SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 0-14019
Ridgewood Hotels, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 58-1656330
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2859 Paces Ferry Road, Suite 700
Atlanta, Georgia
30339
- -------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(770) 434-3670
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _____
Common stock, par value $.01 per share - 1,513,480 shares
outstanding at May 31, 1998.
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
MAY 31, 1998 AND AUGUST 31, 1997
--------------------------------
($000'S omitted, except per share data)
---------------------------------------
(Unaudited)
May 31, August 31,
ASSETS 1998 1997
------ ----------- -----------
Real Estate Investments:
Real Estate Properties
Operating Properties, net $ 1,279 $ 1,325
Land Held for Sale 5,808 6,661
------------ ------------
Total real estate investments 7,087 7,986
Allowance for Possible Losses (3,447) (3,544)
------------ ------------
Net real estate investments 3,640 4,442
Investment in Hotel Joint Ventures 1,063 772
Cash and Cash Equivalents 1,674 1,596
Other Assets 1,393 1,456
------------ ------------
$ 7,770 $ 8,266
============ ============
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
MAY 31, 1998 AND AUGUST 31, 1997
--------------------------------
($000's omitted, except per share data)
---------------------------------------
(Unaudited)
May 31, August 31,
LIABILITIES AND SHAREHOLDERS' INVESTMENT 1998 1997
---------------------------------------- ------------ ------------
Accounts Payable $ 69 $ 159
Accrued Salaries, Bonuses and
Other Compensation 900 863
Accrued Property Tax Expense 77 118
Accrued Interest and Other Liabilities 236 284
Term Loans 2,760 2,804
------------ ------------
Total Liabilities 4,042 4,228
------------ ------------
Commitments and Contingencies
Shareholders' Investment
Series A Convertible Cumulative Preferred Stock,
$1 par value, 1,000,000 shares authorized, 450,000
shares issued and outstanding at May 31, 1998
and August 31, 1997, liquidation preference
and callable at $3,600,000. 450 450
Common Stock, $.01 par value, 5,000,000
shares authorized, 1,513,480 and 1,538,480
shares issued and outstanding at May 31,
1998 and August 31, 1997, respectively. 15 15
Note receivable from officer for
purchase of common stock (75) (75)
Paid-in Surplus 15,951 16,333
Accumulated Deficit since December 30, 1985 (12,613) (12,685)
------------ ------------
3,728 4,038
------------ ------------
$ 7,770 $ 8,266
============ ============
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
---------------------------------------
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 1998 AND MAY 31, 1997
-----------------------------------------------------------------
($000's omitted, except per share data)
---------------------------------------
For the Three Months Ended For the Nine Months Ended
----------------------------- -----------------------------
May 31, May 31, May 31, May 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
REVENUES:
Revenues from wholly-owned hotel operations ....... $ 817 $ 874 $ 2,383 $ 2,367
Revenues from hotel management .................... 285 302 761 800
Sales of real estate properties ................... 55 1,496 1,630 3,508
Equity in net income (loss) of joint ventures ..... 93 8 93 (44)
Income from loans and temporary investments ....... 19 8 39 18
Other ............................................. 47 -- 107 398
------------- ------------- ------------- -------------
1,316 2,688 5,013 7,047
------------- ------------- ------------- -------------
COSTS AND EXPENSES:
Expenses of wholly-owned real estate properties ... 607 640 1,799 1,801
Expenses of hotel management ...................... 181 190 544 576
Costs of real estate sold ......................... 55 1,344 909 2,224
Depreciation and amortization ..................... 73 65 168 192
Interest expense .................................. 85 86 253 257
General, administration and other ................. 307 354 995 1,034
Business development .............................. 119 774 273 844
------------- ------------- ------------- -------------
1,427 3,453 4,941 6,928
------------- ------------- ------------- -------------
NET INCOME (LOSS) ..................................... $ (111) $ (765) $ 72 $ 119
============= ============= ============= =============
LOSS PER COMMON SHARE ................................. $ (0.13) $ (0.56) $ (0.13) $ (0.08)
============= ============= ============= =============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE NINE MONTHS ENDED MAY 31, 1998 AND MAY 31, 1997
-------------------------------------------------------
Increase in Cash and Cash Equivalents
-------------------------------------
($000's Omitted)
----------------
1998 1997
------------- -------------
Cash flows from operating activities:
Net income .................................................... $ 72 $ 119
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization ............................. 168 192
Gain from sales of real estate property ................... (721) (1,285)
Increase in other assets .................................. 23 (515)
Decrease in accounts payable and
