SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 2000, COMMISSION FILE NUMBER 0-1957
UPTOWNER INNS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
West Virginia 55-0457171
-------------------------------- --------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1415 4th Avenue, Huntington, West Virginia 25701
------------------------------------------ ----------
Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code (304) 525-7741
--------------
Securities registered pursuant to 12(g) of the Act:
1,583,563 shares of common stock - $0.50 par value
--------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and, (2) has been subject to
such filing requirements for the past 90 days.
X Yes No
---- ----
The aggregate market value of the voting stock held by non-affiliates
of the registrant, as of the 30th day of June 2000, was $791,782.
As of June 30, 2000, the close of the period covered by this report,
the registrant had 1,583,563 shares of its common capital stock issued and
outstanding. The registrant has issued no other stock.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
The definitive proxy statement to be filed by the registrant, pursuant
to Regulation 14A, is incorporated herein by reference in Part III, Items
10 and 11.
-1-
UPTOWNER INNS, INC.
For the Year Ended June 30, 2000
Table of Contents
PART I
Page
----
<s> <c> <c>
Item 1: Business 3
Item 2: Properties 4-5
Item 3: Legal Proceedings 5
Item 4: Submission of Matters to a Vote of Security Holders 6
Part II
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Item 5: Market for Registrant's Common Stock and Related
Security Holder Matters 6
Item 6: Selected Financial Data 6-7
Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Item 8: Financial Statements 12-28
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 29
Part III
--------
Item 10: Directors and Executive Officers of the Registrant 30
Item 11: Executive Compensation 30
Item 12: Security Ownership of Certain Beneficial Owners
and Management 30-31
Part IV
-------
Item 14: Exhibits, Financial Statement Schedules and
Reports on Form 8-K 32-34
Signatures 35
-2-
PART I
Item 1. BUSINESS.
--------
(a) The registrant, Uptowner Inns, Inc., was incorporated in the State
of West Virginia on July 1, 1961. The registrant operates a 137 room, full
service hotel built in 1962 by the registrant and operated by the registrant.
On January 17, 1997, the Holiday Inn franchise was terminated. The franchise
required standard fees for advertising, reservation system, etc. In late
August 1998, the registrant opened a 135 room Holiday Inn Hotel & Suites
facility adjacent to the Huntington Civic Arena.
The clientele are predominantly business travelers due to the downtown
location. Main hotel occupancy for the year averaged 24% with an average of
$50. rate per room. This yielded a revenue for available rooms of $4,445.
per year. The new Holiday Inn Hotel & Suites occupancy for the year averaged
67% with an average of $82. rate per room. This yielded a revenue for
available rooms of $20,172.
A wholly owned subsidiary of the registrant, Motel and Restaurant
Supply, which was incorporated in the State of West Virginia on July 16,
1966, has had no activity since 1981.
Neither the registrant nor any of its subsidiaries has experienced
bankruptcy, receivership or similar proceedings; has been involved in
reclassification, merger or consolidation; has acquired or, except as
hereinafter set forth, disposed of any material amount of assets otherwise
than in the ordinary course of business; or has undertaken any material
change in the mode of conducting its business.
(b) The registrant is engaged in substantially two lines of businesses,
to wit, the operation of motor hotels with dining and banquet facilities,
and residential/commercial rentals. The income of the registrant from
rentals did not exceed ten percent of the consolidated revenue of the
registrant and its subsidiaries for years ended June 30, 2000 and 1999. For
the year ended June 30, 1998, income from rentals exceeded ten percent.
Consolidated revenue did not exceed $50,000,000. during any of the last
three fiscal years.
The hotel industry is highly competitive with the registrant competing
against numerous national hotel franchises in Huntington, West Virginia. As
the Companies' operations are generally one business segment, its competition
locally includes Radisson hotel, Ramada Inn, Best Western, Comfort Inn, Red
Roof Inn, and Hampton Inn.
Seasonality directly affects this business as a result of people not
traveling or vacationing in large numbers in the late fall and winter because
of poor weather at these geographical locations.
At June 30, 2000, the registrant and its subsidiaries employ
approximately 90 employees.
(c) The registrant has no foreign operation.
-3-
ITEM 2. PROPERTIES.
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(a) The main physical property of the registrant is a 140 unit, four
story motor hotel, with swimming pool, dining, banquet, and lounge
facilities, located in downtown Huntington, West Virginia, at 1415 Fourth
Avenue. This property is owned in fee by the registrant. The motor hotel
is subject to a mortgage in favor of the City National Bank, Huntington, West
Virginia, in the original amount of $1,648,107., payable in monthly
installments of $17,268. per month, including interest at 9.42% until
December 20, 2002, at which time the variable rate may change. The original
note of $2,000,000., along with two (2) other promissory notes, were
refinanced with the above mentioned note on December 20, 1999.
