EXHIBIT 13

RIDGEWOOD
HOTELS, INC.

ANNUAL REPORT
1999

FINANCIAL STATEMENTS

Ridgewood Hotels, Inc. (the "Company") is primarily engaged in
the business of acquiring, developing, operating and managing hotel
properties in the Southeast and "Sunbelt" areas. Additionally, the
Company owns several land parcels which are held for sale.

Board of Directors Officers
Michael M. Earley N. Russell Walden
President - Triton Group President
Management

Luther A. Henderson Byron T. Cooper
President - Pirvest, Inc. Vice President, Construction and
Planning
N. Russell Walden
President - Ridgewood Karen S. Hughes
Hotels, Inc. Vice President, Chief Financial
Officer and Secretary

Corporate Offices
2859 Paces Ferry Road, Suite 700
Atlanta, Georgia 30339
Telephone: (770) 434-3670

Market For Registrant's Common Equity and Related Stockholder Matters

The common stock, $0.01 par value per share (the "Common Stock"),
of the Company is listed in the National Association of Securities
Dealers (NASDAQ) over-the-counter bulletin board service. However,
there effectively has been an absence of an established public trading
market for the Common Stock.

Shares outstanding and per share amounts for all periods
presented have been retroactively adjusted for a three-for-one stock
split effected in the form of a stock dividend on October 31, 1994.
On October 31, 1999, there were 1,513,480 shares of Common Stock
outstanding held by approximately 206 shareholders of record. The
Company paid its first and only cash dividend on the Common Stock
during fiscal year 1990. The dividend paid was approximately $0.06
per share of Common Stock, which totaled approximately $397,000. The
Company may pay future dividends if and when earnings and cash are
available. The declaration of dividends on the Common Stock is within
the discretion of the Board of Directors of the Company and is,
therefore, subject to many considerations, including operating
results, business and capital requirements and other factors.

Selected Financial Data

-----------------------------------------------------------------
($000's omitted, except
per share data) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------

Balance Sheet Data as of August 31
Total Assets $ 5,910 $ 7,280 $ 8,266 $ 8,724 $ 9,673
Term Loan(s) Payable 2,682 2,744 2,804 2,858 2,796
Shareholders' Investment 1,556 2,944 4,038 4,441 5,612
Income Statement Data
Year Ended August 31
Net Revenues 4,547 5,830 8,209 4,314 8,675
Net Loss (1,283) (622) (463) (1,178) (1,656)
Basic and Diluted Loss Per
Common Share (1) $ (1.09) $ (0.64) $ (0.58) $ (1.29) $ (1.90)

(1) Retroactively adjusted for a three-for-one stock split effected in
the form of a stock dividend on October 31, 1994.

Management's Discussion and Analysis of Financial
Condition and Results of Operations

Liquidity and Capital Resources -

During fiscal year 1999, the Company received net proceeds of
approximately $423,000 from the sale of undeveloped land in Texas, Ohio
and Georgia. The proceeds were used to provide additional working capital
to the Company.

In June 1995, the Company received a loan from a commercial lender to
refinance the Ramada Inn in Longwood, Florida. The loan proceeds were
$2,800,000. The loan is for a term of 20 years with an amortization
period of 25 years, and an interest rate of 10.35%. Principal and
interest payments were approximately $26,000 per month beginning August 1,
1995. A portion of the proceeds from the loan was used to repay a term
loan, and the remaining proceeds of approximately $1,500,000 were used for
working capital. 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 amount to a payment of approximately $22,000 per month and are
adjusted annually. The escrow funds are used as tax, insurance and repair
needs arise. As of August 31, 1999, there was approximately $249,000 of
escrowed funds related to this loan agreement.

In June 1999, the Company entered into a contract for the sale of its
hotel and land in Longwood, Florida for approximately $6,100,000. In
November 1999, the contract was amended to include only the sale of the
hotel for $5,000,000. The Company would recognize net profit on the sale
of approximately $3,500,000. There are numerous contingencies which allow
the seller to cancel the contract. Closing would occur approximately 75
days from the amendment date.

The Company has invested in three hotel entities as follows:

RW Hotel Partners, L.P.

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
Georgia corporation ("Ridgewood Georgia") which became the sole general
partner in the Partnership with RW Hotel Investments Associates, LLC
("Investor") as the limited partner. Ridgewood Georgia has a 1% base
distribution percentage versus 99% for the Investor. However,
distribution percentages do vary depending on certain defined preferences
and priorities pursuant to the Partnership Agreement ("Agreement") which
are discussed below. The partnership was originally formed to acquire a
hotel property in Louisville, Kentucky, but subsequently purchased five
additional hotels. The Partnership purchased the hotel in Louisville,
Kentucky for approximately $16,000,000. In December 1995 and January
1996, the Partnership purchased four hotel properties in Georgia for
approximately $15,000,000 and a hotel in South Carolina for $4,000,000,
respectively. Three of the Georgia hotels were sold at a loss in March
1998, and the hotel in Louisville was transferred to a new entity in June
1998 in conjunction with refinancing that hotel (see below). The hotel in
Orangeburg, South Carolina was sold for a loss in November 1998. The
remaining hotel in the Partnership is in Thomasville, Georgia. See
Subsequent Events in Notes to Consolidated Financial Statements.

Income and loss are allocated to Ridgewood Georgia and the limited
partner based upon the formula for allocating Distributable Cash as
described below.

Distributable Cash is defined as the net income from the property
before depreciation plus any net sale proceeds and net financing proceeds
less capital costs. Distributions of Distributable Cash shall be made as
follows:

- First, to the Investor until there has been distributed to the
Investor an amount equal to a 15% cumulative internal rate of return on
the Investor's investment.

- Second, to Ridgewood Georgia until the aggregate amount received by
Ridgewood Georgia equals the aggregate cash contributions made by
Ridgewood Georgia to the Partnership.

- Third, 12% to Ridgewood Georgia and 88% to the Investor until there
has been distributed to the Investor an amount equal to a 25% cumulative
internal rate of return on Investor's investment.

- Fourth, 75% of the residual to the Investor and 25% to Ridgewood
Georgia.

Management of the Partnership intends to adopt a plan of liquidation
and will sell the remaining two hotels. Based on management's estimate,
Ridgewood Georgia will not receive cash in excess of its investment in the
Partnership. See Subsequent Events in Notes to Consolidated Financial
Statements.

A Management Agreement exists between the Partnership and the Company
as Manager ("Manager") for the purpose of managing the hotels. The
Manager shall be entitled to the following property management fees:

(1) 2.5% of the gross revenues from the hotel property.

(2) 1% of the gross revenues from the hotel property as an incentive
fee if distributable cash equals or exceeds 13.5% of total aggregate
acquisition costs.

Total management fees for the years ended August 31, 1999, 1998 and
1997 were approximately $68,000, $233,000 and $301,000, respectively.

