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 September 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 November 5, 1997: 12,403,565
Transitional Small Business Disclosure Format Yes . No X .
<PAGE>
PART I FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
BANYAN HOTEL INVESTMENT FUND
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
---- ----
ASSETS
Cash and Cash equivalents $ 214,330 $ 414,935
Investment Securities -- 864,000
Interest Receivable on Cash
and Cash Equivalents and Investment
Securities 19,056 8,318
Mortgage - Loans Receivable - Related Party 106,189 106,189
- Other 1,443,372 480,517
Prepaid Insurance & Expenses 1,821 6,290
Other Assets 4,437 4,437
------------ ------------
Total Assets $ 1,789,205 $ 1,884,686
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts Payable and Accrued Expenses $ 29,113 $ 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 (85,709,566) (85,639,396)
Treasury Stock, at Cost, for 32,757
Shares of Common Stock (8,189) (8,189)
Unrealized Loss on Investment Securities -- (27,430)
------------ ------------
Total Stockholders' Equity $ 1,760,092 $ 1,802,832
------------ ------------
Total Liabilities & Stockholders'
Equity $ 1,789,205 $ 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 NINE MONTHS ENDED SEPTEMBER 30, 1997 and 1996
(UNAUDITED)
1997 1996
---- ----
INCOME
Interest Income on Cash and Cash
Equivalents $ 11,090 $ 15,582
Interest Income on Mortgages Receivable 62,591 47,910
Interest Income on Investment
Securities 41,715 49,189
--------- ---------
Total Income $ 115,396 $ 112,681
========= =========
EXPENSES
Stockholders' Expenses $ 6,264 $ 15,752
Other Professional Fees 33,413 14,710
General and Administrative 132,320 130,933
--------- ---------
Total Expenses $ 171,997 $ 161,395
Recovery of Class Action
Settlement Costs and Expenses (7,320) (2,669)
Loss on Sale of
Investment Securities 20,889 --
--------- ---------
Total Expenses $ 185,566 $ 158,726
--------- ---------
Net Income (Loss) $ (70,170) $ (46,045)
========= =========
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
STATEMENT OF INCOME AND EXPENSES
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
1997 1996
---- ----
INCOME
Interest Income on Cash and
Cash Equivalents $ 3,026 $ 4,629
Interest Income on Mortgages Receivable 30,472 16,892
Interest Income on Investment
Securities 8,923 16,397
-------- --------
Total Income $ 42,421 $ 37,918
======== ========
EXPENSES
Expenses from Lending Activities:
Loss on Sale of Investment Securities $ 20,889 --
Recovery of Losses on Mortgages,
Loans, Notes and Interest (7,320) --
-------- --------
$ 13,569
-------- --------
OTHER EXPENSES:
Stockholder Expenses $ 2,050 $ 5,012
Other Professional Fees 10,791 10,994
General and Administrative 45,112 44,477
-------- --------
Total Other Expenses $ 57,953 $ 60,483
-------- --------
Total Expenses $ 71,522 $ 60,483
-------- --------
Net Income (Loss) $(29,101) $(22,565)
======== ========
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.
4
<PAGE>
BANYAN HOTEL INVESTMENT FUND
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPT. 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Accumulated Treasury Total
Shares Amount Deficit Stock
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Stockholders' Equity
(Deficit) Dec. 31, 1996 12,403,565 $87,477,847 $(85,534,593) $(8,189) $ 1,935,065
Net Loss -- -- (70,170) -- $ (70,170)
---------------------------------------------------------------
Stockholders' Equity
(Deficit) Sept. 30, 1997 12,403,565 $87,477,847 $(85,604,763) $(8,189) $ 1,864,895
===============================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
BANYAN HOTEL INVESTMENT FUND
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
1997 1996
---- ----
Cash Flow from Operating
Activities:
Net Income (loss) $ (70,170) $ (46,045)
Amortization of Premium or (Discount)
on Investment Securities (209) (251)
Net Change in:
Interest Receivable (10,738) (1,120)
Prepaid Insurance 4,469 (1,776)
Other Assets -- 5,907
Accounts Payable and
Accrued Expenses (52,741) (23,556)
--------- ---------
Net Cash Used in Operating Activities $(129,389) $ (66,841)
========= =========
Cash Flow From Investing Activities:
Proceeds from Sale of Inv. Securities $ 870,750 $ --
Loss on Sale of Inv. Securities 20,889 --
Investment in Mortgages - Net of Principal
Payments Received (962,855) (226,705)
--------- ---------
Net Cash Used in or Provided by
Investment Activities $ (71,216) $(226,705)
--------- ---------
Net Increase or (Decrease) in Cash and
Cash equivalents $(200,605) $(293,546)
Cash and Cash Equivalents at Beginning
of Period 414,935 736,896
--------- ---------
Cash and Cash Equivalents at End
of Period $ 214,330 $ 443,350
========= =========
The accompanying notes are an integral part of the financial statements
6
<PAGE>
BANYAN HOTEL INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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, which are included in the Fund's 1996 Form 10K, 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 September 30, 1997 and for the three months ended September 30,
1997 and 1996. These adjustments made in the financial statements, as presented,
are all of a normal recurring nature to the fund unless otherwise indicated.
