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, 1999 and June 30, 1998,
and the related consolidated statements of income, stockholders' equity
and cash flows for the three years ended June 30, 1999. 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, 1999 and June 30, 1998, and the consolidated results of its
operations and cash flows for the three years ended June 30, 1999
in conformity with generally accepted accounting principles.
(Signed)
SOMERVILLE & COMPANY, P.L.L.C.
September 2, 1999
Huntington, West Virginia
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
June 30, 1999 and 1998
ASSETS
1999 1998
Current Assets:
Cash $ 322,663. $ 90,015.
Accounts receivable (less
allowance for doubtful
accounts of $3,000.
in 1999 and 1998) 86,647. 23,726.
Notes Receivable 82,271. -
Inventories 11,197. 7,362.
Prepaid expenses 65,309. 51,550.
Total current assets $ 569,087. $ 172,653.
Property, Plant and Equipment:
Land 1,480,612. 1,554,112.
Buildings and improvements 10,768,710. 4,989,345.
Furniture and equipment 2,512,955. 2,250,473.
Construction in Progress - 5,580,717.
14,762,277. 14,374,647.
Less accumulated depreciation
and amortization 3,986,965. 3,797,872.
Property, plant and
equipment - net 10,775,312. 10,576,775.
Other Assets:
Deposits and other 117,896. 129,287.
$ 11,462,295. $ 10,878,715.
The accompanying notes are an integral part of these financial statements.
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
June 30, 1999 and 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
Current Liabilities:
Accounts payable $ 591,840. $ 517,587.
Accrued liabilities 179,605. 145,809.
Taxes other than
Federal income tax 312,513. 200,399.
Current portion of long-term debt 1,265,006. 996,925.
Total current liabilities $ 2,348,964. $ 1,860,720.
Long-Term Debt:
Notes payable 6,913,472. 6,931,165.
Total liabilities 9,262,436. 8,791,885.
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 375,787. 262,758.
Total stockholders' equity 2,199,859. 2,086,830.
Total Liabilities and Equity: $ 11,462,295. $ 10,878,715.
The accompanying notes are an integral part of these financial statements.
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
For the years ended June 30, 1999, 1998 and 1997
1999 1998 1997
Revenues:
Rooms $ 2,670,754. $ 850,775. $ 1,198,307.
Food and beverage 380,236. 316,759. 352,279.
Telephone 46,040. 32,173. 36,005.
Rent 235,270. 256,371. 235,986.
Other 25,051. 23,843. 44,436.
Total operating revenues $ 3,357,351. $ 1,479,921. $ 1,867,013.
Costs and Expenses:
Operating departments:
Cost of sales 220,034. 147,608. 182,211.
Salaries 841,724. 441,308. 475,893.
Other 227,548. 64,509. 109,408.
General and administrative 233,684. 125,112. 131,750.
Advertising 181,349. 36,779. 80,171.
Utilities 205,282. 115,676. 118,048.
Repairs and maintenance 73,821. 44,495. 64,610.
Taxes and licenses 367,595. 205,010. 196,937.
Insurance and other 63,321. 40,252. 36,145.
Depreciation and amortization 396,964. 171,905. 192,785.
Total costs and expenses 2,811,322. 1,392,654. 1,587,958.
Operating income 546,029. 87,267. 279,055.
Other Income (Expense):
Gain on sale of assets 244,000. - -
Interest Expense ( 677,000.) ( 212,910.) ( 204,798.)
Total other income (expenses) ( 433,000.) ( 212,910.) ( 204,798.)
Income (Loss) before Federal
Income Taxes 113,029. ( 125,643.) 74,257.
Federal Income Taxes:
Current - - -
Net Income (Loss) $ 113,029. $( 125,643.) $ 74,257.
Net Income (Loss) per Share $ .07 $( .08) $ .05
The accompanying notes are an integral part of these financial statements.