(b) The registrant owns in fee two lots, used for the over-flow
parking, across the street from its main motor hotel at 1432-34 Fourth
Avenue, in Huntington, West Virginia.
(c) The registrant owns in fee an undeveloped lot acquired for future
development or parking, across an alley from its main motor hotel at 1400
Fifth Avenue in Huntington, West Virginia. The lot is available for sale.
(d) The registrant owns in fee two lots immediately west of its motor
hotel, 1401 Fourth Avenue, in Huntington, West Virginia, acquired for future
development and currently used for parking. This property is subject to a
first mortgage in favor of the City National Bank in the original amount of
$1,648,107. as noted in Item 2 (a).
(e) The registrant owns in fee and operates a 40 unit, two story
apartment building within one city block of the motor hotel, at 1340 Fourth
Avenue, in Huntington, West Virginia.
(f) The registrant owns in fee a lot acquired and used for parking,
across the street from its main motor hotel at 1420 Fourth Avenue, in
Huntington, West Virginia.
(g) The registrant owns in fee an undeveloped lot acquired for
future development or for parking, across an alley from its main motor
hotel at 1438 Fifth Avenue, in Huntington, West Virginia. It is anticipated
the lot will be sold within the next fiscal year.
(h) The registrant owns in fee a lot improved by a three story
building within one city block of the main motor hotel at 1416-18 Fourth
Avenue, in Huntington, West Virginia. This property is subject to a mortgage
in favor of Betty M. Dove, in the original amount of $76,000., 10% interest,
maturing June 2002, the balance of which was $16,602. at June 30, 2000.
This property is utilized for the Corporate offices and rental units.
-4-
(i) The registrant owns in fee a vacant lot on the west side of
Huntington approximately 3 miles from the main motor hotel and at an exit
for Interstate 64. This purchase was finalized in October 1988 from an
option entered into in 1983. The property is currently used as a parking
lot until it is deemed beneficial to build and operate a motel in that
location.
(j) The registrant purchased a parcel of real estate with a
residential building in January 1990. This property is across an alley
from the main motor hotel and was acquired for future development and
parking.
(k) The registrant purchased a parcel of real estate with a
building housing residential and commercial tenants in July 1991. This
property is across the street from its main motor hotel and adjacent to
other rental properties and parking facilities. The property has been
renovated and is now fully utilized as rental property. The property is
subject to a mortgage in favor of West Virginia Housing Development Fund
in the original amount of $500,000., 5.5% rate of interest, maturing
November 2018, the balance of which is $426,065. at June 30, 2000.
(l) The registrant owns in fee a Holiday Inn Hotel & Suites, a
135 room motor hotel, located in downtown Huntington at 800 Third Avenue.
The hotel officially opened for business August 28, 1998. The property
is subject to a mortgage in favor of Huntington Urban Renewal Authority in
the amount of $540,000., 8.5% rate of interest and maturing February 2004.
The balance of the note is $473,086. at June 30, 2000The facility is being
marketed for convention and business travelers. It is adjacent to the
Huntington Civic Arena and is used as a major part of marketing for
conventions and meetings in the Tri-State area.
Annual reviews of insurance coverage are done and adequate insurance
is maintained on all properties.
ITEM 3. LEGAL PROCEEDINGS:
-----------------
A $10,000,000. suit in which the Uptowner Inns, Inc. is a defendant
has been filed by James R. Burton, an individual, who was severely
injured in an auto accident by a patron of the lounge in Cabell County
Circuit Court. Legal counsel believes that good defenses exist in this
action, and that the case will ultimately be resolved in Uptowner Inns,
Inc.'s favor. The insurance company has denied liability in this case
and legal counsel believes the risk of loss will fall to Uptowner Inns,
Inc.
-5-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
---------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS.
---------------------------------------------------------
(a) The common stock of the registrant is traded in the over-
the-counter market. During the past two years, there has been limited
activity of common stock. These shares were traded for between $.50 and
$.65 per share.
(b) As of the 20th day of September 2000, the approximate number
of record holders of common stock securities of the registrant was 1,424.
(c ) The registrant has paid no dividends with respect to its
common stock during the past two years.
ITEM 6. SELECTED FINANCIAL DATA.
-----------------------
The following financial information of Uptowner Inns, Inc. and
Subsidiaries is for the years ended June 30, 2000, June 30, 1999, June 30,
1998, June 30, 1997 and June 30, 1996 on a scope similar to that set forth
in the report included elsewhere in this report. These Summaries should
be read in conjunction with the financial statements and related notes
included elsewhere in this report.
