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, 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
B.H.I.T., Inc. Formerly
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.)
875 Avenue of the Americas, Suite 1808
New York, New York 10001
(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, 1998: 12,403,565
Transitional Small Business Disclosure Format Yes |_| No |X|
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
B.H.I.T., Inc. Formerly....
BANYAN HOTEL INVESTMENT FUND
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
---- ----
ASSETS
Cash and Cash Equivalents $ 277,065 $ 238,077
Investment in Joint Venture 1,005,000 --
Interest Receivable on Cash,
Cash Equivalents and Mortgages 6,448 14,188
Mortgage Loans Receivable - Related Party 106,189 106,189
- Other 607,087 1,430,300
Prepaid Insurance & Expenses 15,667 7,080
Other Assets 7,635 4,437
------------ ------------
Total Assets $ 2,025,091 $ 1,800,271
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts Payable and Accrued Expenses $ 21,255 $ 54,358
Note Payable - Joint Venture 350,000 --
Commitments and Contingencies -- --
------------ ------------
Total Liabilities $ 371,255 $ 54,358
------------ ------------
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 (85,815,822) (85,723,745)
Treasury Stock, at Cost, for 32,757
Shares of Common Stock (8,189) (8,189)
------------ ------------
Total Stockholders' Equity $ 1,653,836 $ 1,745,913
------------ ------------
Total Liabilities and Stockholders'
Equity $ 2,025,091 $ 1,800,271
============ ============
Book Value Per Share of Common Stock
12,403,565 Shares Outstanding $ 0.13 $ 0.14
============ ============
The accompanying notes are an integral part of the Financial Statements
2
<PAGE>
B.H.I.T., Inc. Formerly....
BANYAN HOTEL INVESTMENT FUND
STATEMENTS OF INCOME AND EXPENSES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 and 1997
(UNAUDITED)
1998 1997
---- ----
INCOME
Interest Income on Cash and Cash
Equivalents $ 8,770 $ 11,090
Interest Income on Mortgages Receivable 97,981 62,591
Interest Income on Investment
Securities -- 41,715
--------- ---------
Total Income $ 106,751 $ 115,396
========= =========
EXPENSES
Stockholders' Expenses $ 5,419 $ 6,264
Other Professional Fees 43,136 33,413
General and Administrative 150,274 132,320
--------- ---------
Total expenses $ 198,829 $ 171,997
Recovery of Class Action
Settlement Costs and Expenses -- (7,320)
Loss on Sale of
Investment Securities -- 20,889
--------- ---------
Total Expenses $ 198,829 $ 185,566
--------- ---------
Net Income (Loss) $ (92,078) $ (70,170)
========= =========
Net Income (Loss) Per Share of
Common Stock based on Shares
Outstanding of 12,403,565 $ (0.01) $ 0.00
========= =========
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
B.H.I.T., Inc. Formerly....
BANYAN HOTEL INVESTMENT FUND
STATEMENT OF INCOME AND EXPENSES
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 and 1997
(UNAUDITED)
1998 1997
---- ----
INCOME
Interest Income on Cash and
Cash Equivalents $ 2,940 $ 3,026
Interest Income on Mortgages Receivable 20,936 30,472
Interest Income on Investment
Securities -- 8,923
-------- --------
Total Income $ 23,876 $ 42,421
======== ========
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 $ 1,339 $ 2,050
Other Professional Fees 10,403 10,791
General and Administrative 47,253 45,112
-------- --------
Total Other Expenses $ 58,995 $ 57,953
-------- --------
Total Expenses $ 58,995 $ 71,522
-------- --------
Net Income (Loss) $(35,119) $(29,101)
======== ========
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>
B.H.I.T., Inc. Formerly....
BANYAN HOTEL INVESTMENT FUND
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPT. 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Accumulated Treasury Total
Shares Amount Deficit Stock
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Stockholders' Equity
(Deficit) Dec. 31, 1997 12,403,565 $ 87,477,847 $(85,723,744) $(8,189) $ 1,745,914
Net Loss -- -- (92,078) -- $ (92,078)
--------------------------------------------------------------------------------
Stockholders' Equity
(Deficit) Sept. 30, 1998 12,403,565 $ 87,477,847 $(85,815,822) $(8,189) $ 1,653,836
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE>
B.H.I.T., Inc. Formerly....
