EXHIBIT 99.1
EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES
These unaudited pro forma consolidated statements of operations are presented
as if the acquisitions of the Acquired Facilities and the proposed acquisitions
of the KHEC Facility and the M & M Facilities and the related issuances of
shares of common stock had occurred at the beginning of the relevant period.
For the year ended December 31, 1995, the statement also reflects the
acquisition of the Marietta Facility and estimated incremental expenses to
operate as a publicly held company as if it were publicly held on the date of
inception. Such pro forma information is based in part upon the consolidated
statements of operations of Extended Stay America, Inc. and subsidiaries and
the statements of operations of Welcome, Apartment/Inn, Hometown Inn, KHEC,
Gwinnett, and the M & M Facilities. They should be read in conjunction with the
financial statements listed in the index on page F-1 of this Prospectus. In
management's opinion, all adjustments necessary to reflect the effects of these
transactions have been made. The acquisition of the lodging facility from AATI
has not been included in these unaudited statements of operations because the
purchase price and the unaudited results of operations for the periods, when
measured in relation to the Company, did not meet certain materiality standards
and can be excluded as permitted by the rules and regulations of the Securities
and Exchange Commission.
These unaudited pro forma consolidated statements of operations are not
necessarily indicative of what the actual results of operations of the Company
would have been assuming such transactions had been completed as of the
beginning of the period, nor do they purport to represent the results of
operations for any future periods. Results of operations and the related
earnings or loss per share for future periods will be affected by a number of
factors, including but not limited to, the number of facilities opened and the
operating results therefrom, interest costs incurred on indebtedness (including
the amortization of the fees paid in cash and common stock to DLJ), corporate
operating and property management expenses, site selection costs and the number
of future shares issued.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 9, 1995 (INCEPTION)
THROUGH DECEMBER 31, 1995 (UNAUDITED)
PRO FORMA
COMPLETED COMPLETED PROPOSED
ACTUAL ACQUISITIONS ADJUSTMENTS ACQUISITIONS ACQUISITIONS ADJUSTMENTS PRO FORMA
Revenue:
Room revenue........... $ 817,133 $5,957,989 $ (135,614)(1) $6,639,508 $6,940,992 $ (152,131)(1) $13,428,369
Management fees........ 17,775 (17,775)(2)
Other revenue.......... 42,977 277,596 (6,398)(1) 314,175 431,323 (9,453)(1) 736,045
----------- ---------- ---------- ---------- ---------- ---------- -----------
Total revenue........ 877,885 6,235,585 (159,787) 6,953,683 7,372,315 (161,584) 14,164,414
----------- ---------- ---------- ---------- ---------- ---------- -----------
Costs and expenses:
Property operating
expenses.............. 332,523 2,655,610 (61,941)(1) 2,908,417 3,045,884 (66,759)(1) 5,887,542
(17,775)(2)
Corporate operating
and property
management expenses... 2,042,039 391,114 800,000 (3) 3,233,153 543,464 (58,093)(2) 3,718,524
Site selection costs... 512,529 512,529 512,529
Depreciation and
amortization.......... 146,726 623,721 263,067 (4) 1,033,514 737,220 422,780 (4) 2,193,514
----------- ---------- ---------- ---------- ---------- ---------- -----------
Total costs and
expenses............ 3,033,817 3,670,445 983,351 7,687,613 4,326,568 297,928 12,312,109
----------- ---------- ---------- ---------- ---------- ---------- -----------
Income (loss) from
operations.......... (2,155,932) 2,565,140 (1,143,138) (733,930) 3,045,747 (459,512) 1,852,305
Interest income
(expense).............. 848,510 (1,104,633) 1,104,633 (5) 848,510 (1,733,591) 1,689,591 (5) 804,510
----------- ---------- ---------- ---------- ---------- ---------- -----------
Income (loss) before
income taxes.......... (1,307,422) 1,460,507 (38,505) $ 114,580 $1,312,156 $1,230,079 $ 2,656,815
Provision for income
taxes................. (45,000)(6) (45,000) (991,000)(6) (1,036,000)
----------- ---------- ---------- ---------- ---------- ---------- -----------
Net income (loss)...... $(1,307,422) $1,460,507 $ (83,505) $ 69,580 $1,312,156 $ 239,079 $ 1,620,815
=========== ========== ========== ========== ========== ========== ===========