-6-
UPTOWNER INNS, INC.
SELECTED FINANCIAL DATA
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<s> <c> <c> <c> <c> <c>
Operating Revenues $ 4,013,489 $ 3,357,351 $ 1,479,921 $ 1,867,013 $ 2,098,085
Income from Operations 603,612 546,029 87,267 279,055 316,577
Net Income (Loss) (97,216) 113,029 (125,643) 74,257 89,458
Net Income (Loss)
per share (.06) .07 (.08) .05 .06
Weighted Average
Number of Shares 1,583,563 1,583,563 1,583,563 1,583,563 1,583,563
Cash Dividends
Per Share - - - - -
Total Assets 11,059,140 11,141,750 10,878,715 6,535,810 5,011,385
Long-Term Debt 6,876,470 6,913,472 6,931,165 3,119,901 2,322,279
The decline in 1997 resulted from general business decline and the loss of the Holiday Inn
franchise in January 1997. The 1998 decline was due to increased competition by operations close
to the interstate and the concern that the facility would be closed due to the opening of the new
Holiday Inn Hotel & Suites, which had been originally planned for February 1998. The increase in
1999 and 2000 were entirely the result of the new hotel, which operated for over ten months in 1999
and the full year in 2000.
-7-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
-------------------------------------------------
2000 1999 1998
---- ---- ----
<s> <c> <c> <c>
Total Revenues $ 4,013,489 $ 3,357,351 $ 1,479,921
Percentage Increase (Decrease) 19.5% 126.9% (20.7)%
Motor Inn Revenues 3,335,094 2,670,754 850,775
Percentage Increase (Decrease) 24.9% 213.9% (29.0)%
Percentage of Total Revenues 83.1% 79.5% 57.5%
Food and Beverage 365,735 380,236 316,759
Percentage Increase (Decrease) (3.8)% 20.0% (10.1)%
Rents 221,608 235,270 256,371
Percentage Increase (Decrease) (5.8)% (8.2)% 8.6%
Motor inn revenue decreased in 1998 due to increased competition from
other facilities and the concern that the older facility would close in
February 1998, when the Holiday Inn operation was originally scheduled to
open. Food and beverage revenues decreased due to fewer guests and increased
competition in the area due to more restaurants.
The motor inn revenues increased in 2000 due to the opening of the new
facility in late August 1998. The revenues have been consistently higher
than had been anticipated in room and beverage. Revenues decreased in the
older facility in rooms and food operations, due to the continued uncertainty
by the public as to the continuation of that operation. The acquisition of
the Travelodge franchise for this facility was expected to improve revenues,
but has not generated the expected revenues forecasted. Rents decreased in
1999 and 2000 due to the disposal of some rental units.
-8-
OPERATING COST AND EXPENSES AND INTEREST EXPENSES
-------------------------------------------------
2000 1999 1998 1997
---- ---- ---- ----
<s> <c> <c> <c> <c>
Cost of Sales $ 546,917 $ 447,582 $ 212,117 $ 291,619
Percentage increase
(decrease) 22.2% 111.0% (28.3)% (19.5)%
Salaries 1,016,332 841,724 441,308 475,893
Percentage increase
(decrease) 20.7% 90.7% (7.3)% .1%
Advertising 236,758 181,349 36,779 80,171
Percentage increase
(decrease) 30.6% 393.1% (54.1)% (32.0)%
Utilities 231,631 205,282 115,676 118,048
Percentage increase
(decrease) 12.8% 77.5% (2.0)% (21.5)%
Repairs and Maintenance 122,343 73,821 44,495 64,610
Percentage increase
(decrease) 65.7% 65.9% (31.1)% (3.2)%
Taxes and License 419,483 367,595 205,010 196,937
Percentage increase
(decrease) 14.1% 79.3% 4.1% (.1)%
Insurance and Other 66,342 63,321 40,252 36,145
Percentage increase
(decrease) 4.8% 57.3% 11.4% 3.4%
Total Cost and Expenses 3,409,877 2,811,322 1,392,654 1,587,958
Percentage increase
(decrease) 21.3% 101.9% (12.3)% (10.9)%
Interest 700,828 677,000 212,910 204,798
Percentage increase
(decrease) 3.5% 218.0% 4.0% (8.1)%
Cost of sales increases were due to the increase in the revenues from
the opening of the new hotel. Advertising increased in 1999 and 2000 due
to the room revenue increase that affected the change under the Holiday Inn
franchise for advertising and advertising expense should level out in the
next few years. Utilities increased in 1999 and 2000 due to the increased
business in the fiscal year. The registrant has accomplished only needed
repairs and maintenance due to the new facility being constructed and some
uncertainty as to the use of the original motel property in early 1998.
