SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1998; COMMISSION FILE NUMBER 0-1957
UPTOWNER INNS, INC.
(Exact Name of Registrant as Specified in its Charter)
West Virginia 55-0457171
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1415 4th Avenue, Huntington, West Virginia 25701
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code (304) 525-7741
Securities registered pursuant to Section 12 (g) of the Act:
1,583,563 shares of common stock - $0.50 par value
(Title of Class)
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.
X Yes No
The aggregate market value of the voting stock held by non-
affiliates of the registrant, as of the 30th day of June 1998, was
$583,668.
As of June 30, 1998, the close of the period covered by this
report, the registrant had 1,583,563 shares of its common capital
stock issued and outstanding. The registrant has issued no other
stock.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement to be filed by the registrant,
pursuant to Regulation 14A, is incorporated herein by reference in
Part III, Items 10 and 11.
<PAGE>
PART I
ITEM 1. BUSINESS.
(a) The registrant, Uptowner Inns, Inc., was incorporated in the
State of West Virginia on July 1, 1961. The registrant operates a 137 room,
full service hotel built in 1962 by the registrant. On January 17, 1997,
the Holiday Inn franchise was terminated. The franchise required standard
fees for advertising, reservation system, etc.
The clientele are predominately business travelers due to the downtown
location and occupancy for the year averaged 33.8% with an average of $50.
rate per room. This yielded a revenue for available rooms of $6,100.
per year.
In late August 1998, the registrant opened a 135 room Holiday Inn
Hotel & Suites facility adjacent to the Huntington Civic Arena. The
future use of the original facility has not been determined and it is
continuing to operate as a full service hotel.
A wholly owned subsidiary of the registrant, Motel and Restaurant
Supply, which was incorporated in the State of West Virginia on
July 16, 1966, has had no activity since 1981.
Neither the registrant nor any of its subsidiaries has experienced
bankruptcy, receivership or similar proceedings; has been involved in
reclassification, merger or consolidation; has acquired or, except as
hereinafter set forth, disposed of any material amount of assets otherwise
than in the ordinary course of business; or has undertaken any material
change in the mode of conducting its business.
(b) The registrant is engaged in substantially two lines of
businesses, to wit, the operation of motor hotels with dining and
banquet facilities, and residential/commercial rentals. The income
of the registrant from rentals exceeds ten percent of the consolidated
revenue of the registrant and its subsidiaries, which consolidated
revenue did not exceed $50,000,000. during any of the last three fiscal
years.
The hotel industry is highly competitive with the registrant
competing against numerous national hotel franchises in Huntington,
West Virginia. As the Companies' operations are generally one
business segment, its competition locally includes Radisson hotel,
Ramada Inn, Best Western, Comfort Inn, Red Roof Inn, and Hampton Inn.
Seasonality directly affects this business as a result of
people not traveling or vacationing in large numbers in the late fall
and winter because of poor weather at these geographical locations.
At June 30, 1998, the registrant and its subsidiaries employ
approximately 50 employees.
(d) The registrant has no foreign operation.
<PAGE>
ITEM 2. PROPERTIES.
(a) The main physical property of the registrant is a 140
unit, four story motor hotel, with swimming pool, dining, banquet, and
lounge facilities, located in downtown Huntington, West Virginia, at
1415 Fourth Avenue. This property is owned in fee by the registrant.
The motor hotel is subject to a mortgage in favor of the Twentieth
Street Bank, Huntington, West Virginia, in the original amount of
$2,000,000., payable in monthly installments of $22,568. per month,
including interest at 10% until February 4, 2004, when the amount
due must be paid in full. The balance at June 30, 1998 is $1,330,369.
(b) The registrant owns in fee two lots, used for the over-
flow parking, across the street from its main motor hotel at 1432-34
Fourth Avenue, in Huntington, West Virginia.
(c) The registrant owns in fee an undeveloped lot acquired
for future development or parking, across an alley from its main
motor hotel at 1400 Fifth Avenue in Huntington, West Virginia. The lot
is available for sale.
(d) The registrant owns in fee a lot improved by a three
story brick building used as a fraternity house, across an alley from
its main motor hotel, 1434 Fifth Avenue, in Huntington, West Virginia,
acquired for rental and for future development. This property will be
sold in the next fiscal year.
(e) The registrant owns in fee two lots immediately west of
its motor hotel, 1401 Fourth Avenue, in Huntington, West Virginia,
acquired for future development and currently used for parking.
This property is subject to a first mortgage in favor of the
Twentieth Street Bank in the original amount of $2,000,000. as noted
in Item 2 (a).
(f) The registrant owns in fee and operates a 40 unit, two
story apartment building within one city block of the motor hotel, at
1340 Fourth Avenue, in Huntington, West Virginia.
(g) The registrant owns in fee a lot acquired and used for
parking, across the street from its main motor hotel at 1420
Fourth Avenue, in Huntington, West Virginia.
(h) The registrant owns in fee an undeveloped lot acquired
for future development or for parking, across an alley from its main
motor hotel at 1438 Fifth Avenue, in Huntington, West Virginia.
It is anticipated the lot will be sold within the next fiscal year.
(i) The registrant owns in fee a vacant lot within one
city block of the main motor hotel at 1326 Fourth Avenue, in
Huntington, West Virginia. The lot will be sold within the next fiscal year.
<PAGE>
(j) The registrant owns in fee a lot improved by a three story
building originally used as a store and apartment, within one city
block of the main motor hotel at 1416-18 Fourth Avenue, in Huntington,
West Virginia, acquired for rental and for future development,
subject to a mortgage in favor of Betty M. Dove, in the original
amount of $76,000., 10% interest, maturing June 2002, the balance of
which was $29,497. at June 30, 1998.
(k) The registrant owns in fee two parcels within one city
block of the main motor hotel at 1436-38 Fourth Avenue and 1440-42
Fourth Avenue, in Huntington, West Virginia which will be sold in
the next fiscal year.
(l) The registrant owns in fee a vacant lot on the west side
of Huntington approximately 3 miles from the main motor hotel and at
an exit for Interstate 64. This purchase was finalized in October 1988
from an option entered into in 1983. The property is currently used as a
parking lot until it is deemed beneficial to build and operate a
decent motel in that location.
(m) The registrant purchased a parcel of real estate with a
residential building in January 1990. This property is across an
alley from the main motor hotel and was acquired for future
development and parking.
(n) The registrant purchased a parcel of real estate with a
building housing residential and commercial tenants in July 1991.
This property is across the street from its main motor hotel and
adjacent to other rental properties and parking facilities. The
property has been renovated and is now fully utilized as rental
property. The property is subject to a mortgage in favor of West
Virginia Housing Development Fund in the original amount of $500,000.,
5.5% rate of interest, maturing November 2018, the balance of which
is $451,411.
(o) The registrant owns in fee a lot improved by construction
in progress of a Holiday Inn Hotel & Suites located in downtown Huntington
at 800 Third Avenue. This purchase was finalized in December 17, 1996
from a contract entered into on November 21, 1995. The property is subject
to a mortgage in favor of Huntington Urban Renewal Authority in the amount
of $540,000., 8.5% rate of interest, maturing February 2004, the balance
of which is $540,000. and subject to a line of credit in the amount of
$4,144,899., prime plus 1% rate of interest for construction in progress.