On March 17, 1998, the Partnership sold three of its six hotels. The
Company signed a management agreement with the new owner of the three
hotels 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. In connection with the management agreement, the
Company received management fees totaling approximately $191,000 and
$114,000 for the years ended August 31, 1999 and 1998, respectively.

Houston Hotel, LLC

On December 9, 1997, Houston Hotel, LLC ("Houston Hotel") was
organized as a limited liability company 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.

Income or loss allocated to the Company and the Managing Member is
based upon the formula for distributing cash.

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.

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.

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.

In connection with the management agreement, the Company received
management fees totaling approximately $98,000 and $83,000 for the years
ended August 31, 1999 and 1998, respectively.

See Subsequent Events in the Notes to Consolidated Financial
Statements.

RW Louisville Hotel Associates, LLC

On May 13, 1998, RW Louisville Hotel Associates LLC ("RW Louisville
Hotel Associates") was organized as a limited liability company under the
laws of the State of Delaware. The purpose which RW Louisville Hotel
Associates was organized is limited solely to owning and managing the
Holiday Inn ("the Hotel") in Louisville, Kentucky. The Company's
investment in RW Hotel Partners, L.P. of $337,500 (see above) was
transferred to RW Louisville Hotel Associates at its historical basis.
Simultaneously, the Company invested $362,000 into Louisville Hotel, LLC.
The combined equity of $699,500 represents a 10% interest in the Hotel.
Louisville Hotel, LLC loaned $3,620,000 to the Hotel in return for all
cash flows generated from the Hotel.

Income or loss allocated to the Company is based upon the formula for
distributing cash.

Distributable cash is defined as the net cash realized from
operations but after payment of management fees, principal and interest,
capital improvements and other such retentions as the managing member
determines to be necessary. Distributions of distributable cash from
Louisville Hotel, LLC shall be made as follows:

- First, to the managing member until the managing member has been
distributed an amount equal to its accrued but unpaid 13% preferred
return.

- Second, to the Company until the Company has been distributed an
amount equal to its accrued but unpaid 13% preferred return.

- Third, 20% to the Company and 80% to the managing member.

Cash from a sale or refinancing would be distributed 10% to the
Company and 90% to the managing member.

A Management Agreement exists between the Owner 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) Base Management Fee equal to 1.5% of gross revenues from the
hotel property.

(2) Incentive Management Fee equal to 1.5% of gross revenues from
the hotel in which the actual net operating income exceeds 85% of the
budgeted goal for the year.

(3) Super Incentive Management fee equal to: (a) .25% of gross
revenues from the hotel in which the net operating income exceeds 106% of
the budgeted goal for the year; (b) an additional .25% of gross revenues
in which the net operating income exceeds 112% of the budgeted goal; and
(c) an additional .50% of gross revenues in which the net operating income
exceeds 120% of the budgeted goal.

The Company paid an additional $200,000 to Louisville Hotel, LLC as a
fee to acquire the management contract for the hotel. This amount is
included in other assets. The Company is amortizing the fee $70,000 per
year for the first two years and $20,000 per year for the next three
years.

With respect to the sum of $100,000, in the event that the management
contract is terminated by Louisville Hotel, LLC with or without cause and
not pursuant to a third party sale prior to June 5, 2000, Louisville
Hotel, LLC will pay to the Company the sum of $4,166.67 times the number
of months prior to June 5, 2000 that the management contract is
terminated.

With respect to the second sum of $100,000, in the event that the
management contract is terminated by Louisville Hotel, LLC prior to June
5, 2003, Louisville Hotel, LLC will pay to the Company the sum of
$1,666.67 times the number of months prior to June 5, 2003 that the
management contract is terminated.

In connection with the management agreement, the Company received
management fees totaling approximately $285,000 and $57,000 for the years
ended August 31, 1999 and 1998, respectively.

See Subsequent Events in Notes to Consolidated Financial Statements.

Since the Company is not currently generating sufficient operating
cash to cover overhead and debt service, the Company must continue to sell
its real estate assets, seek alternative financing or otherwise
recapitalize the Company. There is currently approximately $200,000 of
available cash. This 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 hotel management contracts through
entities similar to those described above which would provide additional
cash flow. However, given increased competition in the hotel acquisition
market, management contracts may be difficult to obtain.

The Company owns one hotel, has 10% ownership interest in two other
hotels and has a 1% ownership interest in another (see Subsequent Events
in Notes to Consolidated Financial Statements). The Company also
currently has fourteen other hotels which it manages but has no ownership
interest. 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 -

Sales of real estate properties for the fiscal year ended August 31,
1999 decreased compared to 1998 due primarily to greater sales in Ohio and
Florida during 1998. Sales of real estate properties for the fiscal year
ended August 31, 1998 decreased compared to 1997 due primarily to the sale
of the Company's undeveloped land in Maitland, Florida in 1997. The
Company had gains from real estate sales of approximately $80,000,
$744,000 and $1,354,000 during fiscal years 1999, 1998 and 1997,
respectively. Gains or losses on real estate sales are dependent upon the
timing, sales price and the Company's basis in specific assets sold and
will vary considerably from period to period.

Revenues from wholly-owned hotel operations for fiscal year 1999
decreased $331,000, or 11%, compared to 1998. Revenues from wholly-owned
hotel operations for fiscal year 1998 decreased $14,000, or .5%, compared
to 1997. The decreases were due to lower occupancy at the Company's hotel
in Longwood, Florida in 1999 and 1998.

Revenues from hotel management increased $137,000, or 13%, and
$26,000, or 2%, compared to 1999 and 1998 compared to 1997, respectively.
The increases were due to a larger number of hotels under management in
both years.

Due to the Company's investment in unconsolidated entities during
fiscal years 1999, 1998 and 1997, the Company recognized equity in the
income (loss) of the entities of approximately $156,000, $(98,000), and
$65,000, respectively. A provision of $199,000 for possible losses on
investments in unconsolidated entities in fiscal year 1997 was recorded as
there is no indication that the Company will be able to recover the equity
income in the partnership. In turn, the equity in net loss of the
unconsolidated entities reported for 1997 was $134,000.

The other revenue of $117,000 received during fiscal year 1998 was
primarily from profits received on land joint ventures in Atlanta, Georgia
and a worker's compensation insurance refund. The Company received
approximately $398,000 as a consulting fee during fiscal year 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 increased $38,000, or 2%, for
the fiscal year ended August 31, 1999 compared to 1998 due to increased
expenses at the Company's hotel in Longwood, Florida. Expenses of
wholly-owned real estate decreased $69,000, or 3%, for the fiscal year
ended August 31, 1998 compared to 1997 due primarily to fewer land parcels
(and their associated expenses) held by the Company.

Depreciation and amortization expense increased by $199,000, or 77%,
during fiscal year 1999 compared to 1998. The increase was due to greater
amortization of the Company's hotel management agreements and the
write-off of the remaining investment in the hotel management company.