-9-
Interest increased due to the completion of the new hotel and should begin
to level out. Total costs and expenses have increased due to the factors
affecting the major items (noted above).
The increase in 1999 and 2000 of all areas of expense can be attributed
to the opening of the new facility in late August 1998. Expenses for the
older facility were not significantly different in 1999 or 2000.
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE FEDERAL INCOME TAXES
--------------------------------------------------------------------
2000 1999 1998
---- ---- ----
<s> <c> <c> <c>
$(97,216) $113,029 $(125,643)
INCOME TAXES
------------
2000 1999 1998
---- ---- ----
<s> <c> <c> <c>
Income taxes (benefit) $ - $ - $ -
Effective tax rate - - -
For the year ended June 30, 1997, the Company utilized operating loss
carryforwards in the amount of $11,051 to offset taxable income. The
Company has a carryforward loss for taxable income until the year 2014.
INCOME (LOSS)
-------------
2000 1999 1998
---- ---- ----
<s> <c> <c> <c>
$(97,216) $113,029 $(125,643)
-10-
The addition of the Holiday Inn Hotel & Suites has had an obvious impact
on income resulting in an increase in revenues of $1,877,430. in 1999 and
$656,138. in 2000. Costs and expenses have increased $1,418,668. in 1999 and
$598,555. in 2000, resulting in an increase in operating income of $458,762.
in 1999 and $57,583. in 2000.
Management is evaluating the Travelodge franchise in order to find new
alternatives of generating revenue from the older facility. Continued
monitoring of costs and expenses will be done to improve the operating
results for the Company.
In 2000, revenues increased $656,138. and total costs and expenses
increased $866,383. resulting in a decrease in net income over 1999 of
$210,245.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
2000 1999
---- ----
<s> <c> <c>
Resources available at
June 30, 1999 and 1998
Cash $348,064 $322,663
The registrant anticipates liquidity will continue at a below normal
level for the next several years, but will show some slight improvement
due to the completion of the new facility. Resources available have
increased $25,401. as a result of operating activities providing
substantially more than the net outflows for capital expenditures paid
for from Company funds.
Liquidity has moved from .24 in 1999 to .25 in 2000.
-11-
UPTOWNER INNS, INC. AND SUBSIDIARIES
Item 8. FINANCIAL STATEMENTS
--------------------
Financial Statements:
PAGE
Uptowner Inns, Inc. and Subsidiaries
Opinion of Independent Certified Public Accountant 13
Consolidated Balance Sheets as of June 30, 2000 and 1999 14
Consolidated Statement of Operations for the
Year Ended June 30, 2000, 1999 and 1998 15
Consolidated Statement of Stockholders' Equity
For the Year Ended June 30, 2000, 1999 and 1998 16
Consolidated Statement of Cash Flows for the
Year Ended June 30, 2000, 1999 and 1998 17
Notes to Consolidated Financial Statements 18-28
-12-
INDEPENDENT AUDITORS' REPORT
Board of Directors
Uptowner Inns, Inc. and Subsidiary
Huntington, West Virginia
We have audited the accompanying consolidated balance sheets of Uptowner
Inns, Inc. and Subsidiary as of June 30, 2000 and June 30, 1999, and the
related consolidated statements of operations, stockholders' equity and
cash flows for the three years ended June 30, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Uptowner Inns, Inc. and Subsidiary as of June 30, 2000 and
June 30, 1999, and the consolidated results of its operations and cash
flows for the three years ended June 30, 2000 in conformity with
generally accepted accounting principles.
SOMERVILLE & COMPANY, P.L.L.C.
Certified Public Accountants
November 28, 2000
Huntington, West Virginia
-13-
UPTONWER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and 1999
ASSETS
------
2000 1999
---- ----
<s> <c> <c>
Current Assets:
Cash $ 250,186 $ 239,821
Cash - escrow 97,878 82,842
Accounts receivable (less allowance
for doubtful accounts of $3,000
in 2000 and 1999) 59,971 86,647
Notes receivable 47,899 83,271
Inventories 11,966 11,197
Prepaid expenses 65,093 65,309
---------- ----------
Total current assets 532,993 569,087
---------- ----------
Property, Plant and Equipment:
Land 1,480,612 1,480,612
Buildings and improvements 10,554,474 10,448,165
Furniture and equipment 2,729,398 2,512,955
---------- ----------
14,764,484 14,441,732
Less accumulated depreciation and
amortization 4,407,744 3,986,965
---------- ----------
Property, plant and equipment - net 10,356,740 10,454,767
---------- ----------
Other Assets:
Deposits and other 169,407 117,896
---------- ----------
$11,059,140 $11,141,750
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
2000 1999
---- ----
<s> <c> <c>
Current Liabilities:
Accounts payable $ 358,242 $ 271,295
Accrued liabilities 175,045 179,605
Taxes other than Federal income tax 437,520 312,513
Current portion of long-term debt 1,109,220 1,265,006
---------- ----------
Total current liabilities 2,080,027 2,028,419
Long-Term Debt:
Notes payable 6,876,470 6,913,472
---------- ----------
Total liabilities 8,956,497 8,941,891
---------- ----------
Stockholders' Equity:
Common stock - $.50 par value;
authorized - 5,000,000 shares;
issued - 1,583,563 shares 791,782 791,782
Additional paid-in capital 1,032,290 1,032,290
Retained earnings 278,571 375,787
---------- ----------
Total stockholders' equity 2,102,643 2,199,859
---------- ----------
$11,059,140 $11,141,750
========== ==========
The accompanying notes are an integral part of these financial
statements.