BANYAN HOTEL INVESTMENT FUND
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 and 1997
(UNAUDITED)
1998 1997
---- ----
Cash Flow from Operating
Activities:
Net Income (Loss) $ (92,078) $ (70,170)
Amortization of Premium or (Discount)
on Investment Securities -- (209)
Net Change in:
Interest Receivable 7,740 (10,738)
Prepaid Insurance (8,587) 4,469
Other Assets (3,198) --
Accounts Payable and
Accrued Expenses (33,103) (52,741)
--------- ---------
Net Cash Used in Operating Activities $(129,226) $(129,389)
========= =========
Cash Flow From Investing Activities:
Investment in Joint Venture $(655,000) $ --
Proceeds from Sale of Inv. Securities -- 870,750
Loss on Sale of Inv. Securities -- 20,889
Investment in Mortgages - Net of Principal
Payments Received 823,214 (962,855)
--------- ---------
Net Cash Used in or Provided by
Investment Activities $ 168,214 $ (71,216)
--------- ---------
Net Increase or (Decrease) in Cash and
Cash Equivalents $ 38,988 $(200,605)
Cash and Cash Equivalents at Beginning
of Period 238,077 414,935
--------- ---------
Cash and Cash Equivalents at End
of Period $ 277,065 $ 214,330
========= =========
The accompanying notes are an integral part of the financial statements
6
<PAGE>
B.H.I.T., Inc. Formerly....
BANYAN HOTEL INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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, which are included in the Fund's 1997 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 Company
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, 1998 and for the three months ended
September 30, 1998 and 1997. These adjustments made in the financial statements,
as presented, are all of a normal recurring nature to the Company unless
otherwise indicated.
2. MORTGAGE LOANS RECEIVABLE
On October 10, 1995, the Company 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 November 1, 1998, this mortgage was sold to Mr. Harvey Polly for
its then principal balance of approximately $302,000. These funds were used by
the Company to make payment on the note due to the Joint Venture.
On February 29, 1996, the Company 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 Company 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 was 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 Company received a $700,000 principal
payment on this loan. On June 30, 1998 the due date for the remaining $300,000
of this loan was further extended to October 1, 1998, and on September 29, 1998
the loan was further extended to January 1, 1999.
The carrying amount of the above mortgage loans approximates their fair
values.
7
<PAGE>
B.H.I.T., Inc. Formerly....
BANYAN HOTEL INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
3. INVESTMENT IN JOINT VENTURE
On May 28, 1998, the Company made an investment of $1,005,000 in Metro
Franchising Commissary, LLC. The Company has a 50% interest in the Venture for
which it invested $655,000 upon closing, and issued its non-interest bearing
note in the amount of $350,000. The note was due on the date that is earlier of
(i) September 30, 1998 and (ii) the date which is 10 days after the date on
which demand is made by the holder. This due date was subsequently extended to
November 2, 1998, at which time the note was paid.
The business of the Venture is to open Dunkin' Donuts Quick Service
Restaurant locations in Exxon Service Stations in the New York, New Jersey and
Connecticut areas. The Venture has leased property in Long Island City, New
York, where product will be baked for delivery to the various locations. It is
expected that this facility will have the capacity to service 20 to 25
locations.
The individual locations are selected by the Venture with Dunkin' Donut
and Exxon's approval. Each site is renovated, equipped and franchised by the
Venture and operated by the Station operator. All baked products are purchased
from the Venture and the operator also pays the Venture a royalty fee based on
gross sales.
At present, the Venture has its Commissary 99% completed and has ordered
equipment for three locations. It is expected that the first retail locations
will commence operations around December 1, 1998 and that three to four
locations will begin operations each quarter thereafter.
The operating agreement for the Venture provides that as cash flow
develops it will first be distributed to the Company until $1,000,000 of its
investment has been returned.
4. INVESTMENT IN PARTNERSHIP
In 1991, in connection with a release from liability related to a loan
made by the Company, the Company acquired a 50% limited partnership interest in
the partnership which owns the Santa Barbara Biltmore Resort. The Company 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 Company has no obligation to make
additional capital contributions to, or pay the liabilities of, the partnership.
8
<PAGE>
B.H.I.T., Inc. Formerly....
BANYAN HOTEL INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
5. RECOVERY OF LOSSES ON MORTGAGE LOANS, NOTES, INTEREST RECEIVABLES AND
CLASS ACTION COSTS AND EXPENSES
During the first nine months of 1997, the Company received a cash
distribution of $9,760 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 September 30, 1997,
the Company recorded a recovery of $7,320 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 Company's share of amounts due per
the terms of the previously settled VMS securities litigation. At September 30,
1997, the Company had no liability to the Class Action Settlement Fund.
9
<PAGE>
B.H.I.T., Inc. Formerly....
