1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
----------------------
Annual Report pursuant to section 13 or 15 (d) of
the Securities Exchange Act of 1934
for the fiscal year ended December 31, 1994
Commission File number 0-7107
Southern Scottish Inns, Inc.
A Louisiana Corporation
IRS No. 72-0711739
1726 Montreal Circle
Tucker, Georgia 30084
(404) 938-5966
____________________________________________
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common stock, No Par Value
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 report(s), and (2) has been subject to
such filing requirements for the past 90 days.
Yes No X
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K _______.
The aggregate market value of the voting stock held by nonaffiliated of the
registrant on June 30, 1995 was $881,108.37. The aggregate market value
shall be computed by reference to the closing price of the stock on the New
York Stock Exchange on such date. For the purposes of this response,
executive officers and directors are deemed to be the affiliates of the
Registrant and the holding by nonaffiliated was computed as 1,006,981
shares.
The number of shares outstanding of the Registrant's Common Stock as of
June 30 1995, was 2,322,466 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None
2
Definitions: The "Company", the "Registrant" and the "Fiscal Year"
------------------------------------------------------------------
When used in this Annual Report, the "Company," unless the context
indicates otherwise, refers to Southern Scottish Inns, Inc. and its
subsidiaries on a consolidated basis. The "Registrant" refers to Southern
Scottish Inns, Inc. as a separate corporate entity without reference to its
subsidiaries. The "Fiscal Year" refers to the year ended December 31,
1994, which is the year for which this Annual Report is filed. The items,
numbers and letters appearing herein correspond with those contained in
Form 10-K of the Securities and Exchange Commission, as amended through the
date hereof, which specifies the information required to be included in
Annual reports on such Form. In accordance with General Instructions C(2)
to Form 10-K, the information contained herein is, unless indicated herein
being given as of a specified date or for a specified period, given as of
June 30, 1995 and referred to "as of this writing".
PART I
Item 1. Business
(a) General
Due to the Company's development and finance division's acquiring and
selling properties, the number of properties owned, operated, leased and
the number of wrap around mortgages held fluctuates constantly. The table
below show the various different business holdings for the last five years.
12/94 12/93 12/92 12/91 12/90
----- ----- ----- ----- -----
Motel Franchises Held - Total 343 354 314 316 315
Master Hosts Inns 18 21 18 22 20
Red Carpet Inn 147 147 121 118 121
Scottish Inns 156 163 151 151 149
Downtowner Inns - Note 1 3 3 2 3 3
Passport Inns - Note 1 19 20 22 22 22
Motel Operated - Total 0 0 1 1 0
Master Hosts Inns 0 0 0 0 0
Red Carpet Inn 0 0 0 0 0
Scottish Inns 0 0 1 1 0
Independent 0 0 0 0 0
Motel Owned & Leased To
Operators - Total 4 5 4 7 7
Master Hosts Inns 1 1 1 1 1
Red Carpet Inn 1 1 1 2 2
Scottish Inns 2 3 2 3 3
Independent 0 0 0 1 1
Free Standing Restaurants
Owned 0 0 0 1 2
Leased In - Note 2 1 1 1 1 1
Operated 0 0 0 0 1
Subleased - Note 2 1 1 0 2 1
Vacant 0 0 1 0 1
Wrap Around Mortgages or Other
types of Financing Held 13 11 9 7 7
Parcels of Land Held for Investment
or Development 3 3 3 3 3
3
3
Note 1. On August 15, 1990, the Company acquired Downtowner passport
International Motel Corporation, the owner of Downtowner and Passport
registered marks. This acquisition of corporate stock was in the nature of
a conveyance in satisfaction of debt. In late 1991 the Company deemed the
1990 acquisition to be flawed and in February of 1992, the Company acquired
the assets of Passport International Motel Corporation for assumption of
debt and simultaneously conveyed same to Hospitality International, Inc.
the Company's franchising subsidiary, for the same consideration.
Note 2. One property leased from a third party is being operated as a
restaurant by Company's sub-lessee.
(b) Segment Information
The Company identifies its significant industry segments as set forth in
the table below. All revenue items represent sales to unaffiliated
customers, as sales or transfers between industry segments are negligible.
Segment Information
for the Year Ended Dec. 31,
1994 1993
1992
---------- ----------
- ----------
Franchising:
Revenues 2,656,368 2,431,452
2,253,365
Operating Profit (Loss) 87,825 190,667
225,514
Financing & Property Dev.:
Revenues 2,094,266 1,719,853
599,003
Operating Profit (Loss) 527,874 369,430
(471,439)
Lodging Division:
Revenues * *
*
Operating Profit (Loss) * *
*
Food Service Division:
Revenues * *
*
Operating Profit (Loss) * *
*
* Included in Financing & Property Development Information.
(c) Description of Business
(I) Products and Services
The Company's franchise division offers advertising, reservation,
group sales, quality assurance and consulting services to motel
owner/operators.
The Company's lodging division, through largely non-affiliated
lessees, provides budget to moderate rate motel accommodations to the
traveling public.
The Company's Financing division provides owner financing to persons
acquiring motel properties previously operated and/or owned by the
Company. For amounts of revenue of similar products and services in
excess of 15% total, see Item 1 (b) above.
4
(II) Status of Products and Segments
Each of the Company's industry segments is fully developed with an
operational history of several years under Company's direction.
(III) Raw Materials
In a sense, independent motel operations seeking national affiliation
for their properties constitute raw materials for the Company's
franchising division, and sites suitable for development and existing
properties which may be acquired constitute raw materials for both the
Company's lodging division and its financial division.
To date, the Company has experienced little difficulty in obtaining
information on locations to be reviewed by either its franchise
committee or its evaluation committee.
(IV) Patents, Trademarks, Licenses, Franchises, and Concessions
The Company has no patents. The Company does own the trade names
"Master Hosts Inns," "Red Carpet Inns," "Scottish Inns," "Downtowner
Inns," "Passport Inns" and related trademarks, etc. used in operating
lodging facilities under these names.
(V) Seasonability
The Company's financing business by its nature is not subject to
seasonal fluctuations. The revenues from the Company's franchising
division tends to be concentrated in the Spring and Summer months
during peak travel periods.
(VI) Working Capital
The Company's financing receipts are comprised primarily of interest
which does not become reflected on its balance sheet until after it is
earned, whereas its payments on underlying debts are comprised
primarily of principal reduction and the portion which will be returned
over the next twelve months is reflected on the balance sheet as a
current liability. Because of this, the Company believes a current
ratio of less than one to one is appropriate for its business.
However, the Company continues to, among other things, (1) reduce and
contain overhead costs, (2) seek to dispose of underproductive assets,
and (3) seek the most advantageous financing terms available.
(VII) Customers
The Company's business of franchising motels is contingent upon its
being able to locate qualified property owner-operators who are seeking
national affiliation. Through use of its franchise sales force, the
Company has not experienced insurmountable difficulty in locating
independent motel owner-operators nor does it anticipate any such
difficulty in the future. However, more franchisors are offering
multi-level brands, resulting in more down-scaling conversions into the
economy lodging sector and, therefore, providing more competition.
Likewise, the Company's financing division requires that it locate
qualified owner-operators or investors for its properties. Because of
its franchise affiliations the financing division has not experienced,
nor does it anticipate experiencing too much difficulty in locating
qualified investors to purchase its developed properties. However, due
to the Company's desire to limit the loans it holds to a manageable
number and because third party or institutional financing
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for used motel properties are difficult to arrange, once a property is
sold the Company carries the entire financing package and accordingly,
each individual loan represents a larger portion of portfolio than it
does with traditional lending institutions. Therefore, the continued
performance of each existing loan may be material to the operation of
the financing division.
(IX) Government Contracts
The Company is not involved in, nor does it anticipate becoming
involved in, any government contracts.
(X) Competition
The Company's franchising, leased lodging and leased food service
division each compete with other similar businesses, many of which are
larger and have more national recognition than does the Company. Each
of these divisions compete on the basis of service and price/value
relationship.
The Company's financing division competes with other, more traditional
sources of long-term financing, most of which have greater financial
resources than does the Company.
Competition in developing and financing lodging properties has been
significantly affected by over-development in some areas as well as the
area's and the country's general economic condition, and by the market
force of the Resolution Trust Corporation, the latter of which
decreased in the current reporting period.
(XI) Research and Development
No significant research activities were conducted by the Company during
the Fiscal year and the Company does not expect to expend sums on
research activities during the next Fiscal Year.
(XII) Environmental Protection
The Company is not directly affected by environmental protection
measures of federal, state or local authorities to any extent which
would reasonably be expected to cause material capital expenditures for
compliance, so far as in known. However, it is possible that an
approximately five and three-tenths (5.3) acre tract of land held as an
investment and acquired as a possible motel site, located on I-10 in
Ocean Springs, Mississippi, may under the new guidelines, be determined
to be in part "wetlands." If so, its use and value would be adversely
affected. On January 27, 1995, 3.2 acres of said tract were sold at a
consideration undiminished by the wetlands issue; the value of the
remaining 5.3 acres, therefore, may not be diminished.