Net income (loss) per
common share(7)....... $ (0.10) $ 0.01 $ 0.11
=========== ========== ===========
Weighted average
number of common and
equivalent shares
outstanding during
the period(7)......... 12,652,110 13,849,898 15,260,204
=========== ========== ===========
F-2
EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
PRO FORMA
COMPLETED COMPLETED PROPOSED
ACTUAL ACQUISITIONS ADJUSTMENTS ACQUISITIONS ACQUISITIONS ADJUSTMENTS PRO FORMA
Revenue:
Room revenue........... $ 1,137,841 $778,821 $ $ 1,916,662 $1,827,570 $ $ 3,744,232
Other revenue.......... 32,988 30,016 63,004 97,123 160,127
----------- -------- ------- ----------- ---------- --------- -----------
Total revenue........ 1,170,829 808,837 1,979,666 1,924,693 3,904,359
Costs and expenses:
Property operating
expenses.............. 442,540 288,123 730,663 790,051 1,520,714
Corporate operating
and property
management expenses... 1,580,655 58,937 1,639,592 145,739 (11,260)(2) 1,774,071
Site selection costs... 823,733 823,733 823,733
Depreciation and
amortization.......... 203,343 73,199 20,238 (4) 296,780 186,215 103,785 (4) 586,780
----------- -------- ------- ----------- ---------- --------- -----------
Total costs and
expenses............ 3,050,271 420,259 20,238 3,490,768 1,122,005 92,525 4,705,298
Income (loss) from
operations.......... (1,879,442) 388,578 (20,238) (1,511,102) 802,688 (92,525) (800,939)
Interest income
(expense).............. 1,450,132 (64,151) 64,151 (5) 1,450,132 (424,570) 399,570 (5) 1,425,132
----------- -------- ------- ----------- ---------- --------- -----------
Income (loss) before
income taxes........... (429,310) 324,427 43,913 (60,970) 378,118 307,045 624,193
Provision for income
taxes.................. (243,000)(6) (243,000)
----------- -------- ------- ----------- ---------- --------- -----------
Net income (loss)....... $ (429,310) $324,427 $43,913 $ (60,970) $ 378,118 $ 64,045 $ 381,193
=========== ======== ======= =========== ========== ========= ===========
Net loss per common
share(7)............... $ (0.02) $ (0.00) $ 0.02
=========== =========== ===========
Weighted average number
of common and
equivalent shares
outstanding during the
period(7).............. 22,467,393 23,025,192 24,785,595
=========== =========== ===========
- ---------------------
(1) To eliminate the estimated revenues and expenses for the Acquired
Facilities, the Marietta Facility, the KHEC Facility, and the M & M
Facilities for the period January 1, 1995 through January 8, 1995 in order
to present a period comparable to the historical period for the Company.
(2) To eliminate in consolidation management fees charged to the Marietta
Facility prior to being acquired by the Company and franchise fees incurred
by KHEC.
(3) Reflects estimated increases in: (i) salaries and benefits--$238,000; (ii)
state capital-based taxes--$150,000; (iii) audit and tax fees--$75,000;
(iv) legal expenses--$37,000; (v) directors' and officers' insurance--
$150,000; (vi) additional expenses--$150,000, as if the Company had been a
public company on the date of inception.
(4) To adjust depreciation and amortization expense to reflect the expense
based on the purchase price paid and to be paid by the Company for the
Acquired Facilities, the Marietta Facility, the KHEC Facility, and the M &
M Facilities for any period prior to acquisition.
(5) To eliminate non-continuing interest expense paid by the Acquired
Facilities, the Marietta Facility, the KHEC Facility, and the M & M
Facilities prior to acquisition, net of interest income earned by the
Company on the amount of cash used in the acquisitions.
(6) To provide for estimated income tax expense.
(7) See notes 2, 5 and 14 to the Company's consolidated financial statements.
F-3
EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(UNAUDITED)
This unaudited pro forma consolidated balance sheet is presented as if the
June 1996 Offering had been completed and the acquisition of the Gwinnett
Facility and the proposed acquisitions of the KHEC Facility and the M&M
Facilities had occurred on March 31, 1996. Such pro forma information is based
upon the consolidated balance sheet of the Company and the balance sheets of
Gwinnett, KHEC, and the M&M Facilities as of March 31, 1996. It should be read
in conjunction with the financial statements listed in the index on page F-1 of
this Prospectus. In management's opinion, all adjustments necessary to reflect
the effects of these transactions have been made.
