- (34,959)
--------------- -------- -----------
Stockholders'
Equity (Deficit)
March 31, 1997 $ (85,650,999 $ (8,189) $ 1,756,270
================= ======== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
1997 1996
CASH FLOWS FROM
OPERATING
ACTIVITIES:
NET LOSS $(11,603) $ (9,676)
Adjustment to
Reconcile Net Loss
to Net Cash (Used in)
Provided by Operating
Activities:
Amortization of Premium
or discount on Investment
Securities (83) (83)
Net Change in:
Interest Receivable
on Cash and Cash
Equivalents and
Investment Securities (505) (1,567)
Prepaid Insurance 4,717 (1,562)
Other Assets -- 6,247
Accounts Payable and
Accrued Expenses (51,664) 7,334
--------- ---------
Net Cash (Used in)
Provided by Operating
Activities $(59,138) $ 693
--------- ---------
CASH FLOW FROM INVESTMENT
ACTIVITIES:
Net Investment in Mortgages
or Principal Repayments $(12,045) $ 249,213
--------- ---------
Net Cash Provided by (Used in) Investment
Activities $(12,045) $(249,213)
--------- ---------
7
<PAGE>
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (CONTINUED)
(UNAUDITED)
1997 1996
Net Increase (Decrease)
in Cash and Cash
Equivalents $ (47,093) $(248,520)
Cash and Cash Equivalents
at Beginning of Period 414,935 736,897
----------- ----------
Cash and Cash Equivalents
at End of Period $ 367,842 $ 488,377
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
8
<PAGE>
BANYAN HOTEL INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 1997 and for the three months ended March 31, 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 $7,027 during the
first quarter 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 quarter of 1997
this reimbursement amounted to $4,718.
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 at 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. The carrying amount of the mortgage loan approximates the fair value.
9
<PAGE>
BANYAN HOTEL INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
3. MORTGAGE LOANS RECEIVABLE (CONTINUED)
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.
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 Mr.
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 (5) years.
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 to pay the liabilities of, the partnership.
5. INVESTMENT SECURITIES
The Fund's investment securities portfolio at March 31, 1997 is as follow:
Amortized Cost
Net of
Principal Estimated
Paydowns Market Value
Title of Each Issue Received at Mar. 31,
and Name of Issuer Mar. 31, 1997 1997 (2)
Federal National
Mortgage Assn. (1)
7.25%, 3/1/93 -
5/25/22 $ 891,514 $ 829,125
----------------- ------------------
$ 891,514 $ 829,125
================= ==================
10
<PAGE>
BANYAN HOTEL INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
5. INVESTMENT SECURITIES (CONTINUED)
(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 repayment 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 as of
the first 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.
(2) The fund has recorded a market adjustment of $62,389 representing
unrealized losses on its investment securities based on current market
values at March 31, 1997
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 the making of new loans (except for
advances of additional funds under circumstances which it is deemed necessary to
preserve the value of existing collateral) and 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 to 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 $.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 severance 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.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(CONTINUED)
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 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 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.
On October 14, 1996, the Fund was notified by the American Stock Exchange
that its shares would be removed from listing on the Exchange, and that the last
day of trading on the Exchange, would be October 25, 1996. The reason for this
action was that the Fund no longer meets the requirements for continued listing,
and Banyan had discontined previously announced negotiations to acquire a
portfolio of retail shopping center properties.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(CONTINUED)
Also, on October 14, 1996, the Fund issued a press release stating the
above facts, as well as that it had resumed negotiations to acquire, for cash
and stock valued at approximately $80,000,000 a privately held domestic and
international manufacturer and distributor of toys, hobby and leisure products
with annual sales of approximately $80,000,000. Banyan noted that the
acquisition of the toy, hobby and leisure products company was subject to
negotiaton and execution of definitive agreements and subject to obtaining
commitments for financing required to consummate the acquisition. Banyan also
noted that certain aspects of the acquisition program would require stockholder
approval and that the matter would be submitted to stockholders at a meeting on
a date to be announced.
During the week of October 28, 1996, the Fund's shares began trading on
the NASD market with a ticker symbol of "VHTI".
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents consist of cash and short-term investments. The
Fund's cash and cash equivalents balance at March 31,1997 and December 31, 1996
was $367,842 and $414,935 respectively. At March 31, 1997 and December 31, 1996,
the Fund also held investment securities during the quarter with a carrying
value of $829,125 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.
As of March 31, 1996, the Fund's mortgage loan portfolio consisted of
three loans, as detailed in Note 3.
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, investment securities
and mortgages; (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 three months ended March 31, 1997 and 1996 was
$36,837 and $36,558 respectively.
Operating expenses for the three months ended March 31, 1997 were slightly
higher than those for the same period in 1996.
The above changes for the three months ended March 31, 1997, when compared
to the same period in 1996, resulted in an increase in the net loss to $11,603
($0.00 per share) from $9,676 ($0.00 per share)
14
<PAGE>
FART 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.
15
<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
By: /s/ Harvey Polly Date: May 5, 1997
Harvey Polly, Director, President
and Chief executive Officer
By: /s/ Morton I. Kalb Date: May 5, 1997
Morton I. Kalb, Director, Vice Pres.
and Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 367,842
<SECURITIES> 829,125
<RECEIVABLES> 8,822
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,207,362
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,786,460
<CURRENT-LIABILITIES> 30,190
<BONDS> 0
0
0
<COMMON> 87,477,847
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,786,460
<SALES> 0
<TOTAL-REVENUES> 36,837
<CGS> 0
<TOTAL-COSTS> 48,440
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,603)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,603)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