(XIII) Employees
Division 12/94 12/93 12/92
Lodging Operated 0 0 11
Lodging Leased to Outsiders - Note 3 93 69 24
Food Service 0 0 0
Franchise Division 45 46 35
Administrative & Finance 6 4 3
------ ------ -----
Total 144 119 38
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Note 3: These are not employees of the Company at date of this writing,
since operations are leased out but are given for comparative purposes.
(d) Foreign Operations
The Company, as of June 30, 1995, was not then currently involved in any
business operations outside of the United States of America, except through
its franchising division which does do limited business in Canada and has
one franchisee in the Bahamas. As of April 30, 1995, the franchising
division has two franchisees in Costa Rica and two in Jamaica.
Item 2 Properties
The following table sets forth certain information, as of this
writing, concerning properties on which the Company holds notes
secured by mortgages and other types of financing instruments held by
the Company:
Amount Underlying
Location Description Receivable Mortgages
- --------- ------------ ----------- ---------
Lafayette, La 80 Room Motel 291,590.10
216,254.13
on 1.76 acres
Arlington Rd 120 Room Motel 1,020,469.18 -0-
Jacksonville, FL on 3.5 acres
Bald Knob, AR 42 Room Motel 261,392.69 -0-
Gulfport, MS Racquet Club 268,358.28 -0-
(courts, clubhouse, vacant lot)
Gretna, LA 45 Room Motel 271,625.67 -0-
Hattiesburg, MS 48 Room Motel 417,333.65
95,991.67
Lane Avenue 144 Room Motel 1,473,989.51 -0-
Jacksonville, FL on 4 acres
McComb, MS 51 Room Motel 315,891.63
9,134.29
Marrero, LA 100 Room Motel 482,924.41 -0-
on 2.5 acres
Morgan City, LA 49 Room Motel 283,972.45
45,255.66
Natchez, MS 100 Room Motel 878,481.59
*313,070.90
New Iberia, LA 80 Room Motel 599,019.43
273,377.99
Ocean Springs, MS Unimproved Land 247,243.18 46,918.03
* While the indenture in favor of a bank in connection with
this receivable is not a mortgage, an original sum of
$475,000.00 of the receivable was assigned and pledged in
1990 to a bank and might be considered as being in the
nature of an underlying mortgage. Said $475,000 is reduced
to $313,070.60.
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The following table sets forth certain information, as of this writing,
concerning motel properties owned by the Company and under management
contract or leased to Operators.
Location Description Mortgage Balance
- -------- ------------ -----------------
Houma, LA - Note 4 120 Room Motel $ 539,892.73
Huntsville, AL - Note 5 197 Room Motel -0-
3.3 acres of leased land
Marietta, GA - Note 6 154 Room Motel 606,051.33
Vicksburg, MS - Note 4 100 Room Motel 59,869.44
Note 4 These properties, on April 1, 1990, were leased to First
Hospitality Management Corporation, a corporation owned by Robert H.
Douglas, a Director of the Company and a former employee of the
Company.
Note 5 Title to this property was reacquired by foreclosure December
7, 1990. It re-opened for business April, 1990, under an agreement
with Alahunt, Inc., a corporation wholly owned by Richard A. Johnson,
a Director of Registrant. During the current reporting period, the
Company leased this property to Thelma Pullin, a sister of the
Registrant's then president.
Note 6 The Marietta property in 1992 was operated by the Company.
Since 1993, it has been leased to Timothy J. DeSandro, a former
employee of the Company.
Note 7 This property, on April 1, 1990, was leased to First
Hospitality Management Corporation. On August 1, 1991, Lessor and
Lessee jointly terminated said lease and Company leased the property
to Kirby Guimbellot, a brother of the Company's then President. The
Company also entered into a contract with Mr. Guimbellot to sell and
buy this property at a later date, pursuant to which same was sold to
Mr. Kirby Guimbellot on January 5, 1995, for $615,000.00, with the
Company taking back a wrap-around note and mortgage for $602,670.63.
The Company purchased this property in 1989 for $400,000.
Also, until August 2, 1991, the Company operated one "Omelet House"
restaurant located in New Iberia, Louisiana, which it leases from an
individual. On August 1, 1991, the Company entered into a rental agreement
with Alfred W. Schoeffler, who operated same from August 3, 1991, through
September 24, 1992; the property was vacant until March of 1993 at which
time the property was leased to First Hospitality Management Company.
The following table sets forth certain information, as of this writing,
concerning other properties owned or recently owned by the company.
Location Description Mortgage Balance
- --------- ----------- ----------------
Ocean Springs, MS 5.3 acres of land fronting $ 46,918.03
interstate highway, held
for future development.
See Part 1, Item 1(c)(XII)
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Location Description Mortgage Balance
- --------- ----------- ----------------
Pass Christian, MS 42 Residential lots located -0-
in Blue Lake Subdivision, held
for investment.
Madison County, MS 3.0 acres of land at $300 per month
Ross Barnett Reservoir land lease
on which was a night club
when property was acquired.
The building had been
untenantable, was deemed
to be economically unfeasible
to repair and was razed during
current reporting period. Land
is leased from Pearl River
Valley Water Supply District
and the leasehold is marketable
by assignment, sublease or
redevelopment.
Note On 6/9/94 our interest in Purvis, MS land was sold subject to
then debt for consideration of $250,000 to John M. Hill, a
partner of Nelson & Hill, owner of the other undivided 1/2
interest in said land.
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Item 3 Legal Proceedings
Waymon Barron, Plaintiff, v. Southern Scottish Inns, of
Mississippi, Inc., et al, Defendants
On or about September 4, 1986, a Complaint for damages for negligence and
breach of implied warranty was filed in the circuit Court of Warren County,
Mississippi, styled Waymon Barron v. Motel Recovery & Development, Ltd.,
d/b/a Scottish Inn of Vicksburg, a Partnership, Lewis Slaughter and
Southern Scottish Inns, Inc., General Partner, and Sam Patel, bearing Cause
No. 14,307 on the docket of said Court. Service of Process was not had on
Registrant.
On or about August 10, 1987, an Amended Complaint for damages in the same
matter was filed in the same Court, styled Waymon Barron v. Motel Recovery
& Development, a Limited Partnership, Lewis Slaughter and Reba Slaughter,
General Partners, Scott Yeoman and James Johnstone, Limited Partners;
Southern Scottish Inns of Mississippi, Inc., N. V. Patel and Sam Patel,
bearing Cause No. 14,307 C on the docket of said Court. Later, Registrant
and Hospitality International, Inc., a partially owned subsidiary of the
Company, were made additional party Defendants. The Company and its
defendant subsidiaries have obtained separate counsel, answered the
complaints and are preparing defenses.
The Amended Complaint demands judgement of $1,500,00 plus interest and
costs of Court, and trial by jury.
The Amended Complaint alleges that Plaintiff on October 26, 1985, while a
guest in Room 101 of the Scottish Inn in Vicksburg stepped onto a rotten
place in the floor, that his leg went through and he fell injuring his
back, which injury required surgery and resulted in loss of wage earning
ability and loss of his ability to enjoy life.
On October 25, 1985, the date Mr. Barron checked into said room and on
October 26, 1985, the date of his injury, the record title of the Scottish
Inn in Vicksburg was in Defendant Southern Scottish Inns of Miss., Inc.
The motel was not being operated by said subsidiary of the Company or the
Registrant on either of said dates.
On January 26, 1984, this motel was the subject of a Contract For Deed with
Defendants Lewis Slaughter and Reba K. Slaughter, his wife. Subsequently,
and prior to August of 1984, said Defendants transferred their rights,
duties and interest under and in the Contract For Deed to Defendant Motel
Recovery and Development, a limited partnership, of which the named
individual persons were the general or limited partners. In August of
1984, Motel Recovery and Development, leased the subject motel to Defendant
N. V. Patel. On October 2, 1984, Registrant and its defendant subsidiary
recognized the transfer from Mr. and Mrs. Slaughter to Motel Recovery and
Development and the lease from Motel Recovery and development to N. V.
Patel. In May of 1986, Registrant and its defendant subsidiary, through
surrender of possession and of operation of Mr. Patel and Motel Recovery
and Development regained possession and leased same.
For some time, the Plaintiff did not diligently pursue this claim, except
for the taking of depositions of the Plaintiff's doctor and of an expert
building tradesman. Motions for Summary Judgement were filed by the Co-
Defendants, Southern Scottish Inns, Inc. and Southern Scottish Inns of
Miss., Inc. Also, Hospitality International, Inc. filed a motion for
Summary Judgement. Circa October 31, 1993, the Court file reflects that
during the last eight (8) months, the insurer for our Franchisee settled,
on behalf of Hospitality, with the plaintiff and Hospitality International,
Inc. was dismissed. During the current reporting period, the Registrant
10
was dismissed on Summary Judgement and Southern Scottish Inns, of
Mississippi, Inc. was dismissed on Summary Judgements. Plaintiff has
appealed both dismissals and the appeals are pending.