accrued liabilities ..................................... (142) (63)
------------- -------------
Total adjustments ......................................... (672) (1,671)
------------- -------------
Net cash used by operating activities ..................... (600) (1,552)
Cash flows from investing activities:
Principal payments received on mortgage loans ............... -- 2
Proceeds from sales of real estate .......................... 1,503 3,037
Additions to real estate properties ......................... (83) (58)
Investment in joint venture ................................. (316) 81
------------- -------------
Net cash received from investing activities ............... 1,104 3,062
Cash flows from financing activities:
Repayments of notes payable ................................. (44) (39)
Payment of dividends on preferred stock ..................... (270) (225)
Issuance of common stock upon exercise of stock options ..... -- 375
Repurchase of common stock .................................. (112) --
------------- -------------
Net cash used by financing activities ..................... (426) (111)
------------- -------------
Net increase in cash and cash equivalents ....................... $ 78 $ 1,621
Cash and cash equivalents at beginning of period ................ 1,596 298
------------- -------------
Cash and cash equivalents at end of period ...................... $ 1,674 $ 1,919
============= =============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE NINE MONTHS ENDED MAY 31, 1998 AND MAY 31, 1997
-------------------------------------------------------
Increase in Cash and Cash Equivalents
-------------------------------------
($000's Omitted)
----------------
1998 1997
---------- -------------
Supplemental disclosure of cash flow information
and non-cash activity:
Decrease in allowance for possible losses
due to sale of parcel of land ............................. $ 97,000 $ 1,156,000
During the second quarter of fiscal year 1997, the
Company's President and Chief Financial Officer exercised
their stock options for 450,000 shares of the Company's
common stock. In conjunction with the exercise, promissory
notes and cash were received by the Company and common stock
issued as follows:
Cash received from Company's President ................... $ -- $ 375,000
Promissory note received from Chief Financial Officer .... $ -- $ 75,000
Issuance of 450,000 shares of common stock
at $.01 par value ...................................... $ -- $ 4,500
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1998 AND MAY 31, 1997
(Unaudited)
1. GENERAL:
Ridgewood Hotels, Inc. (the "Company") is primarily
engaged in the business of acquiring, developing, operating and
selling real estate property in the Southeast and "Sunbelt" areas.
Additionally, the Company, through its investment in joint ventures,
is engaged in acquiring and managing hotel properties, as well as
managing other hotels throughout the country. The Company also owns
and operates a hotel in Longwood, Florida. All of the Company's
other properties are land properties held for sale, and no additional
development is currently anticipated for the land. The Company was
incorporated under the laws of the State of Delaware on October 29,
1985. In January 1997, the Company changed its name from Ridgewood
Properties, Inc. to Ridgewood Hotels, Inc. Prior to December 31,
1985, the Company operated under the name CMEI, Inc.
The Company's common stock is currently listed in the
National Association of Securities Dealers (NASDAQ) over-the-counter
bulletin board service. Of the Company's issued and outstanding
shares of common stock, 51% of the common stock is owned by the
Company's President, N. Russell Walden. All of the Company's issued
and outstanding shares of preferred stock are owned by Alarmguard
Holdings, Inc.
The accompanying financial statements of the Company
present the historical cost basis amount of assets, liabilities and
shareholders' investment of the real estate business for the periods
presented. The consolidated financial statements include the
accounts of the Company, its wholly-owned subsidiaries and its joint
venture investments after the elimination of all intercompany
amounts.
2. BASIS OF PRESENTATION:
The accompanying consolidated financial statements have
been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. In the
opinion of management, the consolidated financial statements reflect
all adjustments, consisting of normal recurring adjustments, which
are necessary to present fairly the financial position, results of
operations and changes in cash flow for the interim periods covered
by this report. Although certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations,
management believes that the disclosures are adequate to make the
information presented not misleading. These financial statements
should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's annual report
for the fiscal year ended August 31, 1997. The results of operations
for the nine months ended May 31, 1998 are not necessarily indicative
of the results to be expected for the fiscal year ending August 31,
1998.
The Company has net operating loss carryforwards for both
book and tax purposes which may be used to offset future taxable
income.