This unaudited pro forma consolidated balance sheet is not necessarily
indicative of what the actual financial position would have been assuming such
transactions had been completed as of March 31, 1996, nor does it purport to
represent the future financial position of the Company.
ACQUISITIONS
SUBSEQUENT
TO MARCH 31,
1996 AND
PROPOSED
ACTUAL ACQUISITIONS ADJUSTMENTS PRO FORMA
ASSETS
Current assets:
Cash and cash
equivalents.......... $104,010,918 $ 628,882 $ (3,098,882)(1) $391,358,418
289,817,500 (2)
Refundable deposits... 621,654 621,654
Supply inventories.... 291,266 88,050 281,950 (1) 661,266
Prepaid expenses...... 366,142 2,198 (2,198)(1) 366,142
Other current assets.. 56,768 180,808 (180,808)(1) 56,768
------------ ----------- ------------ ------------
Total current
assets............. 105,346,748 899,938 286,817,562 393,064,248
------------ ----------- ------------ ------------
Property and equipment,
net.................... 51,658,313 20,257,229 20,347,771 (1) 92,263,313
Site deposits and
preacquisition costs... 3,913,811 3,913,811
Deferred loan costs..... 5,294,114 8,327 (8,327)(1) 5,294,114
Other assets............ 156,741 102,532 (102,532)(1) 156,741
------------ ----------- ------------ ------------
$166,369,727 $21,268,026 $307,054,474 $494,692,227
============ =========== ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...... $ 925,504 $ 136,042 $ (136,042)(1) $ 925,504
Accrued salaries and
related expenses..... 67,855 22,177 (22,177)(1) 67,855
Due to related
parties.............. 71,845 211,334 (211,334)(1) 71,845
Other accrued
expenses............. 440,612 311,636 (891)(1) 751,357
Deferred revenue...... 330,856 19,087 (19,087)(1) 330,856
Current maturities of
long-term debt....... 6,335,578 (6,335,578)(1)
------------ ----------- ------------ ------------
Total current
liabilities........ 1,836,672 7,035,854 (6,725,109) 2,147,417
------------ ----------- ------------ ------------
Long-term debt.......... 13,564,248 (13,564,248)(1)
Shareholders' Equity:
Preferred stock, $.01
par value, 10,000,000
shares authorized, no
shares issued or
outstanding..........
Common stock, $.01 par
value, 200,000,000
shares authorized,
22,853,092 and
34,039,192 shares
issued and
outstanding for
Actual and Pro Forma,
respectively......... 228,531 226,733 (212,622)(1) 340,392
97,750 (2)
Additional paid in
capital.............. 166,041,256 30,270 38,149,874 (1) 493,941,150
289,719,750 (2)
Due from affiliated
companies and prepaid
services............. (521,395) 521,395 (1)
Accumulated
(deficit)/retained
earnings............. (1,736,732) 932,316 (932,316)(1) (1,736,732)
------------ ----------- ------------ ------------
Total shareholders'
equity............. 164,533,055 667,924 327,343,831 492,544,810
------------ ----------- ------------ ------------
$166,369,727 $21,268,026 $307,054,474 $494,692,227
============ =========== ============ ============
- ---------------------
(1) To reflect the purchase adjustments relating to the acquisition of the
Gwinnett Facility for 172,100 shares of Common Stock and the proposed
acquisitions of the KHEC Facility and the M&M Facilities assuming the
acquisitions are completed through the issuance of approximately 101,000
and 1,138,000 shares, respectively, of Common Stock and to reflect the use
of $2,000,000 of the Company's cash representing the estimated costs to
remodel and to convert the KHEC property to an extended stay lodging
facility and the use of $470,000 of the Company's cash to retire debt of
the M&M Facilities assumed by the Company.
(2) To reflect the estimated net proceeds of the June 1996 Offering.
F-4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Extended Stay America, Inc.