General, administrative and other expenses decreased $116,000, or 5%,
for fiscal year 1999 compared to 1998. General, administrative and other
expenses increased $101,000, or 5%, for fiscal year 1998 compared to 1997.
Expenses in fiscal year 1998 were unusually high due to severance paid to
the executive in charge of hotel operations.

During fiscal years 1999, 1998 and 1997, while the Company was
aggressively pursuing the business of acquiring, developing, operating and
selling hotel properties throughout the country, the Company incurred
business development costs of $148,000, $361,000 and $1,067,000,
respectively. Approximately $878,000 of the business development expense
in fiscal year 1997 related to costs on the unsuccessful purchase of a
hotel in Atlanta, Georgia.

Effect of Inflation -

Inflation tends to increase the Company's cash flow from income
producing properties since rental rates generally increase by a greater
amount than associated expenses. Inflation also generally tends to
increase the value of the Company's land portfolio.

Offsetting these beneficial effects of inflation are the increased
cost and decreased supply of investment capital for real estate that
generally accompany inflation.

Year 2000 -

The Company has established policies and procedures to coordinate
changes to computer systems and applications necessary to achieve a year
2000 date conversion with no effect on customers or disruption to business
operations. These actions are necessary to ensure that the systems and
applications will recognize and process the year 2000 and beyond. Major
areas of potential business impact have been identified and conversion
efforts have been completed or are underway. The Company's primary
operating and financial systems are already Year 2000 compliant. The
Company also is communicating with suppliers, vendors, financial
institutions and others with which it does business to coordinate Year
2000 conversion. The total cost of compliance and its effect on the
Company's future results of operations is being determined as part of the
conversion planning, but is not expected to be material.

RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AUGUST 31, 1999 AND 1998

($000'S omitted, except per share data)

August 31, August 31,
ASSETS: 1999 1998
------ --------- ---------

Current Assets:

Cash and Cash Equivalents $ 471 $ 1,255

Receivables 241 240

Other Current Assets 394 438
---------- ----------
Total Current Assets 1,106 1,933

Real Estate Investments:
Real Estate Properties
Operating Properties, net 1,172 1,248
Land Held for Sale, net 2,028 2,361

Investment in Unconsolidated
Hotel Entities 1,016 832
---------- ----------
Total real estate investments 4,216 4,441

Other Assets 588 906
---------- ----------
$ 5,910 $ 7,280
========== ==========
<FN>

(continued)
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>

RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1999 AND 1998
($000's omitted, except per share data)
LIABILITIES AND SHAREHOLDERS' INVESTMENT

August 31, August 31,
1999 1998
---------- ----------
LIABILITIES:
-----------

Current Liabilities:
Current Maturities of Long-Term Debt $ 40 $ 53

Accounts Payable 246 260

Accrued Salaries, Bonuses and
Other Compensation 84 107

Accrued Property Tax Expense 111 116

Accrued Interest and Other Liabilities 338 289
---------- ----------
Total Current Liabilities 819 825

Accrued Pension Liability 893 820

Long-Term Debt 2,642 2,691
---------- ----------
Total Liabilities 4,354 4,336
---------- ----------
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 in 1999 and 1998 450 450
Common stock, $0.01 par value, 5,000,000
shares authorized, 1,513,480 shares issued
and outstanding in 1999 and 1998 15 15

Paid-in Surplus 15,681 15,861
Note receivable from officer for
purchase of common stock -- (75)
Accumulated deficit since
December 30, 1985 (14,590) (13,307)
---------- ----------
Total Shareholders' Investment 1,556 2,944
---------- ----------
$ 5,910 $ 7,280
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>

RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED AUGUST 31, 1999, 1998 AND 1997

($000's Omitted, except per share data)

1999 1998 1997
--------- ------- ---------

REVENUES:
Revenues from wholly-owned hotel operations........ $ 2,703 $ 3,034 $ 3,048
Revenues from hotel management .................... 1,213 1,076 1,050
Sales of real estate properties ................... 458 1,655 3,808
Equity in net income (loss) of
unconsolidated entities ......................... 156 (98) (134)
Interest income ................................... 15 46 40
Other.............................................. 2 117 397
---------- - -------- ----------
$ 4,547 $ 5,830 $ 8,209
---------- ---------- ----------
COSTS AND EXPENSES:
Expenses of wholly-owned real estate properties ... $ 2,365 $ 2,327 $ 2,396
Costs of real estate sold ......................... 379 911 2,454
Depreciation and amortization ..................... 459 260 258
Interest expense .................................. 342 340 345
General, administrative and other.................. 2,137 2,253 2,152
Business development .............................. 148 361 1,067
---------- ---------- ----------
$ 5,830 $ 6,452 $ 8,672
---------- ---------- ----------
NET LOSS $ (1,283) $ (622) $ (463)

OTHER COMPREHENSIVE INCOME (LOSS) -- -- --
---------- ---------- ----------
COMPREHENSIVE LOSS (1,283) (622) (463)
---------- ---------- ----------
BASIC AND DILUTED LOSS PER COMMON SHARE $ (1.09) $ (0.64) $ (0.58)
========== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>

RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE YEARS ENDED AUGUST 31, 1999, 1998 AND 1997
($000's Omitted, except per share data)

Note
Receivable
Preferred Common From
Stock Stock Officer for Total
---------------------- ------------------------ Paid-in Purchase of Accumulated Shareholders'
Shares Amount Shares Amount Surplus Common Stock Deficit Investment
---------- ---------- ------------ ---------- ---------- ------------ ---------- ----------

Balance, August 31, 1996 450,000 $ 450 1,088,480 $ 11 $ 16,202 $ -- $ (12,222) $ 4,441

Dividends on
Preferred Stock -- -- -- -- (315) -- -- (315)
Issuance of Common Stock -- -- 450,000 4 446 (75) -- 375
Net Loss -- -- -- -- -- -- (463) (463)
----------- ----------- ------------- ----------- ----------- ------------- ----------- -----------
Balance, August 31, 1997 450,000 $ 450 1,538,480 $ 15 $ 16,333 $ (75) $ (12,685) $ 4,038

Repurchase of Common Stock -- -- (25,000) -- (112) -- -- (112)
Dividends on
Preferred Stock -- -- -- -- (360) -- -- (360)
Net Loss -- -- -- -- -- -- (622) (622)
----------- ----------- ------------- ----------- ----------- ------------- ----------- -----------
Balance, August 31, 1998 450,000 $ 450 1,513,480 $ 15 $ 15,861 $ (75) $ (13,307) $ 2,944

Repayment of Note
Receivable -- -- -- -- -- 75 -- 75
Dividends on
Preferred Stock -- -- -- -- (180) (180)
Net Loss -- -- -- -- -- -- (1,283) (1,283)
----------- ---------- ------------ ----------- ----------- ------------ ----------- -----------
Balance, August 31, 1999 450,000 $ 450 1,513,480 $ 15 $ 15,681 -- $ (14,590) $ 1,556
=========== =========== ============ =========== =========== ============= =========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>

Ridgewood Hotels, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended August 31, 1999, 1998 and 1997