For the purpose of the Statement of Cash Flows, cash
includes cash equivalents which are highly liquid investments with
maturity of three months or less.
The Company accounts for its investment in the joint
ventures under the equity method of accounting after the elimination
of all intercompany transactions, including management fees.
Certain prior year amounts have been reclassified to
conform with the current presentation.
3. INCOME TAXES:
The Company's income tax provision for the three and nine
months ended May 31, 1998 and May 31, 1997 is as follows:
For the Three For the Nine
Months Ended Months Ended
------------- ------------
May 31, May 31, May 31, May 31,
1998 1997 1998 1997
-------- -------- -------- --------
Income tax provision -- -- $29,000 --
Utilization of net operating
loss carryforwards -- -- (29,000) --
-------- -------- -------- ---------
Net income tax provision -- -- -- --
======== ======== ======== =========
4. SHAREHOLDERS' INVESTMENT:
Loss Per Common Share --
The loss per common share is calculated based upon the
weighted average number of shares outstanding of approximately
1,514,000 and 1,530,000 for the three and nine months ended May 31,
1998, respectively. The loss per common share is calculated based
upon the weighted average number of shares outstanding of
approximately 1,538,000 and 1,286,000 for the three and nine months
ended May 31, 1997, respectively.
Dividends paid or accrued on preferred stock were $90,000
and $270,000 for the three and nine months ended May 31, 1998,
respectively, and $90,000 and $225,000 for the three and nine months
ended May 31, 1997, respectively. These dividends were deducted from
the net income (and added to the net loss) for purposes of computing
the loss per common share.
The $75,000 promissory note due from the Chief Financial
Officer was extended and is payable in full on January 31, 1999 and
accrues interest at a rate per annum of 8.25%.
Repurchase of Common Stock --
In March 1998 the Vice President of Hotel Operations
exercised his Put Agreement. The Company purchased all 25,000 shares
subject to the Agreement at the purchase price of $4.50 per share and
cancelled the stock.
5. INVESTMENT IN JOINT VENTURE
On December 9, 1997, Houston Hotel, LLC ("Houston Hotel")
was organized as a limited liability corporation under the laws of
the State of Delaware. The purpose which Houston Hotel was organized
is limited solely to owning and managing the Hampton Inn Galleria in
Houston, Texas. The Company contributed approximately $316,000 into
Houston Hotel which represents a 10% interest, and the other 90%
interest is owned by Houston Hotel, Inc. (the "Manager"), a Nevada
corporation. Distributions of distributable cash shall be made as
follows:
- First, 100% to the Manager until it has been distributed
an amount equal to its accrued but unpaid 13% preferred return.
- Second, 100% to the Company until the Company has been
distributed an amount equal to its accrued but unpaid 13% preferred
return.
- Third, 80% to the Manager and 20% to the Company.
Distributable cash is defined as the cash from operations
and capital contributions determined by the Manager to be available
for distribution. Cash from operations is defined as the net cash
realized from the operations of Houston Hotel after payment of all
cash expenditures of Houston Hotel including, but not limited to,
operating expenses, fees, payments of principal and interest on
indebtedness, capital improvements and replacements, and such
reserves and retentions as the Manager reasonably determines to be
necessary.
A Property Management Agreement exists between Houston
Hotel, LLC and the Company as Property Manager ("Property Manager")
for the purpose of managing the hotel. The Property Manager shall be
entitled to the following property management fees:
1) 1.5% of the gross revenues from the hotel property.
2) 1.5% of the gross revenues from the hotel property as
an incentive fee if 85% of the budgeted net operating income is met.
The Company is currently receiving the 13% preferred
return and the management and incentive fees. The Company also
anticipates receiving 20% of distributable cash.
On March 17, 1998, RW Hotel Partners, L.P., a limited
partnership of which the Company is the sole general partner and has
a 1% base distribution percentage, sold three of its six hotels.
Subsequent to May 31, 1998, the Partnership transferred another hotel
to a new entity named RW Louisville Hotel Associates, LLC. (See
Subsequent Events below.)
The Company signed a management agreement with the new
owner of the three hotels purchased from RW Hotel Partners, L.P.
wherein it will receive a management fee equal to 3% of revenues plus
15% of the net operating income plus 5% of any profit realized upon
the sale of the hotels.