Ft. Lauderdale, Florida
We have audited the accompanying combined balance sheets of Boulder Manor,
Inc., Melrose Suites, Inc., Nicolle Manor and St. Louis Manor, Inc. (the "M & M
Facilities") as of December 31, 1994 and 1995, and the related combined
statements of operations and equity and cash flows for each of the three years
in the period ended December 31, 1995. These financial statements are the
responsibility of the M & M Facilities' management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the M & M Facilities
at December 31, 1994 and 1995 and the combined results of their operations and
their cash flows for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Spartanburg, South Carolina
June 27, 1996
F-48
M & M FACILITIES
COMBINED BALANCE SHEETS
(UNAUDITED)
MARCH 31,
DECEMBER 31, 1996
------------------------ -----------
ASSETS 1994 1995
Current assets:
Cash and cash equivalents............. $ 277,626 $ 307,376 $ 280,111
Accounts receivable................... 53,191 63,729
Supply inventories.................... 14,762 14,762
Other current assets.................. 9,592 15,112 61,954
----------- ----------- -----------
Total current assets................ 287,218 390,441 420,556
----------- ----------- -----------
Property and equipment, net............. 9,721,327 16,195,066 16,171,969
Other assets............................ 153,437 85,462 91,957
----------- ----------- -----------
$10,161,982 $16,670,969 $16,684,482
=========== =========== ===========
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable...................... $ 107,733 $ 119,915 $ 102,385
Accrued expenses...................... 12,276 47,627 79,760
Deposits.............................. 46,500 60,812 14,858
Accrued interest expense.............. 87,346 122,698 141,641
Accounts payable to affiliated
company.............................. 108,546 97,848
Current maturities of long-term debt
and notes payable to shareholders.... 464,967 1,014,720 6,071,772
----------- ----------- -----------
Total current liabilities........... 718,822 1,474,318 6,508,264
Long-term debt.......................... 4,318,218 10,139,340 8,301,363
Notes payable to shareholders........... 5,736,898 5,263,995 1,822,122
----------- ----------- -----------
Total liabilities................... 10,773,938 16,877,653 16,631,749
Equity (deficit)........................ (214,235) 377,284 628,318
Advances to shareholders................ (397,721) (583,968) (575,585)
----------- ----------- -----------
$10,161,982 $16,670,969 $16,684,482
=========== =========== ===========
The accompanying notes are an integral part of the combined financial
statements.
F-49
M & M FACILITIES
COMBINED STATEMENTS OF OPERATIONS AND EQUITY (DEFICIT)
(UNAUDITED)
FOR THE THREE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------- ----------------------
1993 1994 1995 1995 1996
Revenue:
Room revenue.......... $3,410,258 $ 3,712,548 $5,685,874 $1,336,776 $1,596,144
Other, net............ 204,638 280,626 361,822 75,998 83,826
---------- ----------- ---------- ---------- ----------
Total revenue....... 3,614,896 3,993,174 6,047,696 1,412,774 1,679,970
---------- ----------- ---------- ---------- ----------
Costs and expenses:
Property operating
expenses............. 1,341,583 1,389,265 2,288,116 505,235 622,586
Property management
fees to related
party................ 314,327 323,429 432,102 106,942 127,692
Depreciation and
amortization......... 585,918 448,277 648,202 170,102 168,083
---------- ----------- ---------- ---------- ----------
Total costs and
expenses........... 2,241,828 2,160,971 3,368,420 782,279 918,361
---------- ----------- ---------- ---------- ----------
Income from operations.. 1,373,068 1,832,203 2,679,276 630,495 761,609
Other income............ 168,503
Interest expense........ 1,027,305 1,016,868 1,614,580 413,769 392,734
---------- ----------- ---------- ---------- ----------
Net income.......... 345,763 983,838 1,064,696 216,726 368,875
Equity (deficit),
beginning of period.... 574,410 416,751 (214,235) (214,235) 377,284
Distributions......... (503,422) (1,614,824) (473,177) (130,168) (117,841)
---------- ----------- ---------- ---------- ----------
Equity (deficit), end of
period................. $ 416,751 $ (214,235) $ 377,284 $ (127,677) $ 628,318
========== =========== ========== ========== ==========
The accompanying notes are an integral part of the combined financial
statements.