($000's Omitted)

1999 1998 1997
--------- --------- ---------

Cash flows from operating activities:
Net loss ................................................... $ (1,283) $ (622) $ (463)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization .......................... 459 260 258
Increase in allowance for possible losses
on investment in unconsolidated entities ............. -- -- 199
Gain from sale of real estate properties ............... (79) (744) (1,354)
Distributions from unconsolidated entities greater (less)
than equity in net (loss) income ..................... -- 184 (14)
(Increase) decrease in other assets .................... 32 185 (571)
Increase (decrease) in accounts payable
and accrued liabilities .............................. 80 168 (1)
---------- ---------- ----------
Total adjustments ...................................... 492 53 (1,483)
---------- ---------- ----------
Net cash used in operating activities .................. (791) (569) (1,946)
---------- ---------- ----------
Cash flows from investing activities:
Principal payments received on mortgage loans ............ -- -- 3
Investment in unconsolidated entities .................... (184) (678) --
Proceeds from sale of real estate ........................ 423 1,526 3,313
Additions to real estate properties ...................... (65) (88) (78)
---------- ---------- ----------
Net cash provided by investing activities .............. 174 760 3,238
---------- ---------- ----------
Cash flows from financing activities:
Dividends on preferred stock ............................. (180) (360) (315)
Issuance of common stock upon exercise of stock options .. -- -- 375
Repurchase of common stock ............................... -- (112) --
Repayments of debt ....................................... (62) (60) (54)
Payment received on note receivable from stock issuance... 75 -- --
---------- ---------- ----------
Net cash (used in) provided by financing activities .... (167) (532) 6
---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents ......... (784) (341) 1,298
Cash and cash equivalents at beginning of year ............... 1,255 1,596 298
---------- ---------- ----------
Cash and cash equivalents at end of year ..................... $ 471 $ 1,255 $ 1,596
========== ========== ==========

<FN>
(continued)
The accompanying notes are an integral part of these consolidated financial statements.
</FN>

Ridgewood Hotels, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended August 31, 1999, 1998 and 1997

- -------------------------------------------------------------------------------------------------

Supplemental disclosures of cash flow information and non-cash activity:

1999 1998 1997
------------ ------------ ----------

Interest paid ....................................... $ 342,000 $ 340,000 $ 345,000

Repurchase of 25,000 shares of common stock subject
to a Put Agreement, at $4.50 per share ............ $ -- $ 112,500 $ --

Decrease in allowance for possible losses due
to sale of parcel of land ......................... $ 128,000 $ 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, a promissory note 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 upon exercise of stock options ...... $ -- $ -- $ 75,000

Issuance of 450,000 shares of common stock,
$0.01 par value, in 1997 .................... $ -- $ -- $ 450,000

- -------------------------------------------------------------------------------------------------

<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>

Ridgewood Hotels, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
August 31, 1999, 1998 and 1997

1. Description of Business and Significant Accounting Policies

Description of the Business and Future Prospects

Ridgewood Hotels, Inc. (the "Company") is primarily engaged in the
business of acquiring, developing, operating and managing hotel properties
in the Southeast and "Sunbelt" areas. Additionally, the Company owns
several land parcels which are held for sale.

The Company's common stock is listed in the National Association of
Securities Dealers (NASDAQ) over-the-counter bulletin board service.
During the fourth quarter of fiscal year 1994, the Company purchased and
retired all of the shares of common stock owned by the Company's
then-majority stockholder, Triton Group, Ltd. On April 15, 1997, Security
Systems Holdings, Inc. merged with Triton Group Ltd., and the
newly-combined entity was named Alarmguard Holdings, Inc. ("Alarmguard").
The cash used to purchase the common stock ("Alarmguard Shares") was from
the proceeds received by the Company from the sale of its mobile home
parks in June 1994.

The Company has incurred losses from operations and experienced
negative cash flow from operations for each of the past five years. In
order to satisfy operating needs and other cash requirements, the Company
has generated cash from the sale of its real estate assets and, to a
lesser extent, debt financing.

The Company believes that, barring unforeseen events, it has
sufficient working capital ($287,000 at August 31, 1999) to cover its
operating needs and debt service requirements through August 31, 2000.
However, existing working capital as reduced by expected operating needs
and debt service requirements is not sufficient to pay dividends on the
Company's preferred stock. The Company has instituted several measures to
generate additional cash. At August 31, 1999, the Company has binding
contracts from potential purchasers covering certain of its real estate
assets. Additionally, the Company continues to seek new contracts to
manage hotel properties owned by third parties. However, there can be no
assurance that the binding contracts will close or that the Company will
be able to generate new hotel management contracts.

In the event that unforeseen events arise during the year ending
August 31, 2000, the Company will be required to sell additional real
estate assets, seek alternative financing or otherwise recapitalize the
Company. There can be no assurance that the Company will be able to
generate cash from real estate sales or through additional debt or equity
financing since such activities will be dependent upon future market
conditions and other factors which presently cannot be foreseen.

The consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.

Basis of Presentation and Consolidation -

The consolidated financial statements of the Company include the
accounts of all of its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.

The investments in the unconsolidated entities are being accounted
for using the equity method of accounting (See Note 8).

Per Share Data -

In fiscal 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, Earnings Per Share ("FAS 128"). Basic earnings per
share is based on the weighted average effect of all common shares issued
and outstanding, and is calculated by dividing net income available to
common stockholders by the weighted average shares outstanding during the
period. Diluted earnings per share is calculated by dividing net income
available to common stockholders, adjusted for the effect, if any, from
assumed conversion of all potentially dilutive common shares outstanding,
by the weighted average number of common shares used in the basic earning
per share calculation plus the number of common shares that would be
issued assuming conversion of all potentially dilutive common shares
outstanding. All historical earnings per share amounts have been restated
to conform to provisions of this statement.

Valuation of Real Estate Properties -

In 1997, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of" ("FAS 121"). This statement requires
that long-lived assets and certain identified intangibles to be held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The statement requires the use of undiscounted estimated
cash flows expected from the asset's operations and eventual disposition.
If the sum of the expected future cash flows is less than the carrying
value of the asset, an impairment loss is recognized based on the fair
value of the asset.

Under FAS 121, properties are classified as either operating
properties or properties held for sale. If determined to be impaired,
operating properties are written down to their fair value, and the
associated loss cannot be recovered if the fair value of the property
increases. Properties held for sale are written down to their fair value
less cost to sell, but the associated loss can be recovered in the event
the fair value of the property increases.

Stock-Based Compensation -

During 1997, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123").
This statement provides entities a choice between fair value and intrinsic
value based methods of accounting for stock based compensation plans. The
Company has elected to continue using the intrinsic value method.

Depreciation and Amortization Policies -

The Company depreciates operating properties and any related
improvements by using the straight-line method over the estimated useful
lives of such assets, which are generally 30 years for building and land
improvements and 5 years for furniture, fixtures and equipment.
Depreciation expense for the years ended August 31, 1999, 1998 and 1997
was approximately $180,000, $172,000 and $166,000, respectively.