6. SUBSEQUENT EVENTS
On June 5, 1998 RW Hotel Partners, L.P. transferred one of
the partnership hotels to a new entity named RW Louisville Hotel
Associates, LLC as required upon the refinancing of the hotel. The
Company entered into a new agreement wherein it will receive 20% of
the operating cash flows and increased its equity interest to 10%.
The Company invested an additional $562,000 to increase its
equity interest in the hotel. The Company also signed a new
management agreement allowing up to a 4% management fee. The
remaining two hotels in RW Hotel Partners, L.P. are for sale. The
Company may or may not remain involved with these two properties when
they are sold.
The sale of the three hotels and transfer of another into
a new entity as noted above resulted in the transfer of the Company's
equity interest as follows:
New joint venture -
Louisville Hotel, LLC $ 337,500
RW Hotel Partners (remaining
equity - two hotels) 40,000
Value of management interest
to be amortized 394,000
The value of the management interest will be amortized over four
years. This amortization will be offset by the additional management
fees that the Company will receive as a result of the sale of the
three hotels and transfer of the other.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 1998
COMPARED TO THE THREE AND NINE MONTHS ENDED
MAY 31, 1997
LIQUIDITY AND CAPITAL RESOURCES --
In June 1995, the Company entered into a loan with a
commercial lender to refinance the Ramada Inn in Longwood, Florida.
The loan proceeds are $2,800,000. The loan is for a term of 20 years
with an amortization period of 25 years, at the rate of 10.35%.
Principal and interest payments are approximately $26,000 per month
beginning August 1, 1995. In addition, the Company is required to
make a repair escrow payment comprised of 4% of estimated revenues,
as well as real estate tax and insurance escrow payments. The total
amount for these items will be a payment of approximately $20,000 per
month and can be adjusted annually. The escrow funds will be used as
tax, insurance and repair needs arise. As of May 31, 1998, there was
approximately $137,000 of escrowed funds related to this loan
agreement.
During the three months ended May 31, 1998, the Company
sold land in Texas for net proceeds of approximately $53,000. During
the first nine months of fiscal year 1998, the Company sold land in
Florida, Ohio, Georgia and Texas for net proceeds of approximately
$294,000, $838,000, $318,000 and $53,000, respectively.
On December 9, 1997, Houston Hotel, LLC ("Houston Hotel")
was organized as a limited liability corporation under the laws of
the State of Delaware. The purpose which Houston Hotel was organized
is limited solely to owning and managing the Hampton Inn Galleria in
Houston, Texas. The Company contributed approximately $316,000 into
Houston Hotel which represents a 10% interest, and the other 90%
interest is owned by Houston Hotel, Inc. (the "Manager"), a Nevada
corporation. Distributions of distributable cash shall be made as
follows:
- First, 100% to the Manager until it has been distributed
an amount equal to its accrued but unpaid 13% preferred return.
- Second, 100% to the Company until the Company has been
distributed an amount equal to its accrued but unpaid 13% preferred
return.
- Third, 80% to the Manager and 20% to the Company.
Distributable cash is defined as the cash from operations
and capital contributions determined by the Manager to be available
for distribution. Cash from operations is defined as the net cash
realized from the operations of Houston Hotel after payment of all
cash expenditures of Houston Hotel including, but not limited to,
operating expenses, fees, payments of principal and interest on
indebtedness, capital improvements and replacements, and such
reserves and retentions as the Manager reasonably determines to be
necessary.
A Property Management Agreement exists between Houston
Hotel, LLC and the Company as Property Manager ("Property Manager")
for the purpose of managing the hotel. The Property Manager shall be
entitled to the following property management fees:
1) 1.5% of the gross revenues from the hotel property.
2) 1.5% of the gross revenues from the hotel property as
an incentive fee if 85% of the budgeted net operating income is met.
The Company is currently receiving the 13% preferred
return and the management and incentive fees. The Company also
anticipates receiving 20% of distributable cash.