PART II
Item 5 Market for Registrant's Common Equity Securities and Related
Matters
(a) The common stock, no par value, of the Registrant is traded on the
Over-the-Counter market. The following table sets forth the range of
per share bid and asked price quotations during the periods indicated.
The following represents quotations between dealers, and do not
include retail mark-ups, mark-downs, or other fees or commissions, and
do not represent actual transactions.
Bid Price
Asked Price
1994 High Low High
Low
----------------- ----------------
- ---------------
1st Quarter .8125 .8125 1.0625
1.0625
2nd Quarter .875 .875 1.75
1.75
3rd Quarter .875 .875 1.75
1.75
4th Quarter .875 .875 1.75
1.75
(b) As of this writing, there are approximately 910 shareholders of the
Registrant's common stock.
(c) No cash dividends have been paid on the Company's common stock during
the two most recent Fiscal Years and none are anticipated to be paid
in the foreseeable future.
Item 6 Selected Financial Data
The following table summarizes selected financial data of the Company for
the past five Fiscal Years. It should be read in conjunction with the more
detailed consolidated financial statements of the Company appearing
elsewhere in this Annual report.
1994 1993 1992 1991 1990
--------- --------- -------- -------- --------
REVENUE 4,986,556 4,151,305 3,982,938 4,645,699 4,327,490
NET 422,724 271,984 360,047 245,598
128,123
INCOME
EARNINGS PER
SHARE .18 .12 .16 .11 .06
TOTAL 14,344,353 13,915,514 13,982,208 14,215,100 15,761,014
LONG TERM 2,125,004 2,356,475 2,853,736 3,049,661 4,438,369
STOCKHOLDER'S
EQUITY 8,740,454 8,231,133 8,100,892 7,725,004 7,457,333
CASH DIVIDENDS
PER SHARE - 0 - - 0 - - 0 - - 0 - - 0 -
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Item 7 Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Capital Resources
(I) No material commitments for capital expenditures are planned other than
any possible purchases or development of properties through the
financing division.
Hospitality International, Inc. was able to acquire a suitable office
facility and moved into same on November 1, 1992. The property
consists of 2.76 acres of land and 26,888 square feet of office space,
of which 15,592 square feet is in use , of which Hospitality uses
11,296 square feet. The property costs $425,000, of which $409,000 was
financed. The loan was guaranteed by Registrant and by Bob Guimbellot,
personally. During the first week of February of 1994, the Company
moved its offices into this facility. At this time, and for the
foreseeable future, Southern Scottish Inns, Inc., Red Carpet Inns
International, Inc. and Hospitality International, Inc. are all sharing
the same office building.
(II) The trend in capital resources has resulted in a loosening of credit
with regard to new motel construction but has not changed perceptively
with regard to older properties. This has forced more sellers of older
properties into the seller financed arena creating more competition for
the Company in its Finance and Development Division. This fact,
coupled with tighter credit on the purchase side, has meant less
profitable opportunities for the Company.
Item 8 Financial Statements and Supplemental Data
The financial statements and financial statement schedules filed as part of
the Annual report are listed in Item 14 below.
Item 9 Disagreements of Accounting and Financial Disclosures
Not applicable.
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Part III
Item 10 Directors and Executive Officers of the Registrant
The Following persons are the directors and the executive officers of the
Registrant.
POSITION AND TERM
NAME AGE WITH REGISTRANT
- -------------------- --------
- ---------------------
Bobby E. Guimbellot 54 CEO - 20 Years
Director - 22
Years
Michael M. Bush 46 Director - 13
Years
Donald Deaton 64 Director - 8 Years
Robert H. Douglas 62 Director - 16
Years
Jack M. Dubard 63 President - 1 Year
Director - 6 Years
C. Guy Lowe, Jr. 59 Director - 22
Years
Gretchen W. Nini 47 Director - 8 Years
Harry C. McIntire 65 Chairman - 1 Year
Director - 18
Years
George O. Swindell 57 Director - 19
Years
Richard A. Johnson 50 Director - 5 Years
Melanie G. Campbell 39 Director - 4 Years
John L. Snyder, Jr. 68 Director - 4 Years
Melinda P. Hotho 32 Director - 1 Year
Timothy D. DeSandro 45 Director - 1 Year
The Board of Directors of the Company held one regularly scheduled meeting
in 1994.
The term of office for all directors expires at the close of the next annual
meeting of shareholders. Officers serve at the please of the Board of
Directors.
Bobby E. Guibellot served as President of the Registrant from January of
1976 through 1994. Mr. Guimbellot remains as Chief Executive Officer of
Registrant. Mr. Guimbellot is also the principal shareholder and Chairman
of the Board of Western Wireline Services, Inc. ("Western Wireline"), an oil
well service company headquartered in Belle Chasse, Louisiana. Mr.
Guimbellot has been Chairman of Red Carpet Inns, International, Inc. a
subsidiary of the registrant, since 1982, and has been President of Red
Carpet since January 1, 1992.
Michael M. Bush is President and Chief Executive Officer of the Mississippi
River Bank, Belle Chasse, Louisiana, a position which he has held for more
than six years.
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Donald Deaton is President of Hospitality International, Inc., a motel
franchising company and subsidiary of the Registrant.
Robert H. Douglas was Director of Motel Operations for the Company until
April 1, 1990, and prior to assuming that position has been in the
independent plant nursery business. He previously served as Secretary and
Treasurer of the Registrant from September 1983, until April 1986. Prior to
that, Mr. Douglas was Director of Operations for the Company for 8 years.
On April 1, 1990, Mr. Douglas, formed the corporation to whom several of the
Company's motels are leased.
Jack M. Dubard is currently the Registrant's President, after having served
as the Vice President for several years, and was previously an independent
consultant to the Registrant and its affiliates. Prior to that, he held an
administrative position with Red Carpet Inns International, Inc. Since
early 1994, Mr. Dubard has served as CEO of Hospitality International, Inc.,
the Company's franchising subsidiary.
C. Guy Lowe, Jr. is a self-employed real estate developer and also provides
office building management services. He has been so engaged for more than 7
years.
Harry C. McIntire is a retired senior captain (pilot) with Delta Air Lines,
Inc. and has been a captain for more than 25 years prior to his retirement.
He has served as Vice Chairman of registrant's Board of Directors and as a
Vice President. Upon Dr. Hotho's resignation, Captain McIntire was elected
as Chairman of the Registrant's Board.
Gretchen W. Nini was a Director, Corporate Secretary, and treasurer of
Western Wireline Services, Inc., an oil well service company headquartered
in Bell Chasse, Louisiana, a position she held for more than 5 years (See
Bobby E. Guimbellot, supra).
George O. Swindell formerly owned Diamond Realty Construction, Gretna
Louisiana; he has been a real estate broker since 1970 and has been a
general contractor of over 17 years.
Richard A. Johnson has had prior experience in construction, manufacturing,
health care, agriculture, recreational facilities, apartments and real
estate. Since June of 1992, Mr. Johnson served as Franchise Development
Coordinator for Hospitality International, Inc., a subsidiary of the
Registrant. He resigned in July 1995 from his employment by Hospitality
International, Inc.
Melanie Campbell is the current Corporate Secretary and Treasurer of Western
Wireline Services, Inc. She has been with this company for more than six
years and during that time has held the position of Office Administrator for
Western. (See Bobby E. Guimbellot, supra).
Melinda P. Hotho - Dr. Vincent W. Hotho, after being a Director of the
Registrant for over twenty-two (22) years, the last eighteen (18) of which
he served with distinction as Chairman, due to some imprudent personal
investments and a potentially ruinous malpractice suit went through a
Chapter 7 Bankruptcy proceeding. He felt it to be in the best interest of
the Registrant and of the Company that he resign as Director and Chairman.
The Board of Directors, pending action of the Stockholders, selected Melinda
P. Hotho, his daughter, to serve on an interim basis.
John L. Snyder, Jr. is recently retired from his position as manager of
engineering at Mid-America Transportation Company. Mr. Snyder had more than
thirty years experience in marine operations. He previously held
administrative or managerial positions with Wisconsin Barge Line, Walker
14
Boat Yard and Mid-South Towing Company.
Timothy J. Desandro has been selected to serve as Director on an interim
basis. He is currently the Lessee of the Scottish Inn located in Marietta,
Georgia, which property he has managed for the past five (5) years.
Previously he functioned in the capacity of oil well service operator, a
position that Mr. DeSandro held for 20 years.
Directors who have resigned:
Richard H. Rogers was employed as marketing consultant for the Knoxville's
World's Fair from January 1982 to May 1982. From 1978 to January 1982, Mr.
Roger served as Vice President and Director of Operations of Cindy's Inc., a
hotel company. He became President of Hospitality International, Inc. as
subsidiary of the Registrant, in May 1982. On October 1993, Mr. Rogers
resigned his presidency of Hospitality International, Inc. He resigned for
personal reasons and to pursue other interests. Mr. Rogers resigned as
Director of the Registrant in 1994.
