<PAGE>
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, 1998
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 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, 1998: 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, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 216,560 $ 238,077
Interest Receivable on
Cash and Cash
Equivalents, Mortgages and
Investment Securities 14,326 14,188
Mortgage Loans, Receivables 1,523,228 1,536,489
Prepaid Insurance 1,761 7,080
Other Assets 4,437 4,437
---------- ----------
Total Assets $ 1,760,312 $ 1,800,271
---------- ----------
---------- ----------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Accounts Payable and
Accrued Expense $ 53,856 $ 54,358
---------- ----------
Stockholders' Equity
Shares of Common Stock
$0.01 Par Value
20,000,000 Shares
Authorized 12,403,563
Shares Issued $87,477,847 $87,477,847
Accumulated Deficit (85,763,202) (85,723,745)
Treasury Stock, At Cost,
for 32,757 Shares of
Common Stock (8,189) (8,189)
---------- ----------
Total Stockholders' Equity $ 1,706,456 $ 1,745,913
---------- ----------
</TABLE>
2
<PAGE>
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997 (continued)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Total Liabilities and
Stockholders' Equity $ 1,760,312 $ 1,800,271
---------- ----------
---------- ----------
Book Value Per Share of
12,403,565 Shares $ 0.14 $ 0.14
---------- ----------
---------- ----------
</TABLE>
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, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
INCOME
Interest Income on Cash
and Cash Equivalents $ 2,038 $ 4,234
Interest Income on
Investment Securities - 16,396
Interest Income on
Mortgages Receivable 44,976 16,207
---------- ----------
Total Income $ 47,014 $ 36,837
---------- ----------
---------- ----------
EXPENSES
Stockholder Expenses $ 2,039 $ 2,068
Other Professional Fees 30,826 1,179
General and Administrative 53,606 45,193
---------- ----------
TOTAL EXPENSES $ 86,471 $ 48,440
---------- ----------
Net Loss $ (39,457) $ (11,603)
---------- ----------
---------- ----------
Net Loss Per Share of
Common Stock (Based
on Number of Shares Out-
standing of 12,403,565 $ 0.00 $ 0.00
---------- ----------
---------- ----------
</TABLE>
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, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Shares of Common Stock
Shares Amount
<S> <C> <C>
Stockholders'
Equity (Deficit)
December 31, 1997 $12,403,565 $87,477,847
Net Loss --- ---
Stockholders'
Equity (Deficit)
March 31, 1998 12,403,565 $87,477,847
---------- ----------
---------- ----------
</TABLE>
5
<PAGE>
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998 (continued)
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated Treasury Total
Deficit Stock
<S> <C> <C> <C>
Stockholders'
Equity (Deficit) $(85,723,745) $ (8,189) $ 1,745,913
December 31, 1997
Net Loss (39,457) --- (39,457)
----------- ------------ ------------
Stockholders'
Equity (Deficit)
March 31, 1998 $(85,763,202) $ (8,189) $ 1,706,456
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
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, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
NET LOSS $ (39,457) $ (11,603)
Adjustment to
Reconcile Net Loss
to Net Cash (Used in)
Provided by Operating
Activities:
Amortization of Premium
or Discount on Investment
Securities -- (83)
Net Change in:
Interest Receivable
on Cash and Cash
Equivalents and
Investment Securities (138) (505)
Prepaid Insurance 5,319 4,717
Accounts Payable and
Accrued Expenses (502) (51,664)
--------- ----------
Net Cash (Used in)
Provided by Operating
Activities $ (34,778) $ 59,138)
--------- ----------
CASH FLOW FROM
INVESTMENT
ACTIVITIES:
Net Investment in Mortgages
or Principal Repayments $ 13,261 $ 12,045
--------- ----------
Net Cash Provided by
(Used in) Investment
Activities $ 13,261 $ 12,045
--------- ----------
</TABLE>
7
<PAGE>
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net Increase (Decrease)
in Cash and Cash
Equivalents $ (21,517) $ (47,093)
Cash and Cash Equivalents
at Beginning of Period 238,077 414,935
--------- ----------
Cash and Cash Equivalents
at End of Period $ 216,560 $ 367,842
--------- ----------
--------- ----------
</TABLE>
8
<PAGE>
BANYAN HOTEL INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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, 1997, 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 this 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, 1998 and for the three
months ended March 31, 1998 and 1997. 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
During 1997, the Fund reimbursed an affiliated company $21,534 for Health
Insurance premiums paid on behalf of the Fund. During the first quarter of
1998, this reimbursement amounted to $5,319.
3. MORTGAGE LOANS RECEIVABLE
In May, 1993, the Financial Accounting Standards board issued Statements
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.
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.
9
<PAGE>
BANYAN HOTEL INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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
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.
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 principal of the corporate owners of both properties have
personally guaranteed the loan. On April 3, 1998, the due date of the loan
was extended to July 1, 1998. On April 30, 1998, the Fund received a $700,000
principal payment on this loan.
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
1998 and 1997, 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
follows:
<TABLE>
<CAPTION>
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)
<S> <C> <C>
Federal National
Mortgage Assn. (1)
7.25%, 3/1/93-
5/25/22 $891,514 $829,125
----------- -----------
$891,514 $829,125
----------- -----------
----------- -----------
</TABLE>
10
<PAGE>
BANYAN HOTEL INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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 for 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 closing 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 discontinued previously announced
negotiations to acquire a portfolio of retail shopping center properties.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
(continued)
During the week of October 28, 1996, the Fund's shares began trading on
the NASD market with a ticker symbol of "VHTI".
On February 9, 1998, the Fund announced that an agreement had been
entered into providing for the acquisition of approximately 38% of the shares
of the Fund by Fifteen Brickell Corp. The Fund noted that it expected to
close this transaction in mid March 1998, assuming Brickell's satisfactory
completion of its due diligence review of the operations, business and
financial condition of the Fund. The mid March closing date was delayed to
March 31st, and as of May 5th, 1998 negotiations are proceeding.
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, 1998 and December 31,
1997 was $216,560 and $238,077 respectively. At March 31, 1997, the Fund held
investment securities with a carrying value of $829,125.
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, 1998, the Fund's mortgage loan portfolio consisted of
four 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, 1998 and 1997 was
$47,014 and $36,837 respectively.
Operating expenses for the three months ended March 31, 1998 were higher
than those for the same period in 1997, due primarily to increased legal
costs.
The above changes for the three months ended March 31, 1998, when
compared to the same period in 1997, resulted in an increase in the net loss
to $39,457 ($0.00 per share) from $11,603 ($0.00 per share)
14
<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.
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, 1998
Harvey Polly, Director, President
and Chief Executive Officer
By: /s/ Morton I. Kalb Date: May 5, 1998
Morton I. Kalb, Director, Vice Pres.
and Chief Financial Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 216,560
<SECURITIES> 0
<RECEIVABLES> 14,326
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,245,829
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,760,312
<CURRENT-LIABILITIES> 53,856
<BONDS> 0
0
0
<COMMON> 87,477,547
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,760,312
<SALES> 0
<TOTAL-REVENUES> 47,014
<CGS> 0
<TOTAL-COSTS> 86,471
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (39,457)
<INCOME-TAX> 0
<INCOME-CONTINUING> (39,457)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,457)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