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the years ended June 30, 1999, 1998 and 1997
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit) Total
Balance -
June 30, 1997 $ 791,782. $ 1,032,290. $ 388,401. $ 2,212,473.
Net Loss - - ( 125,643.) ( 125,643.)
Balance -
June 30, 1998 $ 791,782. $ 1,032,290. $ 262,758. $ 2,086,830.
Net Income - - 113,029. 113,029.
Balance -
June 30, 1999 $ 791,782. $ 1,032,290. $ 375,787. $ 2,199,859.
The accompanying notes are an integral part of these financial statements.
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended June 30, 1999, 1998 and 1997
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1999 1998 1997
Cash Flows From Operating Activities:
Net Income (Loss) $ 113,029. $( 125,643.) $ 74,257.
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 396,964. 171,905. 192,785.
Debt forgiveness ( 9,000.) ( 9,000.) ( 9,000.)
Gain on sale of assets ( 244,000.) - -
(Increase) decrease in other assets 11,391. ( 1,075.) ( 58,406.)
(Increase) decrease in current
assets:
Accounts receivable ( 62,921.) 1,477. 29,453.
Inventories ( 3,835.) ( 1,366.) 3,230.
Prepaid expenses ( 13,759.) ( 111.) ( 23,041.)
Increase (decrease) in current
liabilities:
Accounts payable 74,253. (117,724.) 564,128.
Accrued liabilities 33,796. 42,449. 9,319.
Taxes other than Federal
income taxes 112,114. 8,116. 84,542.
Total Adjustments 295,003. 94,671. 793,010.
Net Cash Provided (Used In)
Operating Activities 408,032. ( 30,972.) 867,267.
UPTOWNER INNS,INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended June 30, 1999, 1998 and 1997
1999 1998 1997
Cash Flows From Investing Activities:
Issuance of notes receivable $( 84,500.) $ - $ -
Payments on notes receivable 1,229. - -
Proceeds from sale of fixed assets 330,363. - -
Capital expenditures ( 681,865.) (4,669,146.) (1,887,017.)
Net cash provided by (used in)
investing activities ( 434,773.) (4,669,146.) (1,887,017.)
Cash Flows From Financing Activities:
Issuance of long-term debt 537,546. 4,617,922. 983,175.
Principal payments of long-term debt ( 278,157.) ( 73,216.) ( 181,996.)
Net cash provided by
financing activities 259,389. 4,544,706. 801,179.
Net Increase (Decrease) in Cash and
Cash Equivalents 232,648. ( 155,412.) ( 218,571.)
Cash and Cash Equivalents at
Beginning of Year 90,015. 245,427. 463,998.
Cash and Cash Equivalents at
End of Year $ 322,663. $ 90,015. $ 245,427.
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Year for:
Interest $ 658,482. $ 177,283. $ 196,614.
The accompanying notes are an integral part of these financial statements.
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 two (2) motor inns in Huntington, West
Virginia that consist of dining, banquet and lounge facilities.
In addition, the Company operates apartment buildings and rental
properties located in Huntington, West Virginia.
The Corporation opened an additional facility in Huntington
known as Holiday Inn Hotel & Suites on August 28, 1998.
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 3 - 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.
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 1999, 1998, and 1997.
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, 1999 and 1998 were
$66,944. and $283,165., respectively.
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Long-term debt:
The long-term indebtedness of the Company at June 30, 1999 and
1998 were as follows:
1999 1998
10% mortgage note due an individual
secured by a deed of trust,
payable at $733. per month,
including interest, until
June 2002 $ 23,370. $ 29,497.
2% note due City of
Huntington, secured by a
second deed of trust,
payable at $2,024. per
month, including interest,
until January 2008 191,369. 211,605.
10% note due a financial institution,
secured by a deed of trust, payable at
$22,568. per month including interest,
until August 2004 1,330,369. 1,330,369.
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 9,000. 18,000.