Dr. Vincent W. Hotho, M.D., after being a Director of the Registrant for
over twenty-two (22) years, the last eighteen (18) of which he served with
distinction as Chairman, due to some imprudent personal investments and a
potentially ruinous malpractice suit went through a Chapter 7 Bankruptcy
proceeding. He felt it to be in the best interest of the Registrant and of
the company that ye resign as Director and Chairman. The Board of
Directors, pending action of the Stockholders, selected Melinda P. Hotho,
his daughter, to serve on an interim basis. The Directors elected Harry C.
McIntire as Chairman upon Dr. Hotho's resignation.
Harry C. Geller, an able and loyal Director for the past fourteen (14)
years, in an effort to shed some activities with a view toward his imminent
retirement, resigned in 1994 as a Director of the Registrant. Mr. Geller,
the sole stockholder and president of Securities Transfer Company, the
Registrant's Transfer Agent, has given Registrant notice that he is closing
Securities Transfer Company at Calendar year end.
Committees of the Board of Directors
The Board of Directors of the Registrant does not maintain any standing
committees.
Item 11 Executive Compensation
For services rendered in all capacities to the Company and its subsidiaries
during the Fiscal Year ended December 31, 1994, the Company paid aggregate
cash compensation in the amount of $92,800.00 to Mr. Guimbellot, the
Registrant's then President and present Chief Executive Officer. His salary
was partially deferred and he is owed $169,687.27, most of which is from
prior periods. His annual salary is $75,000. In 1994, the Company paid
aggregate cash compensation in the amount of $61,742.20 to Mr. Dubard, who
for most of said period was vice president of Registrant and CEO of its
franchising subsidiary, and who for the latter part of said period was
Registrant's president and CEO of Hospitality Inc.The Company provides
Messrs. Guimbellot and Dubard with automobiles and does not require them to
account for the personal use, if any, of the automobiles. The cost is not
included in the compensation reported above. However, the Company estimates
that the amount, which cannot be specifically or precisely ascertained, does
not exceed 10% of the aggregate compensation, paid and unpaid, reported
above.
15
Item 12 Security Ownership of Certain Beneficial Owners and Management
Principal Holders
The following table sets forth, as of this writing, information with respect
to each person who, to the knowledge of the Registrant, might be deemed to
own beneficially 5% or more of the outstanding Southern Scottish Inns, Inc.
common stock, which is the only class of voting securities of the
Registrant. Except, as otherwise indicated, the named beneficial owners
possess sole voting power and sole investment power with respect to the
shares set forth opposite their respective names.
Amount and Nature Present
Name Address of of Beneficial Percent
Beneficial Owner Ownership Of Class -
Note 8
- ----------------- ------------------ --------
Bobby E. Guimbellot 1,127,094 48.53%
1726 Montreal Circle
Tucker, Georgia 30084 - Note 9
Harry C. McIntire 156,011 6.71%
Roswell, GA - Note 10
Note 8 Based on 2,322,466 shares outstanding.
Note 9 Includes 470,750 shares owned by Bobby Guimbellot d/b/a Coastal
Companies, and 35,238 owned by Industrial Funds, an entity of
Western Wireline Services, Inc. Mr. Guimbellot's shares also
include 17,713 and 1,664 shares owned by Lift Boats, Inc. and Tri
Delta Dredge, Inc., respectively and 361,405 shares owned by
Shelly Plantation. Ms. Campbell shares voting rights as to
Industrial Funds shares with Mr. Guimbellot.
Note 10 Voting and investment power on 113,331 shares are shared with his
wife.
Management Ownership
The following table sets forth, as of this writing, information concerning
the ownership of Southern Scottish Inns, Inc. common stock by all directors
and by all directors and officers as a group. Southern Scottish Inns, Inc.
common stock is the only class of equity securities of the registrant.
Except as otherwise indicated, the named beneficial owners possess sole
voting power and sole investment power with respect to the shares set forth
opposite their respective names.
Amount and Nature Present
Name Address of of Beneficial Percent
Beneficial Owner Ownership Of Class -
Note 11
- ----------------- ------------------ --------
Michael W. Bush Note 12 2,811 .12%
Melanie Campbell Note 13 35,638 .02%
Donald Deaton 1,860 .08%
Timothy DeSandro 1,248 .06%
Robert H. Douglas 1,630 .07%
Jack M. Dubard Note 14 6,407 .27%
16
<CATION>
Amount and Nature Present
Name Address of of Beneficial Percent
Beneficial Owner Ownership Of Class -
Note 11
- ----------------- ------------------ --------
S>
Bobby E. Guimbellot Note 13 1,127,094 48.53%
Richard A. Johnson 9,215 .40%
C. Guy Lowe, Jr. 1,135 .05%
Harry C. McIntire Note 15 156,011 6.71%
Gretchen W. Nini Note 16 2,601 .11%
George O. Swindell 1,563 .06%
John L. Snyder, Jr. 600 .02%
------------------ --------
1,315,485 56.64%
Note 11 Based on 2,322,466 shares outstanding.
Note 12 Includes 250 shares in the name of his minor son.
Note 13 Includes 470,750 shares owned by Bobby Guimbellot d/b/a Coastal
Companies, and 35,238 owned by Industrial Funds, an entity of
Western Wireline Services, Inc. Mr. Guimbellot's shares also
include 17,713 and 1,664 shares owned by Lift Boats, Inc. and Tri
Delta Dredge, Inc., respectively and 361,405 shares owned by
Shelly Plantation. Melanie Campbell, the Secretary of Western
Wireline Services, Inc., shares voting and investment powers with
respect to the 35,235 shares owned by Industrial Funds. Only Ms.
Campbell's personal shares of 400 were included in her part of
column total.
Note 14 Includes 413 shares in the name of his wife.
Note 15 Voting and investment powers on 113,331 shares are shared with his
wife.
Note 16 Includes 639 shares in the name of her minor child.
Item 13 Certain Relationships and Related Transactions
J. Puckett and Company/Buena Vista Venture
This entity is an ordinary particular Louisiana partnership. The
Registrant owns twenty-five (25) of the one hundred (100) partnership
units. Bobby E. (Bob) Guimbellot, individually, Registrant's Chief
Executive Officer, owns eleven (11) of said partnership units.
Additionally, Mr. Guimbellot, d/b/a Coastal Companies, owns twenty (20)
of said units. Emilee B. Guimbellot, Bob Guimbellot's mother, owns one
(1) said units. Shelly Plantation Ventures, a partnership in which Mr.
Guimbellot is a principal unit owner and in which his mother is a small
unit owner, while not a partner, is a three (3) per cent equity owner
in J. Puckett. The Registrant, in June of 1992, borrowed $50,000.00
from J. Puckett. This debt was represented by a demand note bearing
interest at twelve (12) % per year and was paid off March 1995. At the
present time, Registrant receives income of $200.00 per unit or $5,000
per month from J. Puckett.
17
Pan American Hospitality
From time to time, and on an as needed basis, the Company has made
advances to Pan American Hospitality, a partnership comprised of
Red Carpet Inns International, Inc. (a subsidiary of the
Registrant), Bobby E. Guimbellot, Emilee Guimbellot (Mr.
Guimbellot's mother), Western Wireline Services, Inc., Mildred
Puckett, Mary R. Dubard (wife of Jack M. Dubard), and two
unrelated individuals. As of December 31, 1994, these advances
total $113,783.
C. Guy Lowe, Jr.
On April 4, 1986, the Company acquired from C. Guy Lowe, Jr., (a
director of the Registrant) all of the outstanding stock of O.S.
of South Louisiana, Inc. in exchange for the Registrant's
promissory note in the face amount of $132,448. On May 5, 1986,
Mr. Lowe assigned this note to Merchants Trust and Savings Bank.
No scheduled payments were made on this note. On July 31, 1990,
Red Carpet Inns International, Inc., a consolidated subsidiary of
the Company, borrowed $100,000 from Merchants Trust and Savings
Bank and loaned it to the Company. The Company, in turn, paid the
$100,000 back to Merchants Trust and savings Bank as assignee, in
full, compromise settlement of the original note of $132,448 to
Mr. Lowe. The Company will lower its basis in its O.S. of South
Louisiana, Inc. stock. The new note from Merchants Trust and
Savings Bank to Red Carpet Inns International, Inc. was guaranteed
by two affiliated entities belonging to the Company President,
Bobby E. Guimbellot. The Company is now indebted to Red Carpet
Inns International, Inc. in the amount of $70,000 at an interest
rate of one and one-half (1 1/2%) percent over Chase Manhattan
Bank prime rate.
18
PART IV
Item 14 Exhibits, Financial schedules and Reports on Form 8-K
(a) Listed below are the following documents which are filed as a part of
this Annual Report.
1. Financial statements
Auditor's Report. Note 17
Consolidated balance sheets of the Company as of December 31, 1994
and 1993.
Consolidated statements of changes in cash flow of the Company for
the Fiscal Years ended December 31, 1994, 1993 and 1992.