The facility was completed in August 1998 and is being marketed
for convention and business travelers. It is adjacent to the Huntington
Civic Arena and will be used as a major part of marketing for conventions
and meetings in the Tri-State area.
Annual reviews of insurance coverage are done and adequate insurance
is maintained on all properties.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS:
A $10,000,000. suit in which the Uptowner Inns, Inc. is a defendant
has been filed by James R. Burton, an individual, who was severely
injured in an auto accident by a patron of the lounge in Cabell County
Court. Legal counsel believes that good defenses exist in this action,
and that the case will ultimately be resolved in Uptowner Inns, Inc.'s favor.
The insurance company has denied liability in this case and legal counsel
believes the risk of loss will fall to Uptowner Inns, Inc.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SECRUITY HOLDER MATTERS
(a) The common stock of the registrant is traded in the over-the-
counter market. During the past two years, there has been limited activity
of common stock. These shares were traded for between $.50 and $.65
per share.
(b) As of the 20th day of September 1998, the approximate number
of record holders of common stock securities of the registrant was 1,434.
(c) The registrant has paid no dividends with respect to its
common stock during the past two years.
ITEM 6. SELECTED FINANCIAL DATA
The following financial information of Uptowner Inns, Inc., and
Subsidiaries is for the years ended June 30, 1998, June 30, 1997, June 30
1996, June 30, 1995, and June 30, 1994, on a scope similar to that set
forth in the report included elsewhere in this report. These Summaries
should be read in conjunction with the financial statements and related
notes included elsewhere in this report.
<PAGE>
UPTOWNER INNS, INC.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Operating
Revenues 1,479,921 1,867,013 2,098,085 2,317,690 2,114,079
Income from
Operations 87,267 279,055 316,577 424,570 121,169
Net Income
(Loss) (125,643) 74,257 89,458 494,600 (81,046)
Net Income (Loss)
per share (.08) .05 .06 .31 ( .05)
Weighted Average Number
of Shares 1,583,563 1,583,563 1,583,563 1,583,563 1,583,563
Cash Dividends
Per Share - - - - -
Total
Assets 10,878,715 6,535,810 5,011,385 5,119,107 4,976,461
Long-Term
Debt 6,931,165 3,119,901 2,322,279 2,527,941 2,924,973
</TABLE>
Revenues increased in 1995 due to marketing tour buses and a
generally improved economic clientele. The decline in 1996 resulted from
the tour bus increase being temporary and the further decline in 1997
resulted from general business decline and the loss of the Holiday Inn
franchise in January 1997. The 1998 decline was due to increased competition
by operations close to the interstate and the concern that the facility would
be closed due to the opening of the new Holiday Inn Hotel & Suites, which
had been originally planned for February 1998.
<PAGE>
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
REVENUES
1998 1997 1996
<S> <C> <C> <C>
Total Revenues $ 1,479,921. $ 1,867,013. $ 2,098,085.
Percentage Increase
(Decrease) ( 20.7)% ( 11.0)% ( 9.5)%
Motor Inn Revenues 850,775. 1,198,307. 1,322,668.
Percentage Increase
(Decrease) ( 29.0)% ( 9.4)% ( 13.5)%
Percentage of Total Revenues 57.5% 64.2% 63.0%
Food and Beverage 316,759. 352,279. 435,756
Percentage Increase
(Decrease) ( 10.1)% ( 19.2)% ( 5.9)%
Rents 256,371. 235,986. 233,853.
Percentage Increase
(Decrease) 8.6% .9% 3.4%
</TABLE>
Motor inn revenue decreased in 1996 due to reductions in bus tours in
the area and competion from other facilities. The decrease in subsequent
years resulted from the increase in competition with new franchises opening
in the area and the concern that the older facility would close in
February 1998, when the Holiday Inn operation was originally scheduled to
open. Food and Beverage revenues decreased due to fewer guests and
increased competition in the area due to more restaurants. Rents increased
due to slightly improved occupancy and some rate increases.
<PAGE>
[CAPTION]
OPERATING COST AND EXPENSES AND INTEREST EXPENSES
<TABLE>
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Cost of Sales $ 212,117. $ 291,619. $ 362,029. $ 397,215.
Percentage increase
(decrease) (28.3)% (19.5)% (8.9)% (13.3)%
Salaries 441,308. 475,893. 475,637. 489,763.
Percentage increase
(decrease) (7.3)% .1% (2.9)% (21.4)%
Advertising 36,779. 80,171. 117,833. 136,137.
Percentage increase
(decrease) (54.1)% (32.0)% (13.4)% (2.7)%
Utilities 115,676. 118,048. 150,454. 142,520.
Percentage increase
(decrease) (2.0)% (21.5)% 5.6% (6.7)%
Repairs and Maint. 44,495. 64,610. 66,769. 95,049.
Percentage increase
(decrease) (31.1)% (3.2)% (29.8)% (39.4)%
Taxes and License 205,010. 196,937. 197,093. 208,048.
Percentage increase
(decrease) 4.1% ( .1)% (5.3)% 68.0%
Insurance and Other 40,252. 36,145. 34,912. 45,027.
Percentage increase
(decrease) 11.4% ( 3.4)% (22.5)% (3.3)%
Total Cost
and Expenses 1,392,654. 1,587,958. 1,781,508. 1,893,120.
Percentage increase
(decrease) (12.3)% (10.9)% (5.9)% (3.0)%
Interest 212,910. 204,798. 222,742. 236,900.
Percentage increase
(decrease) 4.0% (8.1)% (6.0)% 17.2%
</TABLE>
Cost of sales decreased due to the decrease in the revenues and
better management of food and beverage costs. Advertising decreased in 1996
due to the room revenue decrease that affected the change under the
Holiday Inn franchise for advertising and further decreased in 1997 due to
termination of the franchise in January. Utilities decreased due to the
decreased business and the milder weather in the last fiscal year. The
registrant has accomplished only needed repairs and maintenance due to the
new facility being constructed and some uncertainty as to the use of the
current motel property in early 1998. Interest decreased due to the
principal reductions and began to increase in the last year due to increased
borrowing to construct the new facility. Taxes and license increased in 1995
due to real estate tax changes. Total costs and expenses are consistently
decreasing due to the factors affecting the major items (noted above).
That is, declining business has been a major factor in the declining costs
and expenses.
<PAGE>
[CAPTION]
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE FEDERAL INCOME TAXES
1998 1997 1996
$( 125,643.) $ 74,257. $ 93,835.
INCOME TAXES
1998 1997 1996
Income taxes (benefit) $ - $ - $ 4,377.
Effective tax rate - - 4.7%
For the year ended June 30, 1997, the Company utilized operating
loss carryforwards in the amount of $11,501. to offset taxable income.
The Company has a carryforward loss for taxable income until the year
2012.
INCOME (LOSS)
1998 1997 1996
$ 125,643. $ 74,257. $ 89,458.
The loss of the Holiday Inn franchise for the motor inn and
construction in progress of the Holiday Inn Hotel & Suites has had an
obvious impact on income resulting in a decrease in revenues of $231,072.
in 1997 and decreased costs and expenses of $211,494. resulting in a
decrease in Income of $15,201. in 1997.
Continued revenue declines due to lack of a franchise and some
uncertainty as to the continuation of hotel operations resulted in a
decrease of revenues totaling $387,092. The decreased costs and
expenses of $187,192. and the revenue decrease resulted in a net decrease
in income of $199,900. from the prior year and, thus, the net loss for
1998 of $125,643.