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 483,790. 540,000.
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Long-term debt (Cont'd):
1999 1998
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 3,650,198. 3,700,000.
Prime plus 1% note due a financial
institution, secured by a credit line
deed of trust, interest payable monthly,
principal payable upon demand 742,693. 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 42,222. 52,466.
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 812,311. 890,833.
8.7% installment note due to a financial
institution, secured by a vehicle,
payable at $634. per month including
interest, until July 2004 30,640. -
8.75% installment note due a financial
institution, secured by a vehicle,
at $281. per month including interest,
until April 2003 14,573. -
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Long-term debt (Cont'd):
1999 1998
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 439,086. 451,411.
Prime plus 1% installment note
due a financial institution,
secured by a deed of trust,
payable at $3,159. per month,
including interest, until
April 2004. An extension
has been requested. 167,103. 186,702.
25.6% installment note, due a leasing
company, secured by equipment,
payable at $179. per month including
interest, until September 2003 5,532. -
13% installment note, due a leasing
company, secured by equipment,
payable at $260. per month including
interest, until February 2002 7,002. -
15.8% installment note, due a leasing
company, secured by equipment, payable
at $63. per month including interest,
until July 2003 2,273. -
18.2% installment note, due a leasing
company, secured by equipment, payable
at $1,386. per month including interest,
until May 2003 46,348. -
14.1% installment note, due a leasing
company, secured by equipment, payable
at $997. per month including interest,
until May 2003 35,852. -
22.7% installment note, due a leasing
company, secured by equipment, payable
at $589. per month including interest,
until June 2003 18,494. -
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Long-term debt (Cont'd):
1999 1998
15.1% installment note, due a leasing
company, secured by equipment, payable
at $152. per month including interest,
until July 2003 5,522. -
18.9% installment note, due a leasing
company, secured by equipment, payable
at $1,215. per month including interest,
until June 2003 40,686. -
18.9% installment note, due a leasing
company, secured by equipment, payable
at $229. per month including interest,
until June 2003 7,681. -
8,106,114. 7,855,782.
Less current portion 1,217,196. 949,115.
$ 6,888,918. $ 6,906,667.
Maturities of long-term debt, including debt to stockholders,
range from 1999 to 2018 and principal payment requirements during the
next five years ending June 30, are as follows:
2000 $ 1,265,006.
2001 427,210.
2002 572,158.
2003 615,004.
2004 612,259.
Thereafter 4,686,841.
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 1999 and 1998 were:
1999 1998
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, 1999 and 1998:
1999 1998 1997
Purchases from related companies $ - $ 11,268. $ 20,618.
1999 1998
9.25% note due a company added to
their existing note, payable upon pay
down to $25,365. in October 2004 $ 24,554. $ 24,498.
Less current portion - -
$ 24,554. $ 24,498.
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, 1999, 1998
and 1997 is as follows:
1999 1998 1997
% of % of % of
Pre- Pre- Pre-
Tax Tax Tax
Amount Income Amount Income Amount Income
Income tax
provision at
statutory rate $38,430. 34.0% $ - - % $25,247. 34.0%
Increases (decreases)
Gain on disposal ( 3,184.) ( 2.8) - - - -
Dep. difference (35,696.) (31.6) - - (21,549.) (29.0)
Other 450. .4 - - 212. .3
Utilization of
operating loss
carryforward - - - - ( 3,910.) ( 5.3)
Actual provision
and effective
rate $ - - $ - - % $ - - %
4. 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.
June 30, 2013 199,619.
June 30, 2014 56,181.
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Federal income taxes (Cont'd):
Deferred tax assets as of June 30, 1999 and 1998 are as follows:
1999 1998
Deferred tax asset $ 32,190. $ 70,955.
Valuation allowance 32,190. 70,955.