Notes to consolidated financial statements.
2. Exhibits. The exhibits filed as part of the Annual report are
listed on the exhibit index which immediately precedes and is
bound with such exhibits.
(b) No reports on Form 8-K have been filed by the Registrant during the
last quarter of the period covered by this Annual Report.
Note 17 For the company's fiscal years of 1985 through 1990, our Auditor
was Robert M. Mosher, C.P.A. of Biloxi, Mississippi. For the
Company's fiscal years of 1991 through 1992, our Auditor was the
firm of Fountain, Seymour, Mosher & Associates of D'Iberville,
Mississippi. In February of 1994 (See Item 7, Capital Resources
(I)), Registrant and Company moved to the Atlanta area. About
such time and in connection with future audits, the decision was
made to change auditors and to employ Robert J. Clark of Roswell,
Georgia. Mr. Clark had done the Company's Audits for 1983 and
1984. Mr. Clark had done the Audits of 1992 and 1993 for Red
Carpet Inns International, Inc., an affiliate of Registrant. Mr.
Clark has done the Audits for Hospitality International, Inc., a
partially owned subsidiary of Registrant, continuously since 1982.
For the year 1994 and for the foreseeable future, Mr. Clark will
do the audits for Southern Scottish Inns, Inc., Red Carpet Inns
International, Inc. and Hospitality International, Inc. Mr.
Mosher cooperated with Mr. Clark in the transition. In accordance
with the SEC PRACTICE SECTION of the A.I.C.P.A., a partner other
than the partner in charge must perform a concurring review of the
audit report. When the firm is a sole proprietorship, an outside
qualified professional must be utilized and one was so utilized.
19
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.
SOUTHERN SCOTTISH INNS, INC.
----------------------------
(Registrant)
By: Bobby E. Guimbelott 9/5/95 By: Jack M. Dubard 9/5/95
--------------------------- ------------------------
Bobby E. Guimbellot Date Jack M. Dubard Date
Chief Executive Officer President & CFO
20
SIGNATURES
(Cont.)
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.
FOR THE BOARD OF DIRECTORS:
Michael M. Bush Melinda P. Hotho
- ------------------------ ------ ---------------- ------
Michael M. Bush Date Melinda P. Hotho Date
Director Director
Melanie Campbell Richard A. Johnson
- ------------------------ ------ ------------------ ------
Melanie Campbell Date Richard A. Johnson Date
Director Director
Donald Deaton C. Guy Lowe, Jr.
- ------------------------ ------ ----------------- ------
Donald Deaton Date C. Guy Lowe, Jr. Date
Director Director
Timothy D. DeSandro Harry C. McIntire
- ------------------------ ------ ------------------ ------
Timothy D. DeSandor Date Harry C. McIntire Date
Director Director
Robert H. Douglas Gretchen W. Nini
- ------------------------ ------ ---------------- ------
Robert H. Douglas Date Gretchen W. Nini Date
Director Director
Jack M Dubard John Snyder
- ------------------------ ------ ----------------- ------
Jack M. Dubard Date John Snyder Date
Director Director
Bobby E. Guimbellot George O. Swindell
- ------------------------ ------ ------------------ ------
Bobby E. Guimbellot Date George O. Swindell Date
Director Director
21
SOUTHERN SCOTTISH INNS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
22
TABLE OF CONTENTS
PAGE NO.
INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . 1
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS . . . . . . . . . . 2-3
CONSOLIDATED STATEMENT OF INCOME . . . . . . . . 4
CONSOLIDATED STATEMENT OF RETAINED EARNINGS. . . 5
CONSOLIDATED STATEMENT OF CHANGES
IN CASH FLOW. . . . . . . . . . . . . . . . . 6-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . 8-28
23
Board of Directors
Southern Scottish Inns, Inc.
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheets of
Southern Scottish Inns, Inc. and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of income,
stockholder's equity and cash flows for each of the two years in the
period ended December 31, 1994. 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 audits.
The financial statements of Southern Scottish Inns, Inc. as of
December 31, 1992 were audited by other auditors who expressed an
unqualified opinion on those statements.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Southern Scottish Inns, Inc. and subsidiaries at of December 31,
1994 and 1993, and the consolidated results of their operations and
their cash flows for each of the two years in the period ended
December 31, 1994, in conformity with generally accepted accounting
principles.
Roswell, Georgia
August 18, 1995
24
SOUTHERN SCOTTISH INNS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1993
ASSETS
1994 1993
CURRENT ASSETS
Cash $ 83,355 $ 148,207
Accounts Receivable-Note 1 635,648 489,656
Mortgages & Notes Rec.-Note 3 308,675 358,792
Inventory-Note 1 12,506 75,314
Prepaid Expenses 128,442 44,644
Loan Employee 0 1,313
Interest Receivable 213,365 142,122
---------- ----------
TOTAL CURRENT ASSETS $1,381,991 $1,260,048
PROPERTY AND EQUIPMENT - NOTE 1
Land and Land Improvements 1,202,811 1,127,522
Buildings-Note 1 & 2 2,946,353 2,818,012
Furniture, Fixtures &
Equipment-Note 1 & 2 1,025,187 894,474
Leasehold Improvements 3,007 3,007
Sign-Red Carpet Inn 0 35,263
---------- ----------
Total Property & Equipment 5,177,358 4,878,278
Less: Accumulated Depreciation 1,086,631 1,083,043
---------- ----------
Accumulated Amortization 1,509 907
---------- ----------
TOTAL PROPERTY AND EQUIPMENT $4,089,218 $3,794,328
OTHER ASSETS
Mortgages & Notes Rec.-Note 3 $6,198,869 $6,388,963
Investments 166,744 28,189
Organizational Costs - Note 1
Trademarks 1,353,161 1,353,161
Investment in Partnership
Note 1 1,151,550 1,087,575
Utility Deposits 2,820 3,250
------------ ------------
TOTAL OTHER ASSETS $8,873,144 $8,861,138
------------ ------------
TOTAL ASSETS $14,344,353 $13,915,514
=========== ===========
The accompanying notes are an integral part of these
financial statements.
25
SOUTHERN SCOTTISH INNS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1993
LIABILITIES AND STOCKHOLDER'S EQUITY
1994 1993
CURRENT LIABILITIES
Accounts Payable $ 133,392 $ 314,531
Interest Payable 84,826 14,096
Taxes Payable 521,283 142,958
Other Accrued Liabilities 409,048 418,791
Mortgages & Notes Payable-
Note 4 853,485 940,630
Capital Lease Obligations 752 5,153
Note Discounts 139,649 143,533
--------- ---------
TOTAL CURRENT LIABILITIES 2,142,435 1,979,692
LONG-TERM LIABILITIES
Notes Payable - Note 4 2,125,004 2,356,475
--------- ---------
TOTAL LONG-TERM LIABILITIES 2,125,004 2,356,475
DEFERRED CREDITS
Deferred Income-Note 1 1,336,460 1,348,214
--------- ---------
TOTAL DEFERRED CREDITS 1,336,460 1,348,214
--------- ---------
TOTAL LIABILITIES & DEFERRED
CREDITS $ 5,603,899 $ 5,684,381
STOCKHOLDER'S EQUITY
Common Stock- no par value,
Authorized 50,000,000 shares,
Issued, Outstanding 2,322,466
shares in 1994 & 1993,
2,316,921 shares in 1992 -
Note 12 $ 5,963,039 $ 5,963,039
Additional Paid in Capital 42,201 42,201
Retained Earnings 1,998,099 1,575,375
--------- ---------
Total 8,003,339 7,580,615
Minority Interest in
Consolidated Sub. 737,115 650,518
--------- ---------
TOTAL STOCKHOLDER'S EQUITY $ 8,740,454 $ 8,231,133
--------- ---------
TOTAL LIABILITIES
AND STOCKHOLDER'S EQUITY $14,344,353 $13,915,514
========== ==========
The accompanying notes are an integral part of these
financial statements.
26
SOUTHERN SCOTTISH INNS, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
INCOME
Franchising Revenues $2,656,368 $2,431,452 $2,253,365
Financing Revenue 714,676 787,046 599,003
Sale of Furniture 50,458 74,653 0
Other Income 1,295,042 827,159 1,087,195
Interest Income 34,090 30,995 43,375
Gain on Sale of Assets 235,922 0 0
--------- -------- ---------
TOTAL INCOME 4,986,556 4,151,305 3,982,938
COST & EXPENSES
Operating Exp.-Franchise Div. 2,568,543 2,240,785 2,027,851
Operating Exp.-Corp, & Fin. 1,040,006 726,955 1,070,442
Cost of Sales -Furniture Sales 59,899 0 0
Interest Expense 284,003 447,840 326,212
Deprec. & Amortization 182,484 175,628 182,545
--------- --------- ---------
TOTAL EXPENSES 4,134,935 3,591,208 3,607,050
EARNINGS FROM CONTINUING
OPERATIONS BEFORE TAXES &
EXTRAORDINARY ITEMS 851,621 560,097 375,888
PROVISIONS FOR INCOME TAXES
Note 6 (256,791) (96,506) (75,822)
--------- --------- ---------
NET EARNINGS BEFORE
EXTRAORDINARY ITEMS 594,830 463,591 300,066
EXTRAORDINARY ITEMS -
UTILIZATION OF TAX BENEFITS -
NOTE 6 0 0 75,822
WRITE-OFF OF SIGNS - RED CARPET (35,263) 0 0
WRITE-OFF OF CONDEMNED BUILDING (50,246) (148,904) 0
-------- --------- ---------
NET EARNINGS 509,321 314,687 375,888
MINORITY INTEREST IN INCOME
OF CONSOLIDATED SUBSIDIARIES (86,597) (42,703) (15,841)
-------- -------- --------
NET INCOME $ 422,724 $ 271,984 $ 360,047
======== ========= =========
EARNINGS PER SHARE - Note 1 .18 .12 .16
The accompanying notes are an integral part of these financial statements.