-14-
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
For the years ended June 30, 2000, 1999 and 1998
2000 1999 1998
---- ---- ----
<s> <c> <c> <c>
Revenues:
Rooms $3,335,094 $2,670,754 $ 850,775
Food and beverage 365,735 380,236 316,759
Telephone 55,534 46,040 32,173
Rent 221,608 235,270 256,371
Other 35,518 25,051 23,843
--------- --------- ---------
Total operating revenues 4,013,489 3,357,351 1,479,921
--------- --------- ---------
Costs and Expenses:
Operating departments:
Cost of sales 233,351 220,034 147,608
Salaries 1,016,332 841,724 441,308
Other 313,566 227,548 64,509
General and administrative 341,713 233,684 125,112
Advertising 236,758 181,349 36,779
Utilities 231,631 205,282 115,676
Repairs and maintenance 122,343 73,821 44,495
Taxes and licenses 419,483 367,595 205,010
Insurance and other 66,342 63,321 40,252
Depreciation and amortization 428,358 396,964 171,905
--------- --------- ---------
Total costs and expenses 3,409,877 2,811,322 1,392,654
--------- --------- ---------
Operating income 603,612 546,029 87,267
--------- --------- ---------
Other Income (Expenses):
Gain on sale of assets - 244,000 -
Interest expense (700,828) (677,000) (212,910)
--------- --------- ---------
Total other income (expenses) (700,828) (433,000) (212,910)
--------- --------- ---------
Income (Loss) before Federal
Income Taxes (97,216) 113,029 (125,643)
Income Taxes - - -
--------- --------- ---------
Net Income (Loss) $ (97,216) $ 113,029 $ (125,643)
========= ========= =========
Net Income (Loss) per Share $ (.06) $ .07 $ (.08)
========= ========= =========
The accompanying notes are an integral part of these financial
statements.
-15-
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the years ended June 30, 2000, 1999 and 1998
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit) Totals
----- ------- ------- ------
<s> <c> <c> <c>
Balance -
June 30, 1997 $791,782 $1,032,290 $ 388,401 $2,212,473
Net Income (Loss) - - (125,643) (125,643)
------- --------- ------- ---------
Balance -
June 30, 1998 791,782 1,032,290 262,758 2,086,830
Net Income - - 113,029 113,029
------- --------- ------- ---------
Balance -
June 30, 1999 791,782 1,032,290 375,787 2,199,859
Net Income (Loss) - - (97,216) (97,216)
------- --------- ------- ---------
Balance -
June 30, 2000 $791,782 $1,032,290 $ 278,571 $2,102,643
======= ========= ======= =========
The accompanying notes are an integral part of these financial
statements.