Management will seek new business for the older facility that is
not in competition with the new hotel and will consider alternative
uses for the older property to attempt a reduction in losses.
<PAGE>
[CAPTION]
LIQUIDITY AND CAPITAL RESOURCES
1998 1997
Resources available at
June 30, 1998 and 1997
Cash $ 90,015. $ 245,427.
The registrant had significant reductions in liquidity for each
year since 1995 due to the acquisition and development of property for
the Holiday Inn Hotel & Suites adjacent to the Huntington Civic Arena.
The registrant's accounts payable in 1997 include over $408,000. for
costs in the construction project.
The investing activities account for the significant decline in
liquidity with over $900,000. of the cash used in investing activities
coming from currently available revenues (including the increased accounts
payable).
The registrant anticipates the liquidity will continue at a below
normal level for the next several years, but should show some slight
improvement by the last quarter of the current year and into the year
following when the new facility is completed.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARIES
ITEM 8. FINANCIAL STATEMENTS
Financial Statements:
Uptowner Inns, Inc. and Subsidiaries
Opinion of Independent Certified Public Accountant
Consolidated Balance Sheets as of June 30, 1998 and 1997
Consolidated Statement of Operations for the
Year Ended June 30, 1998, 1997 and 1997
Consolidated Statement of Stockholders' Equity
for the Year Ended June 30, 1998, 1997 and 1996
Consolidated Statement of Cash Flows for the
Year Ended June 30, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Uptowner Inns, Inc. and Subsidiaries
Opinion of Independent Certified Public Accountant
Consolidated Statement of Income for the
Year Ended June 30, 1997, 1996 and 1995
Consolidated Statement of Stockholders' Equity
for the Year Ended June 30, 1997, 1996 and 1995
Consolidated Statement of Cash Flows for the
Year Ended June 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE:
NONE
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARIES
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10, Part III, will be set forth
in the definitive proxy statement to be filed by the registrant,
pursuant to Regulation 14A, under the captions "Election of Directors"
and "Executive Officers of the Company" and is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11, Part III, will be set forth
in the definitive proxy statement to be filed by the registrant,
pursuant to Regulation 14A, under the caption "Remuneration of
Directors and Executive Officers", and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The registrant has issued only one type of security,
namely, common capital stock. The following table sets forth certain
information as to the persons and groups who are known to the
registrant to be the beneficial owners of more than five percent of
its voting securities.
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership of Class
Common Violet Midkiff 726,082 Direct and 45.9
922 Eleventh Street Indirect
Huntington, West Virginia
(b) The following table sets forth certain information as
to each class of equity securities of the registrant beneficially
owned by all directors and officers of the registrant as a group.
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership of Class
Common Arthur J. Huber 30,049 Indirect 1.9
Common James R. Camp 8,371 Direct .5
Common Violet Midkiff 726,082 Direct and 45.9
Indirect
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT (Cont'd)
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership of Class
Common Louis Abraham 3,656 Direct .2
Common Carl Midkiff 15,311 Direct and 1.0
Indirect
Common Olive Hager 21,870 Direct 1.4
Common Six Officers and 805,339 Direct and 50.9
Directors as a Indirect
Group
(c) There is no arrangement, known to the registrant, the
operation of which may at a subsequent date result in a change in
control of the registrant.
<PAGE>
PART IV
UPTOWNER INNS, INC. AND SUBSIDIARIES
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(2) Schedules:
Schedule VIII -- Valuation of Qualifying Accounts
(A)(3) Exhibits:
(22) Subsidiaries of Uptowner Inns, Inc.:
All other required exhibits are incorporated in the
Registration Statement Number 2-90194 of Uptowner Inns, Inc.
No reports on Form 8-K have been filed during the period
covered by this report.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Schedule VIII
Column A Column B Column C Column D Column E Column F
Additions
Balance at Charged to Charged to Deductions Balance at
Beginning Profit and Other From End of
Description Period Loss Accounts Reserves Period
As to Uptowner Inns, Inc.:
Year ended June 30, 1998
Reserve for
doubtful
accounts $ 3,000. $ - $ - $ - $ 3,000.
Year ended June 30, 1997
Reserve for
doubtful
accounts $ 3,000. $ - $ - $ - $ 3,000.
Year ended June 30, 1996
Reserve for
doubtful
accounts $ 3,000. $ - $ - $ - $ 3,000.
As to Uptowner Inns, Inc.
and Subsidiaries:
Year ended June 30, 1998:
Reserve for
doubtful
accounts $ 3,000. $ - $ - $ - $ 3,000.
Year ended June 30, 1997:
Reserve for
doubtful
accounts $ 3,000. $ - $ - $ - $ 3,000.
Year ended June 30, 1996:
Reserve for
doubtful
accounts $ 3,000. $ - $ - $ - $ 3,000.
<PAGE>
Exhibit 22 - Subsidiaries of Uptowner Inns, Inc.
* Motel & Restaurant Supply
100% Owned Subsidiary
Incorporated in the State of West Virginia
* Represents a Corporation which had no
activity during fiscal year June 30, 1998 or 1997
<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.
(Registrant) UPTOWNER INNS, INC.
By: /s/Violet Midkiff
Violet Midkiff, President
January 1999
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Arthur Huber
Arthur Huber, Vice President
January 1999
By: /s/James R. Camp
James R. Camp, Treasurer and Director
January 1999
By: /s/Olive Hager
Olive Hager, Secretary and Director
January 1999
By: /s/Carl E. Midkiff
Carl E. Midkiff, Director
January 1999
By: /s/Louis Abraham
Louis Abraham, Director
January 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Uptowner Inns, Inc. and Subsidiary
Huntington, West Virginia
We have audited the accompanying consolidated balance sheets of
Uptowner Inns, Inc. and Subsidiary as of June 30, 1998 and June 30, 1997,
and the related consolidated statements of income, stockholders' equity
and cash flows for the three years ended June 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Uptowner Inns, Inc. and Subsidiary as of June
30, 1998 and June 30, 1997, and the consolidated results of its
operations and cash flows for the three years ended June 30, 1998
in conformity with generally accepted accounting principles.
(Signed)
SOMERVILLE & COMPANY
December 3, 1998
Huntington, West Virginia
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
June 30, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
Current Assets:
<S> <C> <C>
Cash $ 90,015. $ 245,427.
Accounts receivable (less
allowance for doubtful
accounts of $3,000.
in 1997 and 1996) 23,726. 25,203.
Inventories 7,362. 5,996.
Prepaid expenses 51,550. 51,439.
Total current assets $ 172,653. $ 328,065.
Property, Plant and Equipment:
Land 1,554,112. 1,554,112.
Buildings and improvements 4,989,345. 4,989,345.
Furniture and equipment 2,250,473. 1,463,768.
Construction in Progress 5,580,717. 1,698,276.
14,374,647. 9,705,501.
Less accumulated depreciation
and amortization 3,797,872. 3,625,966.
Property, plant and
equipment - net 10,576,775. 6,079,535.
Other Assets:
Deposits and other 129,287. 128,210.
$ 10,878,715. $ 6,535,810.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
June 30, 1998 and 1997
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1998 1997
Current Liabilities:
<S> <C> <C>
Accounts payable $ 517,587. $ 635,311.
Accrued liabilities 145,809. 103,360.
Taxes other than
Federal income tax 200,399. 192,283.