2. MORTGAGE LOANS RECEIVABLE
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.
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 Harvey
Polly, who personally guaranteed the mortgage. The loan calls for 10% interest
per annum, payable monthly, with a balloon payment of principal after five
years.
On August 20, 1997, the Fund made a first mortgage loan in the amount of
$1,000,000, which is secured by one commercial and one residential property
located in the Dallas, Texas area. The loan bears interest at the rate of 12%,
and calls for monthly payments of interest only. The loan is due on April 1,
1998. The principals of the corporate owners of both properties have personally
guaranteed the loan.
The carrying amount of the above three mortgage loans approximate their
fair values.
7
<PAGE>
BANYAN HOTEL INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
3. 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.
4. RECOVERY OF LOSSES ON MORTGAGE LOANS, NOTES, INTEREST RECEIVABLES AND CLASS
ACTION COSTS AND EXPENSES
During the first nine months of 1997 and 1996, the Fund received cash
distributions of $9,760 and $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 periods ended September 30,
1997 and 1996, the Fund recorded recoveries of $7,320 and $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 $7,320 net recovery recorded in 1997 represents the $9,760
distribution received net of $2,440 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 $2,669 net recovery recorded in 1996 represents the
$4,270 distribution received net of $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 September 30, 1997, the Fund had no liability to
the Class Action Settlement Fund.
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.
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").
8
<PAGE>
BANYAN HOTEL INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL (CONTINUED)
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 severance compensation associated therewith; (iv) the
termination of the Administrative Services Agreement with Banyan Management
Corp., and payment of the termination fee associated therewith; (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 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
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL (CONTINUED)
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 understanding 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 September 30, 1997 and December 31,
1996 was $214,330 and $414,935, respectively. This reduction in cash and cash
equivalents is due primarily to the mortgage investments made by the Fund. At
December 31, 1996, the Fund also held investment securities with a carrying
value of $864,000.
As of September 30, 1997, the Fund had an investment of $1,549,561 (net of
principal payments received) in four mortgages. These mortgage loans are more
fully described in Item 2 on page 7 of this report.
During the first nine months of 1997 and 1996, the Fund received cash
distributions of $9,760 and $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 periods ended September 30,
1997 and 1996, the Fund recorded recoveries of $7,320 and $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.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The $7,320 net recovery recorded in 1997 represents the $9,760 distribution
received net of $2,440 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 $2,669 net recovery recorded in 1996 represents the $4,270
distribution received net of $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 September 30, 1997, the Fund had no liability to the
Class Action Settlement Fund.
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 liquidation
trust, if any.
RESULTS OF OPERATIONS
Total income for the nine months ended September 30, 1997 and 1996 was
$115,396 and $112,681 respectively. The increase in total income for the nine
months ended September 30, 1997 when compared to the same period in 1996 is due
primarily to the higher rate of return on the Fund's mortgage investments.
Operating expenses for the nine months ended September 30, 1997 increased
somewhat when compared to the same period in 1996. This increase is due
primarily to increased professional fees resulting from, now discontinued,
acquisition negotiations.
During August of 1997 the Fund sold its investment in marketable securities
and realized a loss of $20,889. Management determined that it would benefit the
Fund to sell these securities in order to invest the proceeds in the higher
yielding mortgage.
During the periods September 30, 1997 and September 30, 1996. The Fund
recorded net recoveries of $7,320 and $2,669 respectively from the liquidating
trust established for the benefit of unsecured creditors of VMS Realty Partners.
The above changes for the nine months ended September 30, 1997, when
compared to the same period in 1996, resulted in increase in the net loss to
$70,170 ($0.00 per share) from $46,045 ($0.0 per share). This increase in net
loss is due primarily to the loss on sale of marketable securities.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS (CONTINUED)
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 discontinued previously announced negotiations to acquire a
portfolio of retail shopping center properties.
During the week of October 28, 1996, the Fund's shares began trading on the
NASD market with a ticker symbol of "VHTI".
12
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are included with this Report.
(b) None
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
By: /s/ Harvey Polly Date: November 5, 1997
Harvey Polly, Director, President
and Chief Executive Officer
/s/ Morton I. Kalb Date: November 5, 1997
Morton I. Kalb, Director, Vice Pres.
and Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 214,330
<SECURITIES> 0
<RECEIVABLES> 19,056
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,298,007
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,789,205
<CURRENT-LIABILITIES> 29,113
<BONDS> 0
0
0
<COMMON> 87,477,847
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,789,205
<SALES> 0
<TOTAL-REVENUES> 115,396
<CGS> 0
<TOTAL-COSTS> 185,566
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (70,170)
<INCOME-TAX> 0
<INCOME-CONTINUING> (70,170)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (70,170)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