The Company amortizes certain intangible assets over the useful life
of those assets. Amortization expense for the years ended August 31,
1999, 1998 and 1997 was approximately $279,000, $88,000 and $92,000,
respectively.

Capitalization Policies -

Repairs and maintenance costs are expensed in the period incurred.
Major improvements to existing properties which increase the usefulness or
useful life of the property are capitalized.

Sale of Real Estate -

All revenue related to the sale of real estate is recognized at the
time of closing. The Company allocates costs of real estate sold using
the specific identification or relative sales value methods based on the
nature of the development. Profit recognition is based upon the Company
receiving adequate cash down payments and other criteria specified by
existing accounting literature.

Cash and Cash Equivalents -

For the purpose of the Consolidated Statements of Cash Flows, cash
includes cash equivalents. Cash equivalents include all highly liquid
investments with maturities of three months or less.

Fair Value of Financial Instruments -

The recorded values of cash, accounts receivable, accounts payable
and accrued liabilities reflected in the financial statements are
representative of their fair value due to the short-term nature of the
instruments.

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
the disclosure of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from those estimates.
Significant estimates included in the Company's financial statements
include allowances for impairment of real estate assets and for deferred
tax assets.

Reclassifications -

Certain prior year amounts have been reclassified to conform with the
current year presentation.

New Accounting Pronouncements -

In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"). This
statement requires enterprises to classify items of other comprehensive
income by their nature in the financial statements and to display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in-capital in the equity statement of the
financial statements. Adoption of this pronouncement had no material
effect on the consolidated statement of operations for the year ended
August 31, 1999.

In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"). This standard requires that enterprises
report financial and descriptive information about its reportable
operating segments. The Company currently has only one segment, real
estate ownership and management, which is the basis for the consolidated
information in the financial statements.

2. Real Estate Investments

The Company's real estate properties by type at August 31, 1999, and
1998 were as follows ($000's omitted):

Furniture,
August 31, 1998 Land & Fixtures &
Type of Project Buildings Equipment Total

Wholly-owned hotel $ 2,535 $ 392 $ 2,927
Less -- accumulated
depreciation (1,679)
-------
Net operating property 1,248
Land $ 5,808 -- 5,808
Less -- allowance for
possible losses (3,447)
-------
Net land 2,361
Investment in unconsolidated
hotel entities 832
-------
Total net real estate
investments $ 4,441
=======
Furniture
August 31, 1999 Land & Fixtures &
Type of Project Buildings Equipment Total

Wholly-owned hotel $ 2,535 $ 418 $ 2,953
Less -- accumulated
depreciation (1,781)
-------
Net operating property 1,172
Land $ 5,347 -- 5,347
Less -- allowance for
possible losses (3,319)
-------
Net land 2,028
Investment in unconsolidated
hotel entities 1,016
-------
Total net real estate
investments $ 4,216
=======

Changes in the allowance for possible losses on real estate
investments for the years ended August 31, 1999, 1998 and 1997
were as follows ($000's omitted):

1999 1998 1997
---- ---- ----

Allowance, beginning of year $3,447 $3,544 $4,700
Reversal of reserves associated
with sales of real estate
assets (128) (97) (1,156)

Allowance, end of year $3,319 $3,447 $3,544
====== ====== ======

3. Commitments and Contingencies

In August 1991, each executive officer was offered a two year
Post-Employment Consulting Agreement (the "Consulting Agreement(s)")
whereby the officer agrees that if he or she is terminated by the Company
for other than good cause, the officer will be available for consulting at
a rate equal to their annual compensation immediately prior to
termination. All officers have chosen to enter into Consulting
Agreements. In August 1998, an amendment was signed by the two executive
officers reducing the consulting period by one month for each month that
the executive continues to be employed by the Company through August 31,
1999, such that if the executive remains employed by the Company through
August 31, 1999, the consulting period shall be twelve months in duration.
In addition, two other employees were offered and have chosen to enter
into one year Consulting Agreements. The executives and two other
employees, upon termination, agree to sign an unconditional release of all
claims and liability in exchange for a one year consulting fee
arrangement.

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 shareholder of the Company who purports to file the Complaint
individually, representatively on behalf of all similarly situated
shareholders, 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 repurchase 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. Discovery has been concluded, and
on March 19, 1998, the Court dismissed all class claims, with only the
derivative claims remaining for trial. The case was tried to Vice
Chancellor Jacobs during the period February 1 through February 3, 1999.
All post-trial briefing and oral argument has been concluded, and the case
has been submitted for decision by the Court.

The Company serves as a general partner in a limited partnership.
As a general partner, the Company may be liable for certain deficiencies
which arise in meeting the terms of loan obligations incurred by the
limited partnership and for operating expenses and other liabilities
incurred by the partnership in the ordinary course of business.

4. Notes Payable

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, and the hotel serves as collateral for the loan.
The loan is for a term of 20 years with an amortization period of 25
years, at a fixed interest 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 $22,000 per month and can be adjusted annually.
The escrow funds will be used as tax, insurance and repair needs arise.
As of August 31, 1999, there was approximately $249,000 of escrowed funds
related to this loan agreement that are included with Other Assets on the
balance sheet. Also, commitment fees and loan costs of approximately
$159,000 were deferred and are being amortized over 20 years.

The approximate average amount of borrowings on the term loan during
fiscal year 1998 was $2,694,000, at an average interest rate of 10.35%.
The maximum amount of borrowings outstanding under this loan was
$2,711,000. The balance of the loan at August 31, 1999 was approximately
$2,676,000. The carrying value of the note approximates its fair value at
August 31, 1999.

In December 1995 and in conjunction with the acquisition of a hotel
management company, the Company assumed three promissory notes dated
September 22, 1994 and payable to three different Georgia corporations.
The total combined outstanding principal was approximately $106,000. All
three notes are for a term of five years at a rate of 6.83%. Combined
principal and interest payments are approximately $2,667 per month through
October 1, 1999. The combined balance of these loans at August 31, 1999
was approximately $5,300.

The approximate average amount of borrowings on the three promissory
notes during fiscal year 1999 was $19,000, at an average interest rate of
6.83%. The maximum amount of combined borrowings outstanding under these
loans was approximately $33,000.

Maturities of long-term debt during the Company's next five fiscal
years are as follows: 2000 - $40,000; 2001 - $42,000; 2002 - $47,000;
2003 - $52,000; 2004 - $58,000; thereafter - $2,443,000.

5. Income Taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for Income
Taxes", which requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.