F-50
M & M FACILITIES
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------- ---------------------
1993 1994 1995 1995 1996
Cash flows from
operating activities:
Net income............ $ 345,763 $ 983,838 $1,064,696 $ 216,726 $ 368,875
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation........ 306,920 310,933 577,679 152,742 150,453
Amortization........ 278,998 137,344 70,523 17,360 17,630
Change in:
Supply
inventories...... (14,762) (15,000)
Accounts
receivable....... (53,191) (32,448) (10,538)
Other current
assets........... (13,273) 3,904 (5,520) (45,347) (46,842)
Accounts payable.. 12,663 (12,339) 12,182 (21,109) (17,530)
Deposits.......... 14,312 (22,584) (45,954)
Accrued interest.. (2,476) 3,823 35,352 150,585 18,943
Accounts payable
to affiliated
company.......... 108,546 61,567 (10,698)
Accrued expenses.. 2,848 240 35,351 41,323 32,133
---------- ----------- ---------- ---------- ---------
Net cash provided by
operating activities. 931,443 1,427,743 1,845,168 503,815 456,472
---------- ----------- ---------- ---------- ---------
Cash flows from
investing activities,
Purchases of property
and equipment.......... (46,502) (109,354) (7,051,417) (6,906,546) (127,356)
---------- ----------- ---------- ---------- ---------
Cash flows from
financing activities:
Payments of deferred
loan costs........... (78,497) (86,269) (2,549) (748) (24,125)
Collections from
(advances to)
shareholders......... 41,269 (15,419) (186,247) (64,880) 8,383
Principal payments on
long-term debt....... (18,487) (20,797) (165,539) (41,385) (43,563)
Principal payments on
notes payable to
shareholders......... (354,243) (400,452) (778,869) (193,552) (179,235)
Proceeds from issuance
of long-term debt.... 59,931 840,409 6,189,034 6,189,034
Proceeds from notes
payable to
shareholders......... 653,346 653,346
Distributions......... (503,422) (1,614,824) (473,177) (130,168) (117,841)
---------- ----------- ---------- ---------- ---------
Net cash (used
in) provided by
financing
activities..... (853,449) (1,297,352) 5,235,999 6,411,647 (356,381)
---------- ----------- ---------- ---------- ---------
Net increase (decrease)
in cash................ 31,492 21,037 29,750 8,916 (27,265)
Cash at beginning of
periods................ 225,097 256,589 277,626 277,626 307,376
---------- ----------- ---------- ---------- ---------
Cash at end of periods.. $ 256,589 $ 277,626 $ 307,376 $ 286,542 $ 280,111
========== =========== ========== ========== =========
Supplemental cash flow
disclosure, interest
paid................... $1,020,889 $ 1,005,894 $1,538,714 $ 253,178 $ 366,135
========== =========== ========== ========== =========
The accompanying notes are an integral part of the combined financial
statements.
F-51
M & M FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation. The combined financial statements include the assets,
liabilities, equity and results of operations of three S-Corporations, (Boulder
Manor, Inc., Melrose Suites, Inc. and St. Louis Manor, Inc.), and of a
partnership, (Nicolle Manor) which are under common ownership and control.
Where referred to herein, the "M & M Facilities" include the four entities
listed above. All significant intercompany accounts and transactions have been
eliminated.
Description of Business. The M & M Facilities operate four extended stay
facilities in Las Vegas, Nevada. On June 26, 1996, an agreement was reached to
sell the property and equipment of the M & M Facilities to Extended Stay
America, Inc.
Pervasiveness 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 disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk. The M & M Facilities maintained deposits
totalling $127,496 at December 31, 1995 with one bank. Deposits in excess of
$100,000 are not insured by the Federal Deposit Insurance Corporation.
Cash and cash equivalents. Cash and cash equivalents consist of cash on hand
and on deposit, and highly liquid instruments with maturities of three months
or less when purchased. The carrying amount of cash and cash equivalents is the
estimated fair value at December 31, 1995.
Supply Inventory. Supply inventories consist primarily of linen, cleaning and
other room supplies and are stated at the lower of cost or market.
Property and Equipment. Property and equipment is stated at cost.
Depreciation is computed by the straight-line method over the estimated useful
lives of the assets. Maintenance and repairs are charged to operations as
incurred; major renewals and improvements are capitalized. The gain or loss on
the disposition of property and equipment is recorded in the year of
disposition.