On August 16, 1995, RW Hotel Partners, L.P. was organized
as a limited partnership (the "Partnership") under the laws of the
State of Delaware. Concurrently, the Company formed Ridgewood
Georgia, Inc., a wholly-owned Georgia corporation ("Ridgewood
Georgia") which became the sole general partner in the Partnership
with RW Hotel Investment Associates, L.L.C. ("Investor") as the limited
partner. On March 17, 1998, the Partnership sold three of its six
hotels. Subsequent to May 31, 1998, the Partnership transferred
another hotel to a new entity named RW Louisville Hotel Associates,
LLC as required upon the refinancing of the hotel. The Company
entered into a new agreement wherein it will receive 20% of the
operating cash flows and increased its equity interest to 10%. The
Company invested an additional $562,000 to increase its
equity interest in the hotel. The Company also signed a new
management agreement allowing up to a 4% management fee. The
remaining two hotels in RW Hotel Partners, L.P. are for sale. The
Company may or may not remain involved with these two properties when
they are sold.
A Management Agreement exists between the Partnership and
the Company as Manager for the purpose of managing hotels in
Kentucky, Georgia and South Carolina. The Company received
management fees for the first nine months of fiscal year 1998 from
managing these hotels.
The Company signed a management agreement with the owner
of the three hotels purchased from RW Hotel Partners, L.P. wherein it
will receive a management fee equal to 3% of revenues plus 15% of the
net operating income plus 5% of any profit realized upon the sale of
the hotels.
Since the Company is not currently generating sufficient
operating cash to cover overhead and debt service, the Company must
continue to sell real estate, seek alternative financing or otherwise
recapitalize the Company. Available cash will be used to fund
operating losses until new sources of income can be generated. The
Company also intends to aggressively pursue the acquisition of hotels
and hotel management contracts through similar joint ventures as
described above which would provide additional cash flow. Currently,
the Company has a letter proposal with another company to locate and
assist in the acquisition of hotel properties for that company.
Additionally, as hotel properties are acquired, the Company would
receive management contracts to manage those properties. However,
given increased competition in the hotel acquisition market,
acquisitions of economically viable properties are more difficult to
identify and purchase.
The Company owns one hotel, has 1% ownership interest in
two other hotels, a 10% ownership in two others which it also manages
and currently has eight other hotels which it manages but has no
ownership. Under the terms of franchise agreements, the Company is
required to comply with standards established by franchisors,
including property renovations and upgrades. The success of the
Company's operations continues to be dependent upon such
unpredictable factors as the general and local economic conditions to
which the real estate and hotel industry is particularly sensitive:
labor, environmental issues, weather conditions, consumer spending or
general business conditions and the availability of satisfactory
financing.
RESULTS OF OPERATIONS --
The Company had no gains from real estate sales for the
three months ended May 31, 1998. The Company had gains from real
estate sales of approximately $721,000 for the nine months ended May
31, 1998. During the three and nine months ended May 31, 1997, the
Company had gains from real estate sales of approximately $152,000
and $1,285,000, respectively. Gains or losses on sales are dependent
upon the specific assets sold in a particular period and the terms of
each sale.
Revenues from wholly-owned hotel operations decreased
approximately $57,000, or 7%, for the three months ended May 31, 1998
compared to the three months ended May 31, 1997 due to decreased
occupancy at the Company's hotel in Longwood, Florida. Revenues from
wholly-owned hotel operations increased approximately $16,000, or 1%,
for the nine months ended May 31, 1998 compared to the nine months
ended May 31, 1997. Even though occupancy decreased for the three
and nine months ended May 31, 1998 compared to the three and nine
months ended May 31, 1997, the average daily room rate has increased.
Revenues from hotel management decreased approximately
$17,000, or 6%, and $39,000, or 5%, for the three and nine months
ended May 31, 1998, respectively, compared to the three and nine
months ended May 31, 1997. The decrease is primarily due to
management termination fees received from two hotels in fiscal year
1997 but not received in fiscal year 1998. Expenses of hotel
management decreased approximately $9,000, or 5% and $32,000, or 6%,
for the three and nine months ended May 31, 1998, respectively,
compared to the three and nine months ended May 31, 1997. The
decrease was due to less hotel management staff than in the prior
year's three and nine months ending May 31, 1997.
Equity in the net income of joint ventures increased
$85,000 and $137,000 for the three and nine months ended May 31,
1998, respectively, compared to the three and nine months ended May
31, 1997. This was primarily due to equity the Company receives in
an investment in a hotel in Houston, Texas.