27
SOUTHERN SCOTTISH INNS, INC.
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
NET INCOME 422,724 271,984 360,047
RETAINED EARNINGS BEGINNING 1,575,375 1,792,193 1,432,146
ADJUSTMENT TO MINORITY INTEREST - 0 (488,802) 0
NOTE 11 --------- ---------- ---------
RETAINED EARNINGS ENDING $1,998,099 $1,575,375 $1,792,193
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
28
SOUTHERN SCOTTISH INNS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN CASH FLOW
FOR YEAR ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993
1992
CASH FLOWS FROM PROVIDED BY (USED
FOR) OPERATING ACTIVITIES
Net Income $ 422,724 $ 271,984 $ 360,047
Non-Cash Items Included in
Net Income:
Depreciation and Amortization 182,484 175,628 182,545
Uncollectible Amounts 295,504 206,035 0
Gain (Loss) Recognized (235,922) 0 (383,887)
Minority Interest Income 86,597 42,703 15,841
Deferred Income Tax 0 0 (286,699)
Net Changes In Current Assets
and Liabilities:
Accounts Receivable (158,324) (353,887) 213,579
Inventories 62,808 (75,314) 6,508
Interest Receivable (71,243) (76,481) 186,710
Accounts Payable (181,138) (127,381) 71,373
Interest Payable 70,730 (934) (34,095)
Taxes Payable 378,325 (66,156) (56,653)
Other Accrued Liabilities (9,743) 177,955 27,670
Utility Deposits 430 410 (255)
Organization & Deferred Costs 0 265 8,284
Prepaid Expenses (83,798) 9,391 88,025
Loan Receivable-Employee 1,313 (1,313) 0
Deferred Income (11,753) (10,586) 0
Investment Income-Affiliates (202,530) 156,058 0
Write-off Condemned Building 0 (148,904) 0
Discount-Notes Receivable 3,884 3,471 0
--------- ---------- ---------
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES 550,348 182,944 398,993
========== ========== =========
CASH FLOWS PROVIDED BY (USED FOR)
INVESTING ACTIVITIES
Acquisition of Fixed Assets (349,199) (85,957) (605,060)
Disposal of Fixed Assets 864 27,429 1,245,335
Purchase/Sale of Investments 0 0 205,033
NET CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES (348,335) (58,528) 845,308
The accompanying notes are an integral part of these financial statements.
29
SOUTHERN SCOTTISH INNS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN CASH FLOW (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
CASH FLOWS PROVIDED BY (USED
FOR) FINANCING ACTIVITIES
Payments on Mortgages and
Notes Receivable-Incurred $ (76,262) $ (230,103) $(1,616,889)
Collections on Mortgages and
Notes Receivable 228,660 401,123 334,008
Proceeds from Issuance on
Mortgages and Notes Payable 461,600 300,605 909,205
Principal Payments on Mortgages
and Notes Payable (876,462) (557,046) (976,935)
Principal Payments on Capital
Lease Obligations (4,401) (2,924) 0
NET CASH PROVIDED BY (USED
FOR) FINANCING ACTIVITIES (266,865) (88,345) (1,350,611)
----------- ---------- ---------
Increase (Decrease) in Cash (64,852) 36,071 (106,310)
=========== ========== =========
Cash - Beginning 148,207 112,136 218,446
=========== ========== =========
Cash - Ending $ 83,355 $ 148,207 $ 112,136
=========== ========== =========
The accompanying notes are an integral part of these financial statements.
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A.-1 BUSINESS COMBINATION
During 1988 the Company acquired a majority interest in Red Carpet
Inns Inc., by issuance and exchange of the Company's stock for some
Red Carpet Inns, Inc. stock and by purchase of some. The acquisition
has been accounted for on a "business combination at predecessor cost"
method (pooling of interest) and the financial statements of the
Company have been retroactively restated to reflect this business
combination.
A.-2 PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries, after elimination of all significant
intercompany balances and transactions. The Company owns a minority
interest in two partnerships which are accounted for by the equity
method.
A.-3 ACCOUNTING POLICY - STATEMENT OF CASH FLOWS
The Company considers all highly liquid debt instruments with a
maturity of three months or less to be cash equivalents.
During 1994, the Company had the following non-cash transactions:
1. The Company exchanged land for an installment note receivable
of $13,000.
2. The Company purchased a building and land by financing
$250,000 of the purchase price with a mortgage note.
In 1994, the Company paid $985 in income taxes and approximately
$236,940 in interest.
In 1993, the Company paid approximately $361,361 in interest.
B. INVENTORIES
Inventories are stated at cost determined on a first-in, first-out
basis.
C. PROPERTIES AND DEPRECIATION
Property and Equipment are recorded at cost. Depreciation is provided
on the straight-line method over the estimated useful lives of the
respective assets. Maintenance and repairs are charged to expense as
incurred; major renewals and betterments are capitalized. When items
of property or equipment are sold or retired, the related cost and
accumulated depreciation are removed from the accounts and any gain or
loss is recognized in accordance with generally accepted accounting
principles.
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 1 - (continued)
D. ACCOUNTS, MORTGAGES AND NOTES RECEIVABLE
The Company has provided an allowance for uncollectible trade accounts
receivable based on a percentage of the outstanding accounts. During
the year all bad debt write-offs were made to the allowance account.
No reserve for uncollectible Mortgages and Notes Receivable is
maintained. When and if a Note Receivable not secured by real estate
becomes questionable, it is written down to its net realizable value.
When a Mortgage or Note Receivable secured by real estate becomes
questionable, it is written down to the adjusted basis of the property
securing it.
E. FRANCHISE FEES
Franchise fee revenues are recognized after the Company has performed
all material services and conditions relating to the sale.
F. REAL ESTATE SALES
Gains on real estate transactions on which substantial down payments
are not received are deferred and recognized as income only as the
principle amount of the obligation is received. This deferred income
is shown on the balance sheet as a deferred credit.
G. DEFERRED DEBT ISSUE COSTS
Deferred debt costs (primarily commitment fees) are being amortized
over the original term of the long-term debt to which they relate.
H. ORGANIZATIONAL COSTS
Organization costs are being amortized on a straight-line basis over a
five year period.
I. PER SHARE DATA
Earnings per share of common stock is based on the weighted average
number of shares which were outstanding during the year.
J. INVESTMENT TAX CREDIT
Investment tax credits are accounted for as a reduction of the tax
liability in the year the property is placed in service using the flow
through method.
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
NOTE 2 - PROPERTY AND EQUIPMENT
Major classifications of property and equipment and their respective
depreciable lives are summarized below:
Depreciable Lives
-----------------
Land Improvements 10-37 years
Buildings 30 1/2 years
Furniture, Fixtures & Equipment 3-7 years
Leasehold Improvements Term of lease
Depreciation and amortization expense was $182,484 in 1994, $175,628
in 1993 and $182,545 in 1992.
NOTE 3 - MORTGAGES AND NOTES RECEIVABLE
The details of the mortgages and notes receivable are as follows:
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note receivable due from
Corporation, secured by
Deed of Trust on property
in Natchez, MS, interest
@ 10.50% for 25 years, due
in equal monthly
installments of $9,802.00 25,288 865,507 22,778
890,795
Note receivable due from
Individual, secured by
Mortgage on property in
Marrero, LA, interest @
10.75% for 25 years, due
in equal monthly
installments of $4,945.00 7,399 479,126 6,648
486,525
Note receivable due from
Corporation, secured by
Mortgage on property in
Gretna, LA, interest
@ 12.00% for 30 years,
due in equal monthly
installments of $3,240.00 16,572 263,092 14,707
279,665
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 3 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note receivable due from
Individual, secured by
Mortgage with Power of Sale
on property in Bald Knob,
AR, interest adjusted
annually based on Federal
Discount Rate plus 5.00%
with floor of 8.00% and
ceiling of 13.00%, payable
in 288 monthly payments
based on interest rate 4,423 259,298 4,325
264,050
Note receivable due from
Corporation, secured by
Purchase Money Wrap-Around
Mortgage Deed on property
located in Jacksonville,
FL (Arlington Road),
interest @ 12.50% for 25
years, due in equal monthly
installments of $11,735.00 15,580 993,291 13,758
999,371
Note receivable due from
Corporation, secured by
Purchase Money Wrap-Around
Mortgage Deed on property
located in Jacksonville,
FL (Lane Avenue), interest
@ 12.00% for 19 years, due
in equal monthly install-
ments of $16,516.00 79,066 1,394,924 24,514
1,449,476
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 3 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note receivable due from
Individual, secured by
Mortgage on property in
Morgan City, LA, interest
for the first 30 months
@ 10.50%, then interest
to increase to 11.25% for
the remaining 270 months
for a total of 25 years.