Current portion of long-term debt 996,925. 272,482.
Total current liabilities $ 1,860,720. $ 1,203,436.
Long-Term Debt:
Notes payable 6,931,165. 3,119,901.
Total liabilities 8,791,885. 4,323,337.
Stockholders' Equity:
Common stock - $.50 par value;
authorized - 5,000,000 shares
issued - 1,583,563 shares 791,782. 791,782.
Additional paid - in capital 1,032,290. 1,032,290.
Retained earnings 262,758. 388,401.
Total stockholders' equity 2,086,830. 2,212,473.
Total Liabilities and Equity: $10,878,715. $ 6,535,810.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
For the years ended June 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Revenues:
Rooms $ 850,775. $ 1,198,307. $ 1,322,668.
Food and beverage 316,759. 352,279. 435,756.
Telephone 32,173. 36,005. 31,676.
Rent 256,371. 235,986. 233,853.
Other 23,843. 44,436. 74,132.
Total operating revenues $ 1,479,921. $ 1,867,013. $ 2,098,085.
Costs and Expenses:
Operating departments:
Cost of sales 147,608. 182,211. 241,148.
Salaries 441,308. 475,893. 475,637.
Other 64,509. 109,408. 120,881.
General and administrative 125,112. 131,750. 159,848.
Advertising 36,779. 80,171. 117,833.
Utilities 115,676. 118,048. 150,454.
Repairs and maintenance 44,495. 64,610. 66,769.
Taxes and licenses 205,010. 196,937. 197,093.
Insurance and other 40,252. 36,145. 34,912.
Depreciation and amortization 171,905. 192,785. 216,933.
Total costs and expenses 1,392,654. 1,587,958. 1,781,508.
Operating income (loss) 87,267. 279,055. 316,577.
Other Income (Expense):
Interest Expense ( 212,910.) ( 204,798.) ( 222,742.)
Income (Loss) before Federal
Income Taxes ( 125,643.) 74,257. 93,835.
Federal Income Taxes:
Current - - 4,377. -
Net Income (Loss) $( 125,643.) $ 74,257. $ 89,458.
Net Income (Loss) per Share $( .08) $ .05 $ .06
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the years ended June 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit) Total
<S> <C> <C> <C> <C>
Balance -
June 30, 1995 $ 791,782. $ 1,032,290. $ 224,686. $ 2,048,758.
Net Income - - 89,458. 89,458.
Balance -
June 30, 1996 $ 791,782. $ 1,032,290. $ 314,144. $ 2,138,216.
Net Income - - 74,257. 74,257.
Balance -
June 30, 1997 $ 791,782. $ 1,032,290. $ 388,401. $ 2,212,473.
Net Income - - ( 125,643.) ( 125,643.)
June 30, 1998 $ 791,782. $ 1,032,290. $ 262,758. $ 2,086,830.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended June 30, 1998, 1997 and 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1998 1997 1996
Cash Flows From Operating Activities:
Net Income (Loss) $(125,643.) $ 74,257. $ 89,458.
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 171,905. 192,785. 216,933.
Debt forgiveness ( 9,000.) ( 9,000.) ( 9,000.)
(Increase) decrease in other assets ( 1,075.) ( 58,406.) ( 65,619.)
(Increase) decrease in current
assets:
Accounts receivable 1,477. 29,453. 25,046.
Receivable - stockholders - - 5,931.
Receivable - other - - 430.
Inventories ( 1,366.) 3,230. 1,477.
Prepaid expenses ( 111.) (23,041.) ( 9,688.)
Increase (decrease) in current
liabilities:
Accounts payable (117,724.) 564,128. 38,590.
Accrued liabilities 42,449. 9,319. 4,407.
Taxes other than Federal
income taxes 8,116. 84,542. ( 50,494.)
Total Adjustments 94,671. 793,010. 158,013.
Net Cash Provided (Used In)
Operating Activities ( 30,972.) 867,267. 247,471.
<PAGE>
UPTOWNER INNS,INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended June 30, 1998, 1997 and 1996
1998 1997 1996
Cash Flows From Investing Activities:
Proceeds from sale of investments $ - $ - $ 576,470.
Capital expenditures (4,669,146.) (1,887,017.) ( 477,641.)
Net cash provided by
investing activities (4,669,146.) (1,887,017.) 98,829.
Cash Flows From Financing Activities:
Issuance of long-term debt 4,617,922. 983,175. -
Principal payments of long-term debt ( 73,216.) ( 181,996.) ( 180,682.)
Net cash provided by
financing activities 4,544,706. 801,179. ( 180,682.)
Net Increase in Cash and
Cash Equivalents ( 155,412.) ( 218,571.) 165,618.
Cash and Cash Equivalents at
Beginning of Year 245,427. 463,998. 298,380.
Cash and Cash Equivalents at
End of Year $ 90,015 $ 245,427. $ 463,998.
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Year for:
Interest $ 212,910. $ 204,798. $ 218,827.
Income Taxes - - 4,377.
The accompanying notes are an integral part of these financial statements.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies:
A. Principles of consolidation:
The consolidated financial statements include the accounts of
UpTowner Inns, Inc. and its Subsidiary after elimination of all
material intercompany balances and transactions. The wholly owned
subsidiary has had no activity since 1981.
B. Business activity:
The Company operates a motor inn in Huntington, West Virginia
that consists of dining, banquet and lounge facilities. In addition,
the Company operates apartment buildings and rental properties
located in Huntington, West Virginia.
C. Inventories:
Inventories are stated at the lower of cost or market on the
first-in, first-out method.
D. Property, plant and equipment:
Property, plant and equipment are stated at cost with
depreciation being provided on the straight-line method over the
estimated useful lives of the assets as follows:
Buildings and improvements 10 - 40 years
Furniture and equipment 2 - 10 years
Repairs, maintenance and renewals are charged to operations
as incurred, and expenditures for significant betterments and
renewals are capitalized.
The cost of fixed assets retired or sold, together with the
related accumulated depreciation, are removed from the accounts
and the resulting gain or loss is included in net earnings.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (Con'd):
E. Income taxes:
The income taxes are provided for the tax effects of the
transactions reported in the financial statements and consist
of taxes currently due plus deferred taxes related primarily
to different methods of depreciation for book and tax purposes and
net operating loss carryovers. The deferred tax assets and
liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled.
F. Per share computations:
Income per share computations are based on weighted average
number of common shares outstanding during the year. The average
number of shares outstanding was 1,583,563 for 1998, 1997, and 1996.
G. Cash and cash equivalents:
For purposes of the statement of cash flows, cash equivalents
include time deposits, certificates of deposit, and all highly
liquid debt instruments with original maturities of three months
or less, of which the Company had none.
H. Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires managment to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
I. Capitalized interest:
Interest costs are capitalized when incurred when proceeds
were used to finance the construction of assets. Capitalized
interest for fiscal year ending June 30, 1998 and 1997 was
$283,165. and $19,733. respectively. There was no capitalized
interest for the fiscal year ended June 30, 1996.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Long-term debt:
The long-term indebtedness of the Company at June 30, 1998 and
1997 were as follows:
1998 1997
10% mortgage note due a
financial institution,
secured by a deed of trust,
payable at $733. per month,
including interest, until
June 2002<PAGE>
$ 29,497. $ 35,043.