The income tax provision (benefit) is as follows:

1999 1998
---- ----

Current:
Federal $ -- $ --
State -- --
---- ----
Total current -- --

Deferred:
Federal -- --
State -- --
---- ----
Total deferred $ -- $ --
==== ====

A reconciliation of the provision for income taxes (benefit) to the
federal statutory rate is as follows:

1999 1998
---- ----

Tax at statutory rate $ (404) $(194)
State taxes, net of
federal benefit (43) --
Permanent items 36 17
Valuation reserve 1,101 186
Other (690) (9)
------ -----
$ -- $ --
====== =====

Deferred tax assets (liabilities) are composed of the following at
August 31, 1999 and August 31, 1998, respectively:

000's Omitted

1999 1998
---- ----

Allowance for possible losses $ 1,246 $ 1,169
Excess of tax over book basis, land held
for sale or future development -- 16
Depreciation and amortization 86 71
Excess of tax over book basis, income
from partnership -- 40
Other 378 331
Tax loss carryforwards 5,966 4,724
------- --------
Gross deferred tax assets 7,676 6,351
------- --------
Excess of book over tax basis, income
from partnership (213) --

Loan amortization (37) (26)
------- --------
Gross deferred tax liabilities (250) (26)
------- --------
Deferred tax assets valuation allowance (7,426) (6,325)
------- --------
$ 0 $ 0
======= ========

For financial reporting purposes, a valuation allowance has been
recognized at August 31, 1999 and 1998 to reduce the net deferred income
tax assets to zero. The net change in the valuation allowance for
deferred tax asset was an increase of $1,101,000. This change resulted
primarily from an increase in the Company's deferred tax assets relating
to state net operating loss carryforwards. The Company has unused net
operating loss carryforwards in certain states in which it operates which
are available to offset future state taxable income in those states. In
prior years, no benefit for the unused state loss carryforwards was
recognized in the financial statements. In the current year, the unused
state loss carryforwards were booked as a deferred tax asset with the
benefit offset by a corresponding valuation allowance.

On August 31, 1999, the Company had federal net operating loss
carryforwards for income tax purposes of approximately $15,394,000, which
will begin to expire in 2005. Under the Internal Revenue Code, if certain
substantial changes in the Company's ownership occur, there are annual
limitations on the amount of loss carryforwards.

6. Shareholders' Investment

Authorized Shares of Common and Preferred Stock -

On January 4, 1995, the Company approved an increase in the
authorized number of shares of the Company's common stock from 3,000,000
shares to 5,000,000 shares and increased the number of authorized shares
of the Company's preferred stock from 500,000 shares to 1,000,000 shares.
In addition, the Company increased the number of shares reserved under the
Ridgewood Hotels, Inc. 1993 Stock Option Plan from 900,000 to 1,200,000
shares. There are currently 1,513,480 shares of common stock outstanding,
of which approximately 51% is owned by the Company's President, N. Russell
Walden.

There are currently 1,000,000 authorized shares of the Company's
Series A Convertible Preferred Stock. The Company has issued 450,000
shares of Series A Convertible Preferred Stock to Alarmguard. The
preferred stock is redeemable by the Company at $8.00 per share and
accrues dividends at a rate of $0.40 per share annually for the first two
years and at a rate of $0.80 per share annually thereafter. Dividends are
payable quarterly commencing on November 1, 1994. Each share of the
preferred stock is convertible into three shares of the Company's common
stock effective August 16, 1996 and is subject to certain anti-dilution
adjustments. As of August 31, 1999, no shares have been converted. In
the event of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of the shares of preferred
stock shall be entitled to receive $8.00 per share of preferred stock plus
all dividends not previously declared and unpaid thereon. As of August
31, 1999, there are $180,000 of dividends in arrears.

Loss Per Share -

The following table sets forth the computation of basic and diluted
loss per share:

1999 1998 1997
---- ---- ----

Net loss $(1,283,000) $(622,000) $ (463,000)
Less preferred dividends paid (180,000) (360,000) (315,000)
Less undeclared preferred dividends (180,000) -- --
------------ ---------- -----------
Net loss applicable to common
shareholders $(1,643,000) $ (982,000) $ (778,000)

Weighted average shares
outstanding - basic and
diluted 1,513,000 1,526,000 1,350,000
============ =========== ===========
Net loss per share - basic and
diluted $ (1.09) $ (0.64) $ (0.58)
============ ========== ===========

The effect of the Company's stock options and convertible securities was
excluded from the computations for each of the three years ended August
31, 1999, 1998 and 1997 as it is antidilutive. Accordingly, for the
periods presented, diluted net loss per share is the same as basic net
loss per share.

Issuance and Repurchase of Common Shares -

In December 1995, the Company purchased a hotel management company in
part by issuing 125,000 shares of the Company's common stock: 100,000
shares and 25,000 shares to the President and Senior Vice President of
Wesley Hotel Group ("Wesley"), respectively. See also Note 10. The
25,000 shares issued to the Senior Vice President of Wesley were subject
to a Put Agreement ("Agreement"). The Agreement states that within ninety
days after the two year anniversary of the effective date of the Agreement
(which was effective in December 1995), the Company shall be obligated to
purchase all or part of the 25,000 shares from the Senior Vice President
of Wesley at a purchase price of $4.50 per share. In March 1998, the Put
Agreement was exercised, whereby the shares were repurchased by the
Company and subsequently cancelled.

1993 Stock Option Plan -

On March 30, 1993, the Company granted options to purchase
378,000 shares of common stock at a price of approximately $1.83 per share
to its key employees and one director under the Ridgewood Hotels, Inc.
1993 Stock Option Plan (the "Plan"). The options vested over a four year
period in 25% increments. All options expire ten years from the date of
grant, unless earlier by reason of death, disability, termination of
employment, or for other reasons outlined in the Plan. As of August 31,
1999, all of the options are exercisable.

On January 28, 1994, the Company granted options to purchase 375,000
and 75,000 shares of common stock at a price of $1.00 per share to its
President and Chief Financial Officer, respectively, under the Plan. On
January 31, 1997, all of the options were exercised. In conjunction with
the exercise, a promissory note for $75,000 was received from the Chief
Financial Officer in exchange for the Company's common stock. The $75,000
promissory note due from the Chief Financial Officer was payable in full
on January 31, 1998 and accrues interest at a rate per annum of 8.25%.
The note was extended and was payable in full on January 31, 1999, along
with any accrued interest. The note was paid in full in April 1999.

Warrants -

On December 16, 1996, 75,000 warrants were issued to Hugh Jones, a
hotel acquisitions consultant for the Company. Each warrant represents
the right to purchase from the Company one share of common stock at the
exercise price of $3.50 per share. The warrants may be exercised at any
time within five years from the date of issuance.

7. Supplemental Retirement and Death Benefit Plan

The Company implemented a non-qualified Supplemental Retirement and
Death Benefit Plan with an effective date of January 1, 1987. The Plan
supplements other retirement plans and also provides pre-retirement death
benefits to participants' beneficiaries.

The net periodic pension cost includes the following components:

August 31, 1999 August 31, 1998
--------------- ---------------

Service cost for the period $39,256 $34,628
Interest cost on projected
benefit obligation 52,014 46,170
Net amortization of transition
liability 11,026 11,026
Recognized net actuarial gain (28,848) (39,938)
------- -------
Net periodic pension cost $73,448 $51,886
======= =======

The following sets forth the funded status of the plan and the amounts
shown in the accompanying balance sheet as of August 31, 1999 and 1998.