Payments are $2,785.00
for 30 months, then
$2,937.00 for the
remaining 270 months 3,280 282,286 2,990
285,567
Note receivable due from
Corporation, secured by
Mortgage on property in
Lafayette, LA, interest for
the first 24 months @ 10.00%,
then interest increases to
11.00% for the next 48 months
and increases again to 12.00%
for the remaining 168 months
for a total of 20 years.
Installments are $2,992.00
for 24 months, then $3,187.00
for the next 48 months and
finally $3,357.00 for the
remaining 168 months. 6,140 288,436 5,611
294,576
Note receivable due from
Corporation, secured by
Deed of Trust on property
in McComb, MS interest
@ 10.75% for 20 years,
due in equal monthly
installments of $3,333.00 12,163 311,197 5,986
317,374
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 3 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note receivable due from
Corporation, secured by
Deed of Trust on property
in Hattiesburg, MS, interest
@ 10.00% for 20 years, due
in equal monthly
installments of $4,246.00 9,185 412,627 8,315
421,812
Note receivable due from
Partnership, secured by
Deed of Trust and assignment
of Lease on Property located
in Gulfport, MS, interest
@ 10.00% for 20 years, due
in equal monthly install-
ments of $4,246.00 5,879 265,901 4,235
270,673
Note receivable due from
Individual, secured by 1984
Lincoln Automobile, interest
@ 15.00% for 30 months, due
in equal monthly installments
of $241.00 0 0 706
680
Note receivable due from
Individual, unsecured,
interest @ 12.950%, due in
equally monthly installments
of $448.34 4,658 5,783 0
0
Note receivable due from
Individual, interest @
13.00%, due in equally monthly
installments of $166.40 1,822 1,421 0
0
Note receivable due from
Partnership, unsecured,
interest @ 12.00%, payable
on demand 3,657 0 3,657
0
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 3 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note receivable due from
Individual, unsecured,
interest @ 10.00%, payable
on demand 71,193 0 73,693
0
Note receivable due from
Corporation, unsecured,
interest @ 12.00% for 54
months, due in equal monthly
installments of $1,457.14 0 0 35,220
0
Note receivable due from
Individual, interest @
15.00%, due in equal monthly
installments of $250.00 2,115 0 0
0
Note receivable due from
Individual, unsecured,
interest @ 8.00% 0 0 14,474
0
Note receivable due from
Individual, unsecured,
interest @ 8.00% 0 0 14,474
0
Note receivable due from
Individual, unsecured,
interest @ 10.00% 38,574 0 38,574
0
Note receivable due from
Individual, unsecured,
interest @ 10.00% 0 0 5,047
0
Note receivable due from
Individual, interest @
10.00%, due in equal monthly
installments of $200.00 1,681 11,228 0
0
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 3 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note receivable from
Partnership, unsecured,
interest @ 15.00%, payments
due in equal installments
(monthly installments
suspended until 1992) 0 0 12,651
0
Note receivable from
Corporation, unsecured,
interest @ 12.00%, payment
due in equal monthly
installments of $354.40
(monthly installments
suspended) 0 4,738 0
4,738
Note receivable from
Partnership, unsecured,
interest @ 12.00% 0 0 16,183
30,804
Note receivable from
Partnership, unsecured,
interest @ 15.00% 0 0 5,462
14,705
Note receivable from
Partnership, unsecured,
interest @ 10.04% 0 0 7,773
5,382
Note receivable from
Partnership, unsecured,
payable on demand,
interest @ 15.00% 0 123,783 0 109,719
Note receivable from
Partnership, unsecured,
interest @ 15.00%, payment
due in equal monthly
installments (monthly
installments suspended) 0 0 9,753 20,132
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 3 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note receivable due from
Partnership, unsecured,
interest @ 14.00%, payment
due in equal monthly
installments of $465.80
(monthly installments
suspended) 0 0 7,258
17,233
Note receivable from
Corporation,
interest @ 12.00% 0 63,607 0
63,607
Note receivable from
Individual, unsecured,
payable on demand,
interest @ 12.00% 0 20,821 0
21,143
Note receivable from
Individual, unsecured,
payable on demand,
interest @ 12.00% 0 4,143 0
4,276
Note receivable from
Corporation, unsecured,
payable on demand,
interest @ 12.00% 0 74,000 0
63,000
Note receivable from
Corporation, unsecured,
payable on demand,
interest @ 12.00% 0 73,660 0
73,660
--------- --------- --------
- ---------
TOTAL $ 308,675 $6,198,869 $ 358,792
$6,388,963
========= ========= ========
=========
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 4 - MORTGAGES AND NOTES PAYABLE
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note payable to Real
Estate Co. #1, unsecured,
interest @ 12.00% 25,093 0 25,093
0
Note payable to Real
Estate Co. #2, unsecured,
interest @ 10.00%, payable in
equal monthly installments
of $500.00 per month for
73 months 5,091 6,130 4,188
11,633
Mortgage payable to Bank,
secured by Motel in
Vicksburg, MS, interest @
9.50%, payable in equal
monthly installments of
$5,179.40 per month for
300 months 56,711 26,115 62,153
72,265
Mortgage payable to Bank,
secured by Motel in
Vicksburg, MS, interest @
9.50%, payable in equal
monthly installments of
$535.50 per month for
82 months 5,869 2,680 6,430
7,458
Mortgage payable to Bank,
secured by Motel in
Hattiesburg, MS, floating
interest rate, payable @
$5,000.00 per month until
January 1993 then @ $8,000.00
per month 85,586 58,817 76,682
153,390
Mortgage Payable to Bank,
secured by undeveloped
land in Ocean Springs,
MS, interest @ 10.00%,
payable in equal monthly
installments per month
of $916.78 for 240 months 4,363 63,983 3,950
68,347
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 4 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Mortgage payable to Bank,
secured by Motel in New
Iberia, LA, interest @
8.00% until 3/31/93,
then variable, payable
in equal installments
of $3,488.43 adjusted
annually 22,265 262,182 15,462
289,858
Mortgage payable to Bank,
secured by the Pledge of
$475,000.00 of the Note
Receivable on the Motel
in Natchez, MS, interest
@ 9.50% payable in
equal installments of
$6,409.41 for 120 months.
In exchange for this note
and pledge, the bank
assigned to the note maker
the notes and mortgages
receivable which are held
on the Huntsville, AL motel 43,869 288,489 35,592
340,713
Mortgage payable to Bank,
secured by Motel in Houma,
LA, interest @ 9.00% until
9/24/95, then @ prime +1/4%
thru 9/24/98. Payments are
for 192 months, currently
$6,828.37 per month 8,908 558,344 81,940
511,734
Mortgage payable to Bank,
secured by Motel in Morgan
City, LA interest @ 9.00%,
until 12/19/95, then @
prime + 1% thru 12/19/98.