2% note due City of
Huntington, secured by a
second deed of trust,
payable at $2,024. per
month, including interest,
until January 2008<PAGE>
211,605. 231,439.
10% note due a financial institution,
secured by a deed of trust, payable at
$22,568. per month including interest,
until August 2004<PAGE>
1,330,369. 1,340,087.
Deferred payment note due
the City of Huntington,
secured by a deed of trust
on rental property, payable
in full during first five
years if property is sold,
20% forgiveness per year
in sixth through tenth
years, dated September 1989<PAGE>
18,000. 27,000.
8.5% note due the Huntington
Urban Renewal Authority of Huntington,
secured by a deed of trust, payable at
$3,825. per month interest only, and final
installment of all principal and accrued
interest then outstanding due and payable
February 2004 540,000. 540,000.
Prime plus 1% installment note due a
financial institution secured by a credit
line deed of trust, interest payable monthly
until September 1998 and then principal and
interest payable at $33,901. per
month until January 2008 3,700,000. 417,809.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Long-term debt (Cont'd):
1998 1997
Prime plus 1% note due a financial
institution, secured by a credit line
deed of trust, interest payable monthly,
principal payable upon demand $ 444,899 $ -
Prime plus 1% installment note due a
financial institution, secured by
second deed of trust, payable
at $1,140. per month, including
interest, until September 2002<PAGE>
52,466. 61,818.
11.4% installment note due a leasing
company, secured by equipment, interest
payable monthly until October 1998, and
then principal and interest payable at
$17,469. per month until
September 2004 890,833. -
5.5% mortgage note due to
the West Virginia Housing
Development Fund, secured
by a deed of trust, payable
at $3,070. per month,
including interest, until
November 2018<PAGE>
451,411. 463,078.
Prime plus 1% installment note
due a financial institution,
secured by a deed of trust,
payable at $2,902. per month,
including interest, until
February 1999<PAGE>
186,702. 202,934.
7,855,782. 3,319,208.
Less current portion 949,115. 224,673.
$6,906,667. $3,094,535.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Long-term debt (Cont'd):
Maturities of long-term debt, including debt to stockholders,
range from 1996 to 2008 and principal payment requirements during the
next five years ending June 30, are as follows:
<TABLE>
<S> <C> <C>
1999 $ 996,925.
2000 413,764.
2001 445,730.
2002 491,059.
2003 526,276.
Thereafter 5,054,336.
$ 7,928,090.
3. Related party transactions:
During October 1988, the Company purchased property from a
related entity for the sum of $528,659. Two notes existing at the
time of purchase are being paid by the Company. One loan was
refinanced to a nonstockholder in 1989. In addition, notes were
executed for the balance of the purchase price. These loans at
June 30, 1998 and 1997 were:
1998 1997
10% note due an individual,
interest payable annually,
due December 1993 $ 8,000. $ 8,000.
10% note due an individual,
interest payable annually,
due December 1993 39,810. 39,810.
47,810. 47,810.
Less current portion 47,810. 47,810.
$ - $ -
The Company is attempting to locate the individuals in
order to satisfy these debts.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Related party transactions (Cont'd):
The company and its subsidiary have entered into transactions with
various entities controlled and related to one of the Company's
shareholders. Following is a summary of transactions with these
entities as of and for the years ended June 30, 1998, 1997 and 1996:
1998 1997 1996
Purchases from related companies $ 11,268. $ 20,618. $ 39,018.
1998 1997
9.25% note due a company added to
their existing note, payable upon pay
down to $25,365. in October 2004 $ 24,498. $ 25,365.
Less current portion - -
$ 24,498. $ 25,365.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Federal income taxes:
A reconciliation of income tax at the statutory rates to the
Company's effective rate for the years ended June 30, 1998, 1997
and 1996 is as follows:
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
% of % of % of
Pre- Pre- Pre-
Tax Tax Tax
Amount Income Amount Income Amount Income
<S> <C> <C> <C> <C> <C> <C>
Income tax
provision at
statutory rate $ - -% $ 25,247. 34.0% $ 31,904. 34.0%
Increases (decreases)
Dep. difference - - (21,549.)(29.0) (19,449.)(20.7)
Other - - 212. .3 519. .5 .7
Alternative
minimum
tax - - - - 4,377. 4.7
Utilization of
operating loss
carry-forward - - ( 3,910.)( 5.3) (12,974.)(13.8)
Actual provision and
effective rate $ - -% $ - -% $ 4,377. 4.7%
</TABLE>
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. The Company has available at June 30, 1998, unused operating
loss carryforwards that may be applied against future taxable
income and that expire as follows:
Unused
Operating
Loss
Expiration Date
June 30, 2002 $ 20,986.
June 30, 2003 433,830.
June 30, 2004 245,295.
June 30, 2005 128,142.
June 30, 2006 147,900.
June 30, 2007 78,505.
June 30, 2008 18,147.
June 30, 2009 70,932.
June 30, 2010 -
June 30, 2011 3,816.
June 30, 2012 1,150.
June 30, 2013 199,619.
Deferred tax assets as of June 30, 1998 and 1997 are as follows:
1998 1997
Deferred tax asset $ 70,955. $ 59,970.
Valuation allowance 70,955. 59,907.
$ - $ -
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Parent Company information:
Following is the selected information for Uptowner Inns, Inc.,
Parent Company only, as of June 30, 1998, 1997 and 1996 and the
years then ended:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Operating revenues $ 1,479,921. $ 1,867,013. $ 2,098,085.
Income from operations 87,267. 279,055. 316,577.
Net income (loss) ( 125,643.) 74,257. 89,458.
Current assets 172,653. 328,065. 556,278.
Total assets 10,878,715. 6,535,810. 5,011,385.
Current liabilities 1,860,720. 1,203,436. 550,890.
Total liabilities 8,791,885. 4,323,337. 2,873,169.
</TABLE>
The company has no restricted net assets.
6. Assets to be disposed of:
In accordance with Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long Lived Assets and for
Long Lived Assets to be Disposed Of, the Corporation records these
assets at original cost less accumulated depreciation. This carrying
value is less than the fair market value of these properties. At
June 30, 1998, these properties are included in property, plant and
equipment as follows:
Land $ 73,500.
Building 109,019.
182,519.
Accumulated depreciation 95,605.
$ 86,914.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Contingencies:
A $10 million suit in which the Uptowner Inns, Inc. is a
defendant has been filed by an individual who was severely injured
in an auto accident by a patron of the lounge. Legal counsel
believes that good defenses exist in this action, and that the case
will ultimately be resolved in Uptowner Inns, Inc.'s favor. The
insurance company has denied liability in this case and legal
counsel believes the risk of loss will fall to UpTowner Inns, Inc.
8. Commitments:
The Company has entered into a maintenance agreement
expiring in May 1999.
Minimum future payments under the non-cancelable agreement
for each of the next five years and in the aggregate are:
<TABLE>
<CAPTION>
Year Ended Amount
<S> <C>
1999 1,515.
2000 -
2001 -
2002 -
2003 -
Total minimum future payments $ 1,515.
</TABLE>
On January 3, 1997, the Uptowner Inns, Inc. entered into a
loan agreement with the Twentieth Street Bank for interim financing
for construction of the Holiday Inn Hotel & Suites now under
construction in the amount of $750,000. As of June 30, 1998, the
balance on this loan is $444,899.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Commitments (Cont'd):
On January 3, 1997, the Uptowner Inns, Inc. entered into a
loan agreement with the Twentieth Street Bank for financing of
construction in the amount of $3,700,000. As of June 30, 1998, the
balance on this loan is $3,700,000.