-16-
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 30, 2000, 1999 and 1998
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
2000 1999 1998
---- ---- ----
<s> <c> <c> <c>
Cash Flows From Operating Activities:
Net income (loss) $(97,216) $ 113,029 $ (125,643)
------- -------- ---------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 428,358 396,964 171,905
Debt forgiveness (9,000) (9,000) (9,000)
Gain on sale of assets - (244,000) -
(Increase) decrease in other assets (51,511) 11,391 (1,075)
(Increase) decrease in current assets
Accounts receivable 26,676 (62,921) 1,477
Inventories (769) (3,835) (1,366)
Prepaid expenses 216 (13,759) (111)
Increase (decrease) in current
liabilities:
Accounts payable 86,947 (246,292) (117,724)
Accrued liabilities (4,560) 33,796 42,449
Taxes other than Federal income
taxes 125,007 112,114 8,116
------- ------- ---------
Total adjustments 601,364 (25,542) 94,671
------- ------- ---------
Net Cash Provided By (Used In)
Operating Activities 504,148 87,487 (30,972)
------- ------- ---------
Cash Flows From Investing Activities:
Issuance of notes receivable - (84,500) -
Payments on notes receivable 35,372 1,229 -
Proceeds from sale of fixed assets - 330,363 -
Capital expenditures (330,331) (361,320) (4,669,146)
------- ------- ---------
Net cash provided by (used in)
Investing activities (294,959) (114,228) (4,669,146)
------- ------- ---------
Cash Flows From Financing Activities:
Issuance of long-term debt 116,400 537,546 4,617,922
Principal payments of long-term debt (300,188) (278,157) (73,216)
------- ------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents 25,401 232,648 (155,412)
Cash and Cash Equivalents at Beginning
of Year 322,663 90,015 245,427
------- ------- ---------
Cash and Cash Equivalents at End of
Year $348,064 $322,663 $ 90,015
======= ======= =========
Supplementary Disclosure of Cash
Flow Information
Cash Paid During the Year For:
Interest $700,828 $658,482 $ 177,283
The accompanying notes are an integral part of these financial statements.
-17-
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies:
A. Principles of consolidation:
The consolidated financial statements include the accounts of
Uptowner Inns, Inc. and its Subsidiary after elimination of all material
intercompany balances and transactions. The wholly owned subsidiary has
had no activity since 1981.
B. Business activity:
The Company operates two (2) motor inns in Huntington, West
Virginia that consist of dining, banquet and lounge facilities. In addition,
the Company operates apartment buildings and rental properties located in
Huntington, West Virginia.
The Corporation opened an additional facility in Huntington known
as Holiday Inn Hotel & Suites on August 28, 1998.
C. Inventories:
Inventories are stated at the lower of cost or market on the
first-in, first-out method.
D. Property, plant and equipment:
Property, plant and equipment are stated at cost with
depreciation being provided on the straight-line method over the estimated
useful lives of the assets as follows:
Buildings and improvements 10 - 40 years
Furniture and equipment 3 - 10 years
Repairs, maintenance and renewals are charged to operations as
incurred, and expenditures for significant betterments and renewals are
capitalized.
The cost of fixed assets retired or sold, together with the
related accumulated depreciation, are removed from the accounts and the
resulting gain or loss is included in net earnings.
-18-
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (Cont'd):
E. Income taxes:
The income taxes are provided for the tax effects of the
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to different methods
of depreciation for book and tax purposes and net operating loss carryovers.
The deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled.
F. Per share computations:
Income per share computations are based on the weighted average
number of common shares outstanding during the year. The average number of
shares outstanding was 1,583,563 for 2000, 1999 and 1998
G. Cash and cash equivalents:
For purposes of the statement of cash flows, cash equivalents
include time deposits, certificates of deposit, and all highly liquid debt
instruments with original maturities of three months or less, of which the
Company had none.
H. Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from these
estimates.
I. Capitalized interest:
Interest costs are capitalized when incurred when proceeds were
used to finance the construction of assets. Capitalized interest for fiscal
year ending June 30, 2000, 1999 and 1998 were $-o-, $66,944. and $283,165.,
respectively.
J. Advertising:
Advertising costs are charged to operations as incurred.
-19-
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (Cont'd):
K. Amortization:
The costs of franchise rights acquired are being amortized on
the straight-line method over their remaining contractual lives. Fees and
other expenses associated with the debt refinancing are being amortized on
the straight-line method over the life of the loan. Amortization expense
charged to operations for the fiscal years ending June 30, 2000, 1999 and
1998 was $7,580., $5,417. and $5,417., respectively.
2. Long-term debt:
The long-term indebtedness of the Company at June 30, 2000 and
1999 were as follows:
2000 1999
---- ----
<s> <c> <c>
10% mortgage note due an individual,
secured by a deed of trust, payable at
$733. per month, including interest,
until June 2002 $ 16,602 $ 23,370
2% note due City of Huntington, secured
by a second deed of trust, payable at
$2,024. per month, including interest,
until January 2008 174,195 191,369
10% note due a financial institution,
secured by a deed of trust, payable at
$22,568. per month including interest,
until August 2004. Refinanced
December 1999 - 1,330,369
Deferred payment note dated September
1989 due the City of Huntington, secured
by a deed of trust on rental property,
payable in full during first five years
if property is sold, 20% forgiveness
per year in sixth through tenth years,
100% forgiveness during the year - 9,000
-20-
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Long-term debt (Cont'd):
2000 1999
---- ----
8.5% note due the Huntington Urban
Renewal Authority of Huntington, secured
by a deed of trust, payable at $3,825.