BANYAN HOTEL INVESTMENT FUND
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
B.H.I.T., Inc. (the "Company"), was formed to make mortgage loans to
affiliates of VMS Realty Partners, ("VMS"), secured by Hotel and Resort
properties. The Company 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 Company 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 Company authorized the
preparation of a formal plan of liquidation which was subsequently adopted on
April 7, 1992 (the "Plan"). The Plan contemplated the Company liquidating its
assets and distributing the proceeds to its stockholders. The Company estimated
that its liquidation value was between $.15 and $.20 per share. After the
adoption of the Plan, Management of the Company 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 Company 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 Company to execute and
deliver a non-binding letter of intent with Mr. Harvey Polly.
On August 3, 1994, the Company 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 Company 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 Company 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 Company of its ownership interest in Banyan Management Corp.
10
<PAGE>
B.H.I.T., Inc., Formerly....
BANYAN HOTEL INVESTMENT FUND
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL (CONTINUED)
On February 15, 1995, a change in control of the Company occurred pursuant
to the closing of the sale of shares of common stock in the Company 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
Company'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 Company 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 Company, not less than 3,335,000 and not more than 40% of the shares of
common stock of the Company 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 Company
for a cash price of $0.22 per share. Upon the acquisition of the aforesaid
shares from the Company, when combined with the shares of common stock
previously owned and acquired pursuant to the tender offer, Mr. Polly was the
beneficial owner of 3,335,983 shares, or approximately 27% of the Company's
outstanding voting shares of common stock.
Upon the closing of the sale of shares of common stock of the Company on
February 15, 1995, the Purchase Agreement provided for the resignation of the
Company'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
Company, no further arrangements or understanding existed among the Company 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
Company. 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. Currently the Company's Executive office is located at 875
Avenue of the Americas, Suite 1808, New York, New York 10001.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company had an investment of $713,738 (net
of principal payments received) in three mortgages. These mortgage loans are
more fully described in Item 2 on Page 7 of this report.
As of September 30, 1998, the Company had invested $655,000 into the Joint
Venture discussed on Page 8 of this report.
11
<PAGE>
B.H.I.T., Inc Formerly....
BANYAN HOTEL INVESTMENT FUND
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
During the first nine months of 1997, the Company received a cash
distribution of $9,760 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,
the Company recorded a recovery of $7,320 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 Company's share of amounts due per the terms of the previously settled VMS
securities litigation. At September 30, 1998, the Company had no liability to
the Class Action Settlement Fund.
The Company's ultimate return of cash to its stockholders is dependent
upon, among other things: (i) the activities undertaken by the Company; (ii)
interest earned from the investment of cash and cash equivalents; (iii) the
Company's ability to control its operating expenses; (iv) possible recoveries
from the Santa Barbara Biltmore Hotel and the liquidating trust, if any, and the
results of operations of the Metro Franchising Commissary, LLC Joint Venture.
RESULTS OF OPERATIONS
Total income for the nine months ended September 30, 1998 and 1997 was
$106,751 and $115,396 respectively.
Operating expenses for the nine months ended September 30, 1998 increased
$26,832 when compared to the same period in 1997. This increase is due primarily
to increased professional fees resulting from, now discontinued, acquisition
negotiations, costs of advertising for an acquisition and moving expenses.
During August of 1997, the company sold its investment in marketable
securities and realized a loss of $20,889. Management determined that it would
benefit the Company to sell these securities in order to invest the proceeds in
the higher yielding mortgage.
During the period ending September 30, 1997, the Company recorded a net
recovery of $7,320 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, 1998 when
compared to the same period in 1997 resulted in an increase in the net loss to
$92,078 ($0.01 per share) from $70,170 ($0.00 per share) This increase in net
loss is due primarily to increased operating expenses.
12
<PAGE>
B.H.I.T., Inc. Formerly....
BANYAN HOTEL INVESTMENT FUND
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, 1998
Harvey Polly, Director, President
and Chief Executive Officer
/s/ Morton I. Kalb Date: November 5, 1998
Morton I. Kalb, Director, Vice Pres.
and Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 227,065
<SECURITIES> 0
<RECEIVABLES> 6,448
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 297,169
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,025,091
<CURRENT-LIABILITIES> 371,255
<BONDS> 0
0
0
<COMMON> 87,477,847
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,025,091
<SALES> 0
<TOTAL-REVENUES> 106,751
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 198,825
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (92,078)
<INCOME-TAX> 0
<INCOME-CONTINUING> (92,078)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (92,078)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