On December 2, 1996, the Uptowner Inns, Inc. entered into a
contract agreement with The Winter Construction Company for the
construction of the Holiday Inn Hotel & Suites now under construction
in the amount of $4,950,000. As of June 30, 1998, the commitment left
on this contract is in excess of $800,000. Uptowner Inns, Inc. has
denied further liability on this contract due to disagreements over
the work performed.
On March 15, 1996, the UpTowner Inns, Inc. entered into a
franchise agreement for the Holiday Inn Hotel & Suites in the
amount of $65,000. This agreement is based upon specific requirements
stated for completion of the hotel and approval before opening as
Holiday Inn Hotel & Suites.
9. Credit risk:
The Company maintains cash balances at a bank. Accounts at
the institution are insured by the Federal Deposit Insurance
Corporation up to $100,000.
10. Subsequent events:
The Corporation opened an additional facility known as Holiday
Inn Hotel & Suites on August 28, 1998. The future use of the original
facility has not been determined and is currently operating as a full
service hotel.
Uptowner Inns, Inc. has enteref into approximately seven (7)
capital leases for furniture and equipment for Holiday Inn Hotel &
Suites, which began in July and August 1998.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Uptowner Inns, Inc. and Subsidiary
Huntington, West Virginia
We have audited the accompanying consolidated balance sheets of Uptowner
Inns, Inc. and Subsidiary as of June 30, 1997 and June 30, 1996, and the
related consolidated statements of income, stockholders' equity and
cash flows for the three years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Uptowner Inns, Inc. and Subsidiary as of June 30, 1997 and
June 30, 1996, and the consolidated results of its operations and cash
flows for the three years then ended in conformity with generally
accounting principles.
(Signed)
Somerville & Company
August 20, 1997
Hungtingon, West Virginia
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
June 30, 1997 and 1996
ASSETS
1997 1996
<TABLE>
<S> <C> <C>
Current Assets:
Cash $ 245,427. $ 463,998.
Accounts receivable (less allowance
for doubtful accounts of $3,000.
in 1997 and 1996) 25,203. 54,656.
Inventories 5,996. 9,226.
Prepaid expenses 51,439. 28,398.
TProperty, Plant and Equipment:
Land 1,554,112. 1,087,921.
Buildings and improvements 4,989,345. 5,322,204.
Furniture and equipment 1,463,768. 1,442,494.
Construction in progress 1,698,276. 143,390.
9,705,501. 7,996,009.
Less accumulated depreciation
and amortization 3,625,966. 3,610,706.
Property, plant and equipment - net 6,079,535. 4,385,303.
Other Assets:
Deposits and other 128,210. 69,804.
$ 6,535,810. $ 5,011,385.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
June 30, 1997 and 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
<TABLE>
<S> <C> <C>
Current Liabilities:
Accounts payable $ 635,311. $ 71,182.
Accrued liabilities 103,360. 94,041.
Taxes other than Federal income tax 192,283. 107,742.
Current portion of long-term debt 272,482. 277,925.
Total current liabilities 1,203,436. 550,890.
Long-Term Debt:
Notes payable 3,119,901. 2,322,279.
Total liabilities 4,323,337. 2,873,169.
Stockholders' Equity:
Common stock - $.50 par value
authorized - 5,000,000 shares;
issued - 1,583,563 shares 791,782. 791,782.
Additional paid-in capital 1,032,290. 1,032,290.
Retained earnings 388,401. 314,144.
Total stockholders' equity 2,212,473. 2,138,216.
$ 6,535,810. $ 5,011,385.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
For the years ended June 30, 1997, 1996 and 1995
1997 1996 1995
<TABLE>
<S> <C> <C> <C>
Revenues:
Rooms $ 1,198,307. $ 1,322,668. $ 1,528,981.
Food and Beverage 352,279. 435,756. 463,231.
Telephone 36,005. 31,676. 47,118.
Rent 235,986. 233,853. 226,197.
Other 44,436. 74,132. 52,163.
Total operating revenues 1,867,013. 2,098,085. 2,317,690.
Costs and Expenses:
Operating departments:
Cost of sales 182,211. 241,148. 236,210.
Salaries 475,893. 475,637. 489,763.
Other 109,408. 120,881. 161,005.
General and administrative 131,750. 159,848. 202,154.
Advertising 80,171. 117,833. 136,137.
Utilities 118,048. 150,454. 142,520.
Repairs and maintenance 64,610. 66,769. 95,049.
Interest 204,798. 222,742. 236,900.
Taxes and licenses 196,937. 197,093. 208,048.
Insurance and other 36,145. 34,912. 45,027.
Depreciation and amortization 192,785. 216,933. 177,207.
Total costs and expenses 1,792,756. 2,004,250. 2,130,020.
Operating income 74,257. 93,835. 187,670.
Other Income (Expense):
Gain on disposal of subsidiary - - 306,930.
Income before Federal Income Taxes 74,257. 93,835. 494,600.
Federal Income Taxes:
Current - 4,377. -
Deferred - - -
Net Income $ 74,257. $ 89,458. $ 494,600.
Net Income per share $ .05 $ .06 $ .37
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UPTOWNER INNS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the years ended June 30, 1997, 1996 and 1995
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit) Totals
<TABLE>
<S> <C> <C> <C> <C>
Balance -
June 30,1994 $ 791,782. $ 1,032,290. $( 269,914.) $ 1,554,158.
Net Income - - 494,600. 494,600.
Balance -
June 30, 1995 791,782. 1,032,290. 224,686. 2,048,758.
Net Income - - 89,458. 89,458.
Balance -
June 30, 1996 791,782. 1,032,290. 314,144. 2,138,216.
Net Income - - 74,257. 74,257.
Balance -
June 30, 1997 $ 791,782. $ 1,032,290. $ 388,401. $ 2,212,473.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended June 30, 1997, 1996 and 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1997 1996 1995
<TABLE>
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 74,257. $ 89,458. $ 494,600.
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 192,785. 216,933. 177,207.
Debt forgiveness ( 9,000.) ( 9,000.) -
(Gain) loss on disposal
of subsidiary - - ( 306,930.)
(Increase) decrease in
other assets ( 58,406.) ( 65,619.) 37,072.
(Increase) decrease in
current assets:
Accounts receivable 29,453. 25,046. ( 28,910.)
Receivable - stockholders - 5,931. ( 4,549.)
Receivable - other - 430. ( 280.)
Inventories 3,230. 1,477. 7,903.
Prepaid expenses ( 23,041.) ( 9,688.) 2,544.
Increase (decrease) in
current liabilities:
Accounts payable 564,128. 38,590. 20,105.
Accrued liabilities 9,319. 4,407. ( 55.)
Taxes other than Federal
income taxes 84,542. ( 50,494.) ( 22,217.)
Total adjustments 793,010. 158,013. ( 118,110.)
Net Cash Provided
By Operating Activities 867,267. 247,471. 376,490.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended June 30, 1997, 1996 and 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
1997 1996 1995
<S> <C> <C> <C>
Cash Flows From Investing Activities:
Purchase of investments $ - $ - $( 576,470.)
Proceeds from sale of investments - 576,470. -
Proceeds from sale of fixed assets - - 750,000.