per month interest only, and final
installment of all principal and accrued
interest then outstanding due and payable
February 2004* $ 473,086 $ 483,790
Prime plus 1% installment note due a
financial institution secured by a credit
line deed of trust, principal and interest
payable at $33,901. per month until
January 2008 3,588,850 3,650,198
Prime plus 1% note due a financial
institution, secured by a second deed of
trust, interest payable monthly, principal
payable upon demand 749,048 742,693
Prime plus 1% installment note due a
financial institution, secured by second
deed of trust, payable at $1,140. per
month, including interest, until
September 2002. Refinanced December 1999 - 42,222
11.4% installment note due a leasing
company, secured by equipment, interest
payable monthly until October 1998, and
then principal and interest payable at
$17,469. per month until September 2004 685,138 812,311
8.7% installment note due a financial
institution, secured by a vehicle,
payable at $634. per month including
interest, until July 2004 26,056 30,640
8.75% installment note due a financial
institution, secured by a vehicle,
payable at $376. per month including
interest, until April 2003 11,521 14,573
-21-
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Long-term debt (Cont'd):
2000 1999
---- ----
5.5% mortgage note due to the West
Virginia Housing Development Fund,
secured by a deed of trust, payable
at $3,070. per month, including
interest, until November 2018** $ 426,065 $ 439,086
Prime plus 1% installment note due
a financial institution, secured by
a deed of trust, payable at $3,159.
per month, including interest, until
April 2004. An extension has been
requested. Refinanced December 1999 - 167,103
Note due a financial institution,
secured by deed of trust, payable at
$17,268. per month including interest,
current interest rate 9.42%, variable
interest rate based upon the three
year constant maturity Treasury Bill
rate (charge will not occur more
often than every three years) until
December 2014*** 1,626.653 -
17.7% installment note, due a leasing
company, secured by equipment, payable
at $153. per month including interest,
until September 2003 4,504 5,532
13% installment note, due a leasing
company, secured by equipment, payable
at $260. per month including interest,
until February 2002 4,654 7,002
15.8% installment note, due a leasing
company, secured by equipment, payable
at $63. per month including interest,
until July 2003 1,842 2,273
18.2% installment note, due a leasing
company, secured by equipment, payable
at $1,386. per month including interest,
until May 2003 37,432 46,348
-22-
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Long-term debt (Cont'd):
2000 1999
---- ----
14.1% installment note, due a leasing
company, secured by equipment, payable
at $997. per month including interest,
until May 2003 $ 28,475 $ 35,852
22.7% installment note, due a leasing
company, secured by equipment, payable
at $589. per month including interest,
until June 2003 15,295 18,494
15.1% installment note, due a leasing
company, secured by equipment, payable
at $152. per month including interest,
until July 2003 4,465 5,522
18.9% installment note, due a leasing
company, secured by equipment, payable
at $1,215. per month including interest,
until June 2003 33,181 40,686
18.9% installment note, due a leasing
company, secured by equipment, payable
at $229. per month including interest,
until June 2003 6,264 7,681
--------- ---------
7,913,326 8,106,114
Less current portion 1,061,410 1,217,196
--------- ---------
$6,851,916 $6,888,918
========= =========
* As part of the debt agreement, Uptowner shall deposit any proceeds
from the sale of surplus real estate into an escrow account. At the end of
each quarter, 75% of proceeds will remain in the escrow account for working
capital, and 25% will be sent to the Huntington Renewal Authority to reduce
the debt. At June 30, 2000 and 1999, the balance in the escrow account is
$68,086. and $62,222., respectively.
** As part of the debt agreement, various escrows are required to
cover real estate taxes, hazard insurance, replacement reserve, other
interest and replacement reserve interest. At June 30, 2000 and 1999, the
balance in the escrow is $24,623. and $20,620., respectively.
-23-
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Long-term debt (Cont'd):
*** As part of the debt agreement, deposits will be made monthly
into an escrow account to be used as a reserve for repairs and capital
improvements. At June 30, 2000 and 1999, the balance in the escrow
account is $5,169. and $-0-, respectively.
Maturities of long-term debt, including debt to stockholders, and
principal payment requirements during the next five years ending June 30,
are as follows:
<s> <c>
2001 $1,109,220
2002 348,335
2003 376,825
2004 831,300
2005 204,215
Thereafter 5,115,795
---------
$7,985,690
=========
3. Related party transactions:
During October 1988, the Company purchased property from a related
entity for the sum of $528,659. Two notes existing at the time of purchase
are being paid by the Company. One loan was refinanced to a nonstockholder
in 1989. In addition, notes were executed for the balance of the purchase
price. These loans at June 30, 2000 and 1999 were:
2000 1999
---- ----
<s> <c> <c>
10% note due an individual, interest
payable annually, due December 1993 $ 8,000 $ 8,000
10% note due an individual, interest
payable annually, due December 1993 39,810 39,810
------ ------
47,810 47,810
Less current portion 47,810 47,810
------ ------
$ - $ -
====== ======
-24-
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Related party transactions (Cont'd):
The Company is continuing to accrue interest on this debt. The
amount of accrued interest at June 30, 2000, 1999 and 1998 is $60,161.,
$55,380. and $50,599., respectively. Interest expense charged to
operations for each of the fiscal years ended June 30, 2000, 1999 and
1998 was $4,781.