August 31, 1999 August 31, 1998
--------------- ---------------

Unfunded excess of projected benefit
obligation over plan assets $(893,274) $(819,826)
========= =========
Projected benefit obligation (778,536) (654,260)
Unrecognized net obligation at
transition 33,074 44,100
Unrecognized net gain (147,812) (209,666)
--------- ---------
Net accrued pension liability $(893,274) $(819,826)
========= =========

The weighted average discount rate used to measure the projected benefit
obligation was 7.0% in 1999 and 7.5% in 1998. There was no compensation
increase and no expected return on plan assets assumed for 1998 and 1997.

Concurrent with the implementation of the Supplemental Retirement and
Death Benefit Plan, the Company purchased key-person life insurance
contracts on the lives of the Plan participants. The policies are owned
by and payable to the Company and are "increasing whole life" insurance.
The Company pays level annual premiums, may borrow against cash values
earned, and pays interest annually on any loans which may be cumulatively
outstanding. The Company has recorded a total pension liability of
approximately $893,000 as of August 31, 1999. At August 31, 1999 the net
cash surrender value available to settle the outstanding pension liability
was approximately $45,000.

8. Investment in Unconsolidated Entities

RW Hotel Partners, L.P.

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
Georgia corporation ("Ridgewood Georgia") which became the sole general
partner in the Partnership with RW Hotel Investments Associates, L.L.C.
("Investor") as the limited partner. Ridgewood Georgia has a 1% base
distribution percentage versus 99% for the Investor. However,
distribution percentages do vary depending on certain defined preferences
and priorities pursuant to the Partnership Agreement ("Agreement") which
are discussed below. The partnership was originally formed to acquire a
hotel property in Louisville, Kentucky, but subsequently purchased five
additional hotels. The Partnership purchased the hotel in Louisville,
Kentucky for approximately $16,000,000. In December 1995 and January
1996, the Partnership purchased four hotel properties in Georgia for
approximately $15,000,000 and a hotel in South Carolina for $4,000,000,
respectively. Three of the Georgia hotels were sold at a loss in March
1998, and the hotel in Louisville was transferred to a new entity in June
1998 in conjunction with refinancing that hotel (see below). The hotel in
Orangeburg, South Carolina was sold at a loss in November 1998. The only
remaining hotel in the Partnership is in Thomasville, Georgia (see
Subsequent Events).

Income and loss are allocated to Ridgewood Georgia and the limited
partner based upon the formula for allocating Distributable Cash as
described below.

- First, to the Investor until there has been distributed to the
Investor an amount equal to a 15% cumulative internal rate of return on
the Investor's investment.

- Second, to Ridgewood Georgia until the aggregate amount received by
Ridgewood Georgia equals the aggregate cash contributions made by
Ridgewood Georgia to the Partnership.

- Third, 12% to Ridgewood Georgia and 88% to the Investor until there
has been distributed to the Investor an amount equal to a 25% cumulative
internal rate of return on Investor's investment.

- Fourth, 75% of the residual to the Investor and 25% to Ridgewood
Georgia.

Management of the Partnership intends to adopt a plan of liquidation
and will sell the remaining hotel. Based on management's estimate,
Ridgewood Georgia will not receive cash in excess of its investment in the
Partnership (see Subsequent Events).

(1) 2.5% of the gross revenues from the hotel property.

(2) 1% of the gross revenues from the hotel property as an incentive
fee if distributable cash equals or exceeds 13.5% of total aggregate
acquisition costs.

Total management fees for the years ended August 31, 1999, 1998 and
1997 were approximately $68,000, $233,000 and $301,000 respectively.

For the fiscal year ended August 31, 1997, the Company recorded
equity in income (loss) of the Partnership totaling $(134,000) net of
provision for possible losses. The Company has recorded during 1997 a
provision for possible losses of approximately $199,000 as there is no
indication that the Company will be able to recover the equity income in
the Partnership given the provisions of the partnership agreement
regarding the distribution of cash to the partners upon liquidation.

Houston Hotel, LLC

Income or loss allocated to the Company and the Managing Member is
based upon the formula for distributing cash.

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.

(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.

In connection with the management agreement, the Company received
management fees totaling approximately $98,000 and $83,000 for the fiscal
years ended August 31, 1999 and 1998, respectively.

See Subsequent Events.

RW Louisville Hotel Associates, LLC

Income or loss allocated to the Company is based upon the formula for
distributing cash.

- First, to the managing member until the managing member has been
distributed an amount equal to its accrued but unpaid 13% preferred
return.

- Second, to the Company until the Company has been distributed an
amount equal to its accrued but unpaid 13% preferred return.

- Third, 20% to the Company and 80% to the managing member.

Cash from a sale or refinancing would be distributed 10% to the
Company and 90% to the managing member.

(1) Base Management Fee equal to 1.5% of gross revenues from the
hotel property.

(2) Incentive Management Fee equal to 1.5% of gross revenues from
the hotel in which the actual net operating income exceeds 85% of the
budgeted goal for the year.

In connection with the management agreement, the Company received
management fees totaling approximately $285,000 and $57,000 for the years
ended August 31, 1999 and 1998, respectively.

See Subsequent Events.

A summary of the investment in unconsolidated entities is as follows:

1999 1998
---- ----

Beginning balance of investment
in unconsolidated entities $ 832 $ 338
Capital contributions 184 678
Equity in loss -- (98)
Distributions -- (86)
------ ------
Ending balance of investment
in unconsolidated entities $1,016 $ 832
====== ======

The unaudited combined balance sheet and statement of operations of
the unconsolidated entities are as follows:

COMBINED UNCONSOLIDATED ENTITIES
CONDENSED BALANCE SHEET
UNAUDITED
(000's omitted)

8/31/99 8/31/98
---------- ----------

CURRENT ASSETS $ 2,018 $ 2,730
PROPERTY AND EQUIPMENT, net 37,499 36,410
INTANGIBLE ASSETS, net 629 565
---------- ----------
TOTAL ASSETS $ 40,146 $ 39,705
========== ==========

CURRENT LIABILITIES $ 1,854 $ 1,850
LONG-TERM DEBT 31,622 28,382
---------- ----------
TOTAL LIABILITIES 33,476 30,232

CAPITAL, net 6,670 9,473
---------- ----------
TOTAL LIABILITIES AND
CAPITAL $ 40,146 $ 39,705
========== ==========

COMBINED UNCONSOLIDATED ENTITIES
CONDENSED STATEMENT OF OPERATIONS
UNAUDITED
($000's Omitted)

8/31/99 8/31/98 8/31/97
--------- --------- ---------

HOTEL OPERATIONS:
Revenues $ 11,681 $ 17,057 $ 17,058
Operating Expenses 10,146 12,781 13,696
---------- ---------- ----------
Income From Hotel Operations 1,535 4,276 3,362
---------- ---------- ----------
Interest Expense 2,632 2,059 1,682
Depreciation/Amortization 1,562 1,943 1,926
Loss due to change to liquidation
basis of accounting for RW Hotel
Partners, L.P. -- 2,828 --
---------- ---------- ----------
NET INCOME (LOSS) $ (2,659) $ (2,554) $ (246)
========== ========== ==========

9. Employee Savings Plan

The Ridgewood Hotels Employee Savings Plan ("Savings Plan") is a
savings and salary deferral plan which is qualified under Sections 401(a)
and 401(k) of the Internal Revenue Code of 1986. The Savings Plan
includes all employees of the Company who have completed one year of
service and have attained age twenty-one.