During the three and nine months ended May 31, 1998, other
income was $47,000 and $107,000, respectively. For the three months
ended May 31, 1998, the Company recognized $47,000 of other income
for a dividend received from its property and liability insurer for
low claims history. For the nine months ended May 31, 1998, the
Company recognized other revenue of approximately $57,000 from its
investment in a small joint venture which develops residential lots
in Atlanta, Georgia. The Company received approximately $398,000 as
a consulting fee during the nine months ended May 31, 1997. This
consulting fee was earned by the Company for its involvement in the
negotiations and purchase of a large hotel by another hotel company.
Expenses of wholly-owned real estate properties decreased
$33,000, or 5%, and $2,000 for the three and nine months ended May
31, 1998, respectively, compared to the three and nine months ended
May 31, 1997. The decrease is primarily due to the Company's hotel
in Florida.
Business development expenses decreased $655,000, or 85%,
and $571,000, or 68%, for the three and nine months ended May 31,
1998, respectively, compared to the three and nine months ended May
31, 1997. The decrease was due to a $675,000 non-refundable deposit
forfeited in 1997 on the unsuccessful purchase of a hotel in Atlanta,
Georgia.
General, administration and other expenses decreased
$47,000, or 13%, and $39,000, or 4%, for the three and nine months
ended May 31, 1998, respectively, compared to the three and nine
months ended May 31, 1997. The decrease is primarily due to
decreased legal costs and miscellaneous other expenses.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 2, 1995 a complaint was filed in the Court of
Chancery of the State of Delaware (New Castle County) entitled
William N. Strassburger v. Michael M. Early, Luther A. Henderson,
John C. Stiska, N. Russell Walden, and Triton Group, Ltd.,
defendants, and Ridgewood Hotels, Inc., nominal defendant, C.A. No.
14267 (the "Complaint"). The plaintiff is an individual stockholder
of the Company who purports to file the Complaint individually,
representatively on behalf of all similarly situated stockholders,
and derivatively on behalf of the Company. The Complaint challenges
the actions of the Company and its directors in consummating the
Company's August 1994 repurchases of its common stock held by Triton
Group, Ltd. and Hesperus Partners Ltd. in five counts, denominated
Waste of Corporate Assets, Breach of Duty of Loyalty to Ridgewood,
Breach of Duty of Good Faith, Intentional Misconduct, and Breach of
Duty of Loyalty and Good Faith to Class. On July 5, 1995, the
Company filed a timely answer generally denying the material
allegations of the Complaint and asserting several affirmative
defenses. This case is in the concluding stages of discovery. On
March 19, 1998, the Court granted a motion filed by the defendants,
dismissing all class claims, leaving only the derivative claims
remaining for trial. No trial date has been set. The Company
intends to vigorously contest this matter.
On August 23, 1996, Great American Resorts filed a
complaint in the Superior Court of Cobb County, State of Georgia,
entitled Great American Resorts, Inc. and Great American Casinos,
Inc. v. Charles Taylor, Deborah Lynn Cannon, Walter D. Hrab and
Ridgewood Hotels, Inc., Civil Action File No. 9616398-05, alleging
that the Company and the other defendnats are liable for breach of
contract and breach of fiduciary duty stemming from a contract
between Great American and one of the Company's susbidiaries. The
complaint seeks damages, attorneys' fees and pre-judgment interest.
It also seeks an order requiring that certain books and records be
turned over to the plaintiffs. On September 27, 1996, the Company
filed a timely answer generally denying the material allegations of
the complaint and asserting several affirmative defenses. On May 4,
1998, this case was dismissed by the Court for want of prosecution.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
A. Exhibits:
10(a) Operating Agreement between Houston
Hotel, LLC and Ridgewood Hotels, Inc.
effective December 9, 1997
10(b) Operating Agreement between RW
Hurstbourne Hotel, Inc. and RW
Louisville Hotel Investors, LLC
effective May 13, 1998
10(c) Operating Agreement between Ridgewood
Hotel, Inc. and Louisville Hotel, L.P.
effective June 5, 1998
27 Financial Data Schedule
B. Reports on Form 8-K:
No exhibits or reports on Form 8-K were filed
during the three months ended May 31, 1998.
SIGNATURES
Pursuant to the requirements 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.
RIDGEWOOD HOTELS, INC.
By: /s/ N. R. Walden
N. Russell Walden
President
By: /s/ Karen S. Hughes
Karen S. Hughes
Vice President,
Chief Accounting Officer
Date: July 13, 1998