The estimated useful lives on the assets are as follows:
Buildings and improvements...................................... 40 years
Furniture, fixtures and equipment............................... 5-7 years
Deferred Loan Costs. The M & M Facilities have incurred costs in obtaining
financing. These costs have been deferred and are being amortized over the life
of the respective loan using the effective yield method. Deferred loan costs
are included in other assets.
Income Taxes. Any income taxes related to income earned by the M & M
Facilities are paid by the shareholders and partners.
Revenue Recognition. Room revenue and other income are recognized when
earned. Prepayments and deposits are recorded as unearned revenue.
Unaudited Interim Financial Statements. The unaudited interim financial
statements have been prepared pursuant to generally accepted accounting
principles applicable to interim financial statements and include all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results of
F-52
M & M FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
operations for the interim periods presented. All such adjustments are, in the
opinion of management, of a normal recurring nature. Results for the three
months ended March 31, 1995 and 1996 are not necessarily indicative of results
to be expected for a full year. All data at March 31, 1995 and 1996 and for
each of the three-month periods then ended are unaudited.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31:
1994 1995
Land............................................. $ 1,775,107 $ 2,525,107
Buildings and improvements....................... 8,493,697 13,689,568
Furniture and fixtures........................... 795,334 1,900,881
----------- -----------
11,064,138 18,115,556
Less accumulated depreciation.................... 1,342,811 1,920,490
----------- -----------
$ 9,721,327 $16,195,066
=========== ===========
3. LONG-TERM DEBT AND NOTES PAYABLE TO SHAREHOLDERS:
1994 1995
Long-term debt and notes payable to shareholders
consist of the following as of December 31:
Mortgage loan, principal and interest payable monthly
at approximately $34,550 through June 1, 2019,
interest at 9.75%..................................... $4,179,775 $4,136,257
Mortgage loan principal and interest payable monthly at
approximately $47,230 through July 1, 2002 with a
final payment of approximately $5,240,000 in July
2002, interest at 8.134% in 1995 and thereafter at the
bank's current index rate (based on cost of funds of
Federal Home Loan Bank of San Francisco) plus 3.25%... 5,869,141
Note payable to shareholders, principal and interest
payable at approximately $52,260 through December
1996, with a final payment of $3,019,487 on January 1,
1997, interest at 10%................................. 3,875,260 3,609,222
Note payable to shareholders, principal and interest
payable at approximately $32,700 through December
1996, with a final payment of $1,940,348 on January 1,
1997, interest at 10%................................. 2,301,051 2,127,676
Other related party note payable....................... 313,890
Other.................................................. 163,997 361,869
----------- -----------
10,520,083 16,418,055
Less current maturities................................ 464,967 1,014,720
----------- -----------
Long-term debt, net of current maturities.............. $10,055,116 $15,403,335
=========== ===========
The notes payable to shareholders are collateralized by real property at two
of the entended stay facilities. The shareholders have related loans with a
financial institution collateralized by these properties. These loans with the
financial institutions total approximately $8,675,000 at December 31, 1995.
The mortgage loans are collateralized by substantially all of the M & M
Facilities property and equipment. Aggregate maturities of long term debt are
as follows: 1996--$1,014,720; 1997--$5,477,558; 1998--$217,487; 1999--$241,077;
2000--$212,019; thereafter--$9,255,194.
The M & M Facilities believe that there is no material difference in the
carrying amount and estimated fair value of the long-term debt.
F-53
M & M FACILITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. RELATED PARTY TRANSACTIONS:
Management fees charged by a related entity controlled by the
shareholders/partners and interest charged on notes payable to
shareholders/partners are as follows:
MANAGEMENT INTEREST
FEES EXPENSE
1993.................................................. $314,327 $668,754
1994.................................................. 323,429 630,263
1995.................................................. 432,102 598,482
The M & M Facilities purchased substantially all the property and equipment
from an affiliated company which constructed the extended stay facilities.
5. LITIGATION:
From time to time, the M & M Facilities have been involved in various legal
proceedings. Management believes that all such litigation is routine in nature
and incidental to the conduct of its business, and that none of such
litigation, if determined adversely to the M & M Facilities, would have a
material adverse effect on their financial condition.
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