Each participant in the Savings Plan may elect to reduce his or her
compensation by any percentage, not to exceed 15% of compensation when
combined with any Matching Basic or Discretionary Employer Contributions
(below) made on behalf of the participant, and have such amount
contributed to his or her account under the Savings Plan. Elective
employer contributions are made prior to the withholding of income taxes
on such amounts. A participant may also elect to contribute to the Plan
an amount of cash or property equal to or up to 10% of his or her
compensation ("Voluntary Contributions"). Voluntary Contributions are
made on an after-tax basis.

The Savings Plan provides for an employer matching contribution in an
amount equal to 50% of the elective employer contributions, provided that
in no event shall such employer matching contributions exceed 3% of the
participant's compensation. In addition, the Board of Directors of the
Company is authorized to make discretionary contributions to the Savings
Plan out of the Company's current or accumulated profits ("Discretionary
Contributions"). Discretionary Contributions are allocated among those
participants who complete at least 1,000 hours of service during the plan
year and are employed by the Company on the last day of the plan year.

Employees are subject to a seven year graduated vesting schedule with
respect to Basic Employer Contributions, Matching Employer Contributions
and Discretionary Contributions.

Distributions from the Savings Plan will generally be available upon
or shortly following a participant's termination of employment with the
Company, with additional withdrawal rights with respect to Voluntary
Contributions.

For the fiscal years ending August 31, 1999, 1998 and 1997, expense
for the Employee Savings Plan was approximately $18,000, $18,000 and
$21,000, respectively.

10. Acquisition of Hotel Management Company

In December 1995, the Company acquired the Wesley Hotel Group, a
hotel management company located in Atlanta, Georgia. At the time of
acquisition, Wesley managed five hotels. The acquisition has been
accounted for using the purchase method of accounting. In conjunction
with the acquisition, the Company issued 125,000 shares of common stock
with a determined market value of $1.50 per share (see Note 6) and assumed
three promissory notes with a combined outstanding principal of
approximately $106,000, bringing the total investment in Wesley to
$293,000. The investment recorded by the Company for the acquisition is
being amortized over the useful life of the assets acquired. As of August
31, 1999 the useful life of the assets acquired was determined to be -0-,
so the entire investment has been fully amortized.

11. Subsequent Events

On September 30, 1999, the Company purchased additional equity in
Louisville Hotel, LLC. The Company increased its ownership from 10% to
80%. The consideration issued to acquire the increased ownership was
$2,500,000, composed of the following:

Transfer of 10% ownership interest in
Houston Hotel, LLC $443,000

Cash payment 124,000

Promissory note to Louisville Hotel, L.P.
secured by the Company's ownership
interest in Louisville Hotel, LLC(2) 1,333,000

Promissory note to Louisville Hotel, L.P.
secured by the Company's Phoenix,
Arizona land(2) 300,000

Promissory note to Louisville Hotel, L.P.
secured by one parcel of the Company's
Longwood, Florida land (2) 300,000
----------
Total additional equity in Louisville Hotel,
LLC $2,500,000
==========

(1) The cash to make this payment was obtained from Louisville
Hotel, LLC in connection with a modification of the management
contract of the hotel. This amount represents the unamortized
portion of the original $200,000 participation fee paid to
Louisville Hotel, LLC to acquire the management contract of the
hotel.

(2) The three promissory notes are cross defaulted. The three
promissory notes bear interest at 13% and mature on September
30, 2002.

With 80% ownership, the Company is now the Managing Member of
Louisville Hotel, LLC. Louisville Hotel, L.P. now has 20% ownership in
Louisville Hotel, LLC and is the Non-Managing Member.

Income or loss allocated to the Company is based upon the formula for
distributing cash.

- First, to the Company in an amount equal to the cumulative interest
paid on the acquisition loans of $1,333,000, $300,000 and $300,000. The
Company would then use these funds to pay Louisville Hotel, L.P.

- Second, a 13% preferred return to Louisville Hotel, L.P. on their
original $3,061,000 investment.

- Third, a 13% preferred return to the Company on its capital
contribution of $1,207,000.

- Fourth, 80% to the Company and 20% to Louisville Hotel, L.P.

Cash from a sale or refinancing would be distributed 10% to Louisville
Hotel, L.P. and 90% to the Company. If a sale or refinancing occurs after
September 30, 2000 but before September 30, 2001, then the distribution
would change to 15% and 85%, respectively.

On November 18, 1999, RW Hotel Partners, L.P. sold the partnership's
remaining hotel in Thomasville, Georgia at a loss. The partnership will
be dissolved, and the Company will neither receive cash nor be required to
pay out cash related to the partnership.

Report of Independent Accountants

November 17, 1999

To the Board of Directors and
Shareholders of Ridgewood Hotels, Inc.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of cash flows and of
shareholders' investment present fairly, in all material respects, the
financial position of Ridgewood Hotels, Inc. and its subsidiaries (the
"Company") at August 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended August 31, 1999, in conformity with generally accepted accounting
principles. 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. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion
expressed above.

PRICEWATERHOUSECOOPERS LLP
Atlanta, Georgia

Market Information

The Company's common stock is listed in the National Association of
Securities Dealers (NASDAQ) over-the-counter bulletin board service.

Transfer Agent

Harris Trust and Savings Bank, Dallas, Texas is the Company's stock
transfer agent. Harris maintains the Company's shareholder records. To
change name, address or ownership of stock, to report lost certificates,
or to consolidate accounts, contact:

Harris Trust and Savings Bank
1601 Elm Street
Thanksgiving Tower, Suite 2320
Dallas, Texas 75201
(214) 665-6033

General Counsel

Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303

Independent Accountants

PricewaterhouseCoopers LLP
50 Hurt Plaza
Suite 1700
Atlanta, Georgia 30303

Shareholder and General Inquiries

The Company is required to file an Annual Report on Form 10-K for its
fiscal year ended August 31, 1999 with the Securities and Exchange
Commission. Copies of this annual report may be obtained without charge
upon written request to:

Ridgewood Hotels, Inc.
Shareholder Relations
2859 Paces Ferry Road
Suite 700
Atlanta, Georgia 30339
(770) 434-3670