Payments are for 192 months,
currently $1,560.91 per
month 111,494 0 6,821
129,718
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 4 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Mortgage payable to
Individual, secured by
Motel in Marietta, GA,
interest @ 12.00%,
payable in equal monthly
installments of $2,330.37
per month for 24 months 25,596 5,208 7,563
0
Mortgage payable to
Individual, secured by
Office Building in
Gulfport, MS, interest
@ 9.00%, payable in
equal monthly installments
of $620.81 per month
for 94 months 5,034 24,077 4,602
29,111
Mortgage payable to SBA,
secured by Office Building
in Gulfport, MS. interest
@ 10.00%, payable in equal
monthly installments of
$350.00 per month for
99 months 2,367 17,046 2,106
19,450
Mortgage payable to
Corporation, secured by
Motel in Lafayette, LA,
interest @ 9.00%, payable
in equal monthly
installments of $2,510.00
per month for 181 months 10,621 210,825 9,710
220,670
Mortgage payable to a
Corporation, secured by a
Motel in Morgan City, LA,
interest @ 10.50%,
payable in equal monthly
installments of $650.56
per month for 30 months 0 0 1,284
0
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 4 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note payable to Individual,
unsecured, interest @
13.00%, payable in full
September 1992 0 0 3,011
0
Note payable to Bank,
secured, by assignment of
Notes Receivable on a Gretna,
LA, and a Marrero, LA
motel, interest @ Chase
Prime Rate plus 2%, payable
in 5 installments of $3,004.54,
7 installments of $4,430.29, 6
installments of $5,684.99, and
25 installments of $7,684.99 0 0 85,316
3,637
Note payable to Individual,
unsecured, interest @
15.00%, payable on demand 0 9,792 0
9,792
Note payable to Individual,
unsecured, interest @
8.00%, payable in equal
monthly installments of
$452.37 per month 3,202 26,080 0
0
Note payable to Corporation,
unsecured, interest
@ 15.00%, payable on
demand 0 23,593 0
23,593
Note payable to Individual,
secured by Lease, interest
@ 13.00%, payable in
equal monthly installments
of $974.00 per month for
91 months 27,085 30,096 26,715
34,727
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 4 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note payable to Individual,
unsecured, interest @
10.00%, payable in
equal monthly installments
of $1,931.12 per month for
36 months 0 0 9,419
0
Note payable to Individual,
unsecured, interest @
8.50%, payable in equal
monthly installments of
$2,461.85 per month 8,746 239,867 0
0
Note payable to Individual,
unsecured, interest @
9.00%, payable in 12 monthly
installments of $408.44 for
12 months, 1 installment of
$15,000.00, 7 installments
of $5,132.07, and 1 final
installment of $4,871.38 39,546 14,913 39,546
14,913
Note payable to Individual,
unsecured, without interest,
payable in equal monthly
installments of $500.00 per
month for 26 months 11,562 0 11,562
0
Note payable Phillip
North, unsecured
interest @ 10.00% 578 0 578
0
Note payable North &
Guidon, unsecured,
interest @ 10.00%, payable
in monthly installments of
$5,000 per month until paid 27,003 0 13,780
0
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 4 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note payable Joan Maxwell
unsecured, interest @ 10.00%,
payable in equal monthly
installments of $160.54
per month 1,009 8,617 914
9,626
Note payable J. Puckett,
unsecured, interest @
10.00%, payable on demand 9,449 0 40,943
0
Note payable to Bank,
interest @ 15.00% 30,582 0 66,582
0
Note payable to Houma
Atrium, interest @ 9.00% 2,589 0 2,589
0
Note payable to a Bank,
secured by Building,
interest @ Prime + 1%,
payable in 180 monthly
installments 22,042 201,974 22,042
296,037
Note payable to Bank,
secured by Building,
interest @ Prime + 1%,
payable in 180 monthly
installments 0 0 4,723
55,257
Note payable to Bank,
secured by Auto, interest
@ 11.25%, payable in
equal monthly installments
of $231.09 per month for
36 months 0 0 1,298
0
Note payable to Corporation,
secured by Auto, interest
@ 7.50%, payable in equal
monthly installments of
$212.35 per month for
36 months 2,226 0 2,226
2,470
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 4 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note payable to Bank
secured by Building,
interest @ 10.50%,
payable in equal monthly
installments of $1,389.36 16,668 29,165 0
0
Note payable to Corporation,
unsecured, interest @ 8.00%
payable in equal monthly
installments of $4,410.03 38,425 0 0
0
Note payable to Corporation,
unsecured, interest @ 10.00% 38,500 0 0
0
Note payable to Corporation,
secured by Auto, interest
@ 7.50%, payable in equal
monthly installments of
$212.35 per month for
36 months 2,226 0 2,226
2,470
Note payable to Corporation,
secured by Auto, interest
@ 7.50%, payable in equal
monthly installments of
$212.35 per month for
36 months 0 0 2,226
2,470
Note payable to Corporation,
secured by Auto, interest
@ 8.00%, payable in equal
monthly installments of
$318.61 per month for
24 months 0 0 3,638
292
Note payable to Corporation,
secured by Auto, interest
@ 8.00%, payable in equal
monthly installments of
$434.30 for 36 months 4,939 0 4,939
4,982
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 4 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note payable to Corporation,
secured by Auto, interest
@ 8.00%, payable in equal
monthly installments of
$430.91 for 36 months 4,901 0 4,901
4,944
Note payable to Corporation,
secured by Auto, interest
@ 10.90%, payable in equal
monthly installments of
$299.42 for 36 months 1,687 0 2,912
1,991
Note payable to Corporation,
secured by 1992 Mercury,
interest @ 8.5%, payable
in equal monthly installments
of $235.49 for 54 months 2,700 5,654 1,153
9,394
Note payable to Corporation,
secured by 1993 Chevrolet,
interest @ 9.75%, payable
in equal monthly installments
of $382.33 for 36 months 4,354 2,352 2,591
7,849
Note payable to Corporation,
secured by 1992 Grand Prix,
interest @ 8.95%, payable
of $287.80 for 36 months 3,292 2,770 3,292
5,765
Note payable to Corporation,
secured by 1992 Lincoln,
interest @ 9.00%, payable
of $598.91 for 36 months 6,838 6,235 6,838
11,919
Note payable to Individual,
unsecured, without interest,
payable on demand 103,410 0 188,065
0
Note payable to Corporation
interest @ 12.00% 14,800 0 14,800
0
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 4 - (Continued)
1994 1993
Due Beyond Due
Beyond
Current One Year Current One
Year
DESCRIPTIONS
Note payable to Individual
secured by Corporate stock,
interest @ 10.00%, payable
on demand 12,259 0 28,229
0
-------- -------- --------
- --------
TOTAL $ 853,485 $2,125,004 $ 940,630
$2,356,475
========= ========= =========
=========
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
The maturity of principle obligations on the long-term notes and
mortgages payable is as follows:
1996 - 317,505
1997 - 190,835
1998 - 173,862
1999 - 177,039
2000 and later - 1,265,764
NOTE 5 - RELATED RECEIVABLES CONTINGENCY
Notes and accounts receivable from a partnership, the principle
partners of which are also directors of the Company, in the amount of
$874,628, were exchanged in 1991 for a 25% interest in the
partnership.
NOTE 6 - INCOME TAXES
The Company and its eligible subsidiaries file a consolidated federal
income tax return. The following is an analysis of the income tax
liabilities for the years ended December 31:
1994 1993 1992
Tax at Statutory Rate $ 260,483 $ 105,978 $ 87,572
LESS: Tax Reduction due to
Surtax Benefit 42,092 28,393 11,750
ADD: Income Tax due to
State 38,400 18,921 0
--------- --------- ---------
TAX DUE $ 256,791 $ 96,506 $ 75,822
========= ========= =========
The tax due is from consolidated entities that do not file a
consolidated tax return with the parent company and is a result of the
taxable income of those entities.
Certain sales of investment assets, the gains on which have been
recognized in the financial statements, are, for tax purposes, being
recognized on the installment method. The taxes attributed to these
gains have been provided for in the financial statements.
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
NOTE 6 - (Continued)
The utilization of tax benefits is the result of net operating loss
carry forward of the Company and one of the consolidated subsidiaries
that is not part of the Company's consolidated tax return. That
Company has a statutory tax on financial statement income before
application of net operating loss carry forward.
NOTE 7 - ANALYSIS OF STOCKHOLDERS' EQUITY
Common Stock Add'l Pd Retained
No. Shares Amount In Capital Earnings
Balance 12-31-92 2,316,921 5,963,039 42,201 1,792,193
1993 Income 271,984
Shares Issued 5,545
Adjustment to
Minority Interest _________ _________ _________ (488,802)
Balance 12-31-93 2,322,466 5,963,039 42,201 1,575,375
1994 Income 422,724
Balance 12-31-94 2,322,466 5,963,039 42,201 1,998,099
========= ========= ========= =========
A Director receives 200 shares for each meeting attended. A non-
director employee receives 50 shares for each meeting attended when
invited to attend. Outstanding stock has been restated for 1987
shares issued and outstanding for the acquisition of Red Carpet Inns,
Inc. shares in 1988.
NOTE 8 - RELATED PARTY TRANSACTIONS
From time to time on an as needed basis, the Company has made open
advances to Pan America Hospitality, a partnership comprised of
certain officers and corporate shareholders of the Company. As of
December 31, 1994, these advances totaled $123,783.00.
The Company has advanced monies to a related partnership through the
years. See Note 5, Contingent Receivables for details of the
transactions.
NOTE 9 - CONDEMNED BUILDING WRITE OFF
In 1993 an existing building was condemned and written off. The loss
shown on the books was $148,904.00. The fixed asset and accumulated
depreciation for this property was removed from the corporate books,
except for an allowance of $50,000 for salvage of scrap metal. This
amount was written off in 1994.
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
NOTE 10 - PENDING LITIGATION
At present time the company has a pending litigation against them in
the amount of $1,500,000.00. The resolution of this lawsuit is
unknown at this time.
NOTE 11 - CHANGE IN METHODOLOGY FOR CALCULATING MINORITY INTEREST IN
SUBSIDIARIES
A change in the calculation for determining minority interest was made
in 1993. Minority interest was increased based on requirements stated
in Financial Accounting Standard No. 94.
NOTE 12 - STOCK ISSUANCE TO OFFICERS
During 1993 Common Stock was issued to Corporate officers. These
shares were exchanged for Red Carpet Inns, Inc. common stock based on
like kind market rules and totaled 3,334 shares.