Capital expenditures (1,887,017.) ( 477,641.) ( 21,053.)
Net cash provided by
investing activities (1,887,017.) 98,829. 152,477.
Cash Flows From Financing Activities:
Issuance of long-term debt 983,175. - -
Principal payments of long-term debt ( 181,996.) ( 180,682.) ( 349,786.)
Net cash provided by
financing activities 801,179. ( 180,682.) ( 349,786.)
Net Increase in Cash and Cash
Equivalents ( 218,571.) 165,618. 179,181.
Cash and Cash Equivalents at
Beginning of Year 463,998. 298,380. 119,199.
Cash and Cash Equivalents at
End of Year $ 245,427. $ 463,998 $ 298,380.
</TABLE>
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Year for:
Interest $ 204,798 $ 218,827. $ 232,323.
Income taxes - 4,377. -
The accompanying notes are an integral part of these financial statements.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies:
A. Principals of consolidation:
The consolidated financial statements include the accounts of
Uptowner Inns, Inc. and its Subsidiary after elimination of all
material intercompany balances and transactions. The wholly owned
subsidiary has had not activity since 1981.
B. Business activity:
The Company operates a motor inn in Huntington, West Virginia
that consists of dining, banquet and lounge facilities. In addition,
the Company operates apartment buildings and rental properties
located in Huntington, West Virginia.
C. Inventories:
Inventories are stated at the lower of cost or market on the
first-in, first-out method.
D. Property, plant and equipment:
Property, plant and equipment are stated at cost with
depreciation being provided on the straight-line method over the
estimated useful lives of the assets as follows:
Buildings and improvements 10 - 40 years
Furniture and equipment 2 - 10 years
Repairs, maintenance and renewals are charged to operations
as incurred, and expenditures for significant betterments and
renewals are capitalized.
The cost of fixed assets retired or sold, together with the
related accumulated depreciation, are removed from the accounts with
the resulting gain or loss is included in net earnings.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (Cont'd):
E. Income taxes:
The income taxes are provided for the tax effects of the
transactions reported in the financial statements and consist of
taxes currently due plus deferred taxes related primarily to
different methods of depreciation for book and tax purposes and
net operating loss carryovers. The deferred tax assets and
liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled.
F. Per share computations:
Income per share computations are based on weighted average
number of common shares outstanding during the year. The average
number of shares outstanding was 1,583,563 for 1997, 1996, and 1995.
G. Cash and cash equivalents:
For purposes of the statement of cash flows, cash equivalents
include time deposits, certificates of deposit, and all highly
liquid debt instruments with original maturities of three months
or less, of which the Company had none.
H. Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from these estimates.
I. Capitalized interest:
Interest costs are capitalized when incurred when proceeds
were used to finance the construction of assets. Capitalized
interest for fiscal year ending June 30, 1997 was $19,733.
There was no capitalized interest for the fiscal years ending
June 30, 1996 and 1995.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Disposal of subsidiary:
On August 31, 1994, the Company sold all of the assets of Uptowner
Inns of Parkersburg, its wholly owned subsidiary for cash of $750,000.
The transaction resulted in a gain of $306,930., which has been
included in operations in the year ended June 30, 1995.
Operating revenues $ -
Costs and expenses 35,527.
Net income from operations ( 35,527.)
Intercompany - debt forgiveness 572,710.
Gain on disposal 306,930.
Net income (loss) $ 844,113.
3. Long-term debt:
The long-term indebtedness of the Company at June 30, 1997 and
1996 were as follows:
1997 1996
10% mortgage note due an individual
institution, secured by a deed of
trust, payable at $733. per month,
including interest, until June 2002 $ 35,043. $ 40,100.
2% note due City of Huntington, secured
by a second deet of trust, payable at
$2,024. per month, including interest,
until January 2008 231,439. 250,881.
10% note due a financial institution,
secured by a deed of trust, payable at
$22,568. per month including interest,
until August 2004 1,340,087. 1,435,579.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Long-term debt (Cont'd):
1997 1996
Deferred payment note due the City
of Huntington, secured by a deed of
trust on rental property, payable
in full during first five years if
property is sold, 20% forgiveness
per year in sixth through tenth
years, dated September 1989 $ 27,000. $ 36,000.
8.5% note due the Huntington Urban
Renewal Authority of Huntington,
secured by a deed of trust, payable
at $3,825. per month interest only,
and final installment of all principal
and accrued interest then outstanding
due and payable February 2004 $ 540,000. $ -
Prime plus 1% installment note due a
financial institution secured by a
credit line deed of trust, payable
quarterly and then payable at $33,901.
per month until January 2008 $ 417,809. $ -
7.5% mortgage note, unsecured, payable
at $218. per month, including interest $ - $ 22,182.
Prime plus 1% installment note due a
financial institution, secured by second
deed of trust, payable at $1,140. per
month, including interest, until
September 2002 $ 61,818. $ 70,278.
Prime plus 2% installment note due a
financial institution, secured by
equipment, payable at $586. per month,
including interest $ - $ 5,106.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Long-term debt (Cont'd):
1997 1996
5.5% mortgage note due to the West
Virginia Housing Development Fund,
secured by a deed of trust, payable
at $3,070. per month, including
interest, until November 2018 $ 463,078. $ 474,122.
Prime plus 1% installment note due a
financial institution, secured by a
deed of trust, payable at $2,902.
per month, including interest,
until February 1999 $ 202,934. $ 218,146.
$ 3,319,208. $ 2,552,394.
Less current portion 224,673. 230,115.
$ 3,094,525. $ 2,322,279.
Maturities of long-term debt, including debt to stockholders, range
from 1996 to 2008 and principal payment requirements during the next
five years ending June 30, are as follows:
1998 $ 272,483
1999 526,225
2000 350,579.
2001 365,838.
2002 264,979.
Thereafter 1,612,279.
$ 3,392,383.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Related party transactions:
During October 1988, the Company purchased property from a related
entity for the sum of $528,659. Two notes existing at the time of
purchase are being paid by the Company. One loan was refinanced to a
nonstockholder in 1989. In addition, notes were executed for the balance
of the purchase price. These loans at June 30, 1997 and 1996 were:
1997 1996
10% note due an individual, interest
payable annually, due December 1993 $ 8,000. $ 8,000.
10% note due an individual, interest
payable annually, due December 1993 39,810. 39,810.
47,810. 47,810.
Less current portion 47,810. 47,810.
$ - $ -
The Company is attempting to locate the individuals in order to
satisfy these debts.
The Company and its subsidiary have entered into transactions with
various entities controlled and related to one of the Company's
shareholders. Following is a summary of transactions with these entities
as of and for the years ended June 30, 1997 and 1996:
1997 1996
Purchases from related companies $ 20,618. $ 39,018.