$ - $ -
5. Parent Company information:
Following is the selected information for UpTowner Inns, Inc.,
Parent Company only, as of June 30, 1999, 1998 and 1997 and for the
years then ended:
1999 1998 1997
Operating revenues $ 3,357,351. $ 1,479,921. $ 1,867,013.
Income (loss)
from operations 546,029. 87,267. 279,055.
Net income (loss) 113,029. ( 125,643.) 74,257.
Current assets 569,087. 172,653. 328,065.
Total assets 11,462,295. 10,878,715. 6,535,810.
Current liabilities 2,348,964. 1,860,720. 1,203,436.
Total liabilities 9,262,436. 8,791,885. 4,323,337.
The Company has no restricted net assets.
6. 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.
7. 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. Amounts on deposit in excess of $100,000. for the
fiscal year ended June 30, 1999 totaled $176,658..
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 operations, 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 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
Hungtingon, West Virginia
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
June 30, 1998 and 1997
ASSETS
1998 1997
Current Assets:
Cash $ 90,015. $ 245,427.
Accounts receivable (less allowance
for doubtful accounts of $3,000.
in 1998 and 1997) 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.
The accompanying notes are an integral part of these financial statements.
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
June 30, 1998 and 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
1998 1997
Current Liabilities:
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.
$10,878,715. $ 6,535,810.
The accompanying notes are an integral part of these financial statements.
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
For the years ended June 30, 1998, 1997 and 1996
1998 1997 1996
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 87,267. 279,055. 361,577.
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 per share $( .08 ) $ .05 $ .06
The accompanying notes are an integral part of these financial statements.
UPTOWNER INNS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the years ended June 30, 1998, 1997 and 1996
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit) Totals
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 Loss - - ( 125,643.) ( 125,643.)
Balance -
June 30, 1998 $ 791,782. $ 1,032,290. $ 262,758. $ 2,086,830.
The accompanying notes are an integral part of these financial statements.
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
By Operating Activities ( 30,972.) 867,267. 247,471.
The accompanying notes are an integral part of these financial statements.
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 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.
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.
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 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 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, 1998 was $283,165.
and $19,733., respectively. There was no capitalized interest
for the fiscal year ended June 30, 1996.
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 an individual
institution, secured by a deed of
trust, payable at $733. per month,
including interest, until June 2002 $ 29,497. $ 35,043.
2% note due City of Huntington, secured
by a second deet of trust, payable at
$2,024. per month, including interest,
until January 2008 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 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 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 interestg payable at
$33,901. per month until January 2008 3,700,000. 417,809.
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLDIATED 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 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 $ 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 $ 186,702. $ 202,934.
$ 7,855,782. $ 3,319,208.
Less current portion 949,115. 224,673.
$ 6,906,667. $ 3,094,535.
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:
1999 $ 996,925.
2000 413,764.
2001 445,730.
2002 491,059.
2003 526,276.
Thereafter 5,054,336.
$ 7,928,090.
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, 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.
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.
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:
1998 1997 1996
% 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%
Increases (decreases):
Depreciation
difference - - ( 21,549.) (29.0) ( 19,449.)(20.7)
Other - - 212. .3 519. .5
Alternative minimum tax - - - - 4,377. 4.7
Utilization of operating
loss carryforward - - ( 3,910.) ( 5.3) ( 12,974.)(13.8)
Actual provision and
effective rate $ - -% $ - -% $ 4,377. 4.7%
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Federal income taxes (Cont'd):
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 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.
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. $ 59,907.
Valuation allowance 70,955. 59,907.
$ - $ -
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 for the
years then ended:
1998 1997 1996
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.
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.
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
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
1999 $ 1,515.
2000 -
2001 -
2002 -
2003 -
Total minimum future payments $ 1,515.
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.
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
of the Holiday Inn Hotel & Suites now under 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
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 entered into approximately seven (7)
capital leases for furniture and equipment for Holiday Inn Hotel
& Suites, which begin in July and August 1998.