1997 1996
9.25% note due a company added to their
existing note, payable upon pay down to
$25,366. in October 2004 $ 25,365. $ -
Less current portion - -
$ 25,365. $ -
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Federal income taxes:
A reconciliation of income tax at the statutory rates to the
Company's effective rate for the years ended June 30, 1997, 1996 and
1995 is as follows:
1997 1996 1995
% of % of % of
Pre-tax Pre-tax Pre-tax
Amount Income Amount Income Amount Income
Income tax provision at
stautory rate $ 25,247. 34.0% $ 31,904. 34.0% $ 168,164. 34.0%
Increases (decreases):
Gain on disposal - - - - 20,228. -
Depreciation
difference ( 21,549.)(29.0) ( 19,449.)(20.7) ( 26,738.)( 5.4)
Other 212. .3 519. .5 3,477. .7
Alternative minimum tax - - 4,377. 4.7 - -
Utilization of operating
loss carryforward ( 3,910.)( 5.3) ( 12,974.)(13.8) (165,131.)(33.4)
Actual provision and
effective rate $ - -% $ 4,377. 4.7% $ - -%
The Company has available at June 30, 1997, unused operating loss
carryforwards that may be applied against future taxable income and
that expire as follows:
Unused
Operating
Loss
Expiration Date Carryforwards
June 30, 2002 $ 20,986.
June 30, 2003 433,830.
June 30, 2004 245,295.
June 30, 2005 128,142.
June 30, 2006 147,900.
June 30, 2007 78,505.
June 30, 2008 18,147.
June 30, 2009 70,932.
June 30, 2010 -
June 30, 2011 3,816.
June 30, 2012 1,150.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Federal income taxes (Cont'd):
Deferred tax assets as of June 30, 1997 and 1996 are as follows:
1997 1996
Deferred tax asset $ 59,907. $ 83,885.
$ - $ -
6. Parent Company information:
Following is the selected information for Uptowner Inns, Inc.,
Parent Company only, as of June 30, 1997, 1996 and 1995 and for the
years then ended:
1997 1996 1995
Operating revenues $ 1,867,013. $ 2,098,085. $ 2,317,690.
Income from operations 74,257. 93,835. 223,197.
Net income (loss) 74,257. 89,458. ( 349,513.)
Current assets 328,065. 556,278. 990,326.
Total Assets 6,535,810. 5,011,385. 5,127,107.
Current liabilities 1,203,436. 550,890. 542,408.
Total liabilities 4,323,337. 2,873,169. 3,070,349.
The Company has no restricted net assets.
7. Contingencies:
A $10 million suit in which the Uptowner Inns, Inc. is a defendant
has been filed by an individual who was severely injured in an auto
accident by a patron of the lounge. Legal counsel believes that good
defenses exist in this action, and that the case will ultimately be
resolved in Uptowner Inns, Inc.'s favor. The insurance company has
denied liability in this case and legal counsel believes the risk of
loss will fall to Uptowner Inns, Inc.
There are other suits pending June 30, 1997 of approximately
$50,000. in which the Corporation is a defendant. In the opinion of
management and legal counsel, the Corporation's potential liability
arising from such cases is not reasonably determinable at this time.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Commitments:
The Company has entered into a maintenance agreement expiring
May 1999.
Minimum future payments under the non-cancelable agreement for
each of the next five years and in the aggregate are:
Year Ended Amount
1998 $ 1,653.
1999 1,515.
2000 -
2001 -
2002 -
Total minimum future payments $ 3,168.
On January 3, 1997, the Uptowner Inns, Inc. entered into a loan
agreement with the Twentieth Street Bank for interim financing for
construction of the Holiday Inn Hotel & Suites now under construction
in the amount of $750,000. As of June 30, 1997, the balance on this
loan is zero because the need to borrow on this loan has not arisen.
On January 3, 1997, the Uptowner Inns, Inc. entered into a loan
agreement with the Twentieth Street Bank for financing of construction
of the Holiday Inn Hotel & Suites now under construction in the amount
of $3,700,000. As of June 30, 1997, the balance on this loan is
$417,809.
On December 2, 1996, the Uptowner Inns, Inc. entered into a
contract agreement with The Winter Construction Company for the
construction of the Holiday Inn Hotel & Suites now under construction
in the amount of $4,950,000. As of June 30, 1997, the commitment left
on this contract is $3,698,870.
On March 22, 1996, the Uptowner Inns, Inc. entered into a contract
agreement with Marks & Associates, Inc. for the interior design of the
Holiday Inn Hotel & Suites now under construction in the amount of
$31,320. As of June 30, 1997, the commitment left on this contract is
$4,957.
On September 15, 1995, the Uptowner Inns, Inc. entered into a
contract agreement with David L. Wallace & Associates, P.A. for
architectural services of the Holiday Inn Hotel & Suites now under
construction in the amount of $76,000. As of June 30, 1997, the
commitment left on this contract is $46,427.
<PAGE>
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Commitments (Cont'd):
On March 11, 1996, the Uptowner Inns, Inc. entered into a contract
agreement with Site Design for professional services for the Holiday
Inn Hotel & Suites now under construction not to exceed $5,000. As of
June 30, 1997, the possible commitment left on this contract is $1,017.
On March 15, 1996, the Uptowner Inns, Inc. entered into a franchise
agreement for the Holiday Inn Hotel & Suites in the amount of $65,000.
This agreement is based upon specific requirements stated for completion
of the hotel and approval before opening as Holiday Inn Hotel & Suites.
On May 6, 1996, the Uptowner Inns, Inc. entered into a master
technology agreement with Holiday Inn Worldwide for the front desk system
for the Holiday Inn Hotel & Suites for $31,949. As of June 30, 1997, no
funds have been required due to level of construction in progress.
On May 9, 1996, the Uptowner Inns, Inc. received a proposal from
GIAC Leasing Corporation for reservation equipment for the Holiday Inn
Hotel & Suites in the amount of $31,949. As of June 30, 1997, a contract
has not been signed, but Holiday Inn Worldwide requires this equipment
and in all probability GIAC will be contracted.
On September 23, 1996, the Uptowner Inns, Inc. entered into a
leasing agreement with GIAC Leasing Corporation for furniture, fixtures,
and equipment for the Holiday Inn Hotel & Suites for $810,000. As of
June 30, 1997, they have paid $16,200. for a lease documentation fee and
proposal fee.
On November 25, 1996, the Uptowner Inns, Inc. entered into an
agreement with the Winter Construction Company to perform construction
estimated to cost $200,000. in order to reduce the construction contract
signed on December 2, 1996. As of June 30, 1997, no funds have been
required due to level of construction in progress.
9. Credit risk:
The Company maintains cash balances at a bank. Accounts at the
institution are insured by the Federal Deposit Insurance Corporation
up to $100,000.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 90,015.
<SECURITIES> 0.
<RECEIVABLES> 23,726.
<ALLOWANCES> 0.
<INVENTORY> 7,362.
<CURRENT-ASSETS> 172,653.
<PP&E> 14,374,647.
<DEPRECIATION> 3,797,872.
<TOTAL-ASSETS> 10,878,715.
<CURRENT-LIABILITIES> 1,860,720.
<BONDS> 0.
0.
0.
<COMMON> 791,782.
<OTHER-SE> 0.
<TOTAL-LIABILITY-AND-EQUITY> 10,878,715.
<SALES> 316,759.
<TOTAL-REVENUES> 1,479,921.
<CGS> 147,608.
<TOTAL-COSTS> 1,392,654.
<OTHER-EXPENSES> 0.
<LOSS-PROVISION> 0.
<INTEREST-EXPENSE> (212,910.)
<INCOME-PRETAX> (125,643.)
<INCOME-TAX> 0.
<INCOME-CONTINUING> (125,643.)
<DISCONTINUED> 0.
<EXTRAORDINARY> 0.
<CHANGES> 0.
<NET-INCOME> (125,643.)
<EPS-PRIMARY> .08
<EPS-DILUTED> 0.
</TABLE>