The Company and its subsidiary have entered into transactions with
various entities controlled and related to one of the Company's
shareholders. Following is a summary of transactions with these entities
as of and for the years ended June 30, 2000, 1999 and 1998:
2000 1999 1998
---- ---- ----
<s> <c> <c> <c>
Purchases from related
companies $ 3,067 $ - $11,268
====== ====== ======
(Expensed and/or
capitalized)
2000 1999
---- ----
9.25% note due related
company, due October 2004 $24,554 $24,554
Less current portion - -
------ ------
$24,554 $24,554
====== ======
-25-
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Income taxes:
A reconciliation of income tax at the statutory rates to the
Company's effective rate for the years ended June 30, 2000, 1999 and 1998
is as follows:
2000 1999 1998
---- ---- ----
% of % of % of
Pre-tax Pre-tax Pre-tax
Amount Income Amount Income Amount Income
------ ------ ------ ------ ------ ------
<s> <c> <c> <c> <c> <c> <c>
Income tax provision
at statutory rate $ - -% $ 38,430 34.0% $ - -%
Increases (decreases):
Gain on disposal - - (3,184) (2.8) - -
Depreciation
difference - - (35,696) (31.6) - -
Other - - 450 .4 - -
Utilization of
operating loss
carryforward - - - - - -
----- -- ------ ---- ---- --
Actual provision
and effective
rate $ - -% $ - -% $ - -%
===== == ======= ==== ==== ==
The Company has available at June 30, 2000, unused operating loss
carryforwards that may be applied against future taxable income and that
expire as follows:
Unused Operating Loss
Expiration Date Carryforwards
--------------- -------------
<s> <c>
June 30, 2002 $ 20,986
June 30, 2003 433,830
June 30, 2004 245,295
June 30, 2005 128,142
June 30, 2006 147,900
June 30, 2007 78,505
June 30, 2008 18,147
June 30, 2009 70,932
June 30, 2010 -
June 30, 2011 3,816
June 30, 2012 1,150
June 30, 2013 199,619
June 30, 2019 54,375
June 30, 2020 165,986
-26-
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Income taxes (Cont'd):
Deferred tax assets as of June 30, 2000 and 1999 are as follows:
2000 1999
---- ----
<s> <c> <c>
Deferred tax asset $64,058 $32,190
Valuation allowance 64,058 32,190
------ ------
$ - $ -
====== ======
5. Parent Company information:
Following is the selected information for Uptowner Inns, Inc.,
Parent Company only, as of June 30, 2000, 1999 and 1998 and for the years
then ended:
2000 1999 1998
---- ---- ----
<s> <c> <c> <c>
Operating revenues $ 4,013,489 $ 3,357,351 $ 1,479,921
Income (loss) from
operations 603,612 546,029 87,267
Net income (loss) (97,216) 113,029 (125,643)
Current assets 532,993 569,087 172,653
Total assets 11,059,140 11,141,750 10,878,715
Current liabilities 2,080,027 2,028,419 1,860,720
Total liabilities 8,956,497 8,941,891 8,791,885
The Company has no restricted net assets.
6. Contingencies:
A $10 million suit in which the Uptowner Inns, Inc. is a defendant has
been filed by an individual who was severely injured in an auto accident by a
patron of the lounge. Legal counsel believes that good defenses exist in
this action, and that the case will ultimately be resolved in Uptowner Inns,
Inc.'s favor. The insurance company has denied liability in this case and
legal counsel believes the risk of loss will fall to Uptowner Inns, Inc.
-27-
UPTOWNER INNS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6 Contingencies (Cont'd):
During the year ended June 30, 2000, a settlement was entered into
for the final payment for the construction of the new facility. This
resulted in a prior period adjustment of $320,545. to reduce the amount of
building and accounts payable at June 30, 1999.
7. Credit risk:
The Company maintains cash balances at a bank. Accounts at the
institution are insured by the Federal Deposit Insurance Corporation up to
$100,000. Amounts on deposit in excess of $100,000. for the fiscal year
ended June 30, 2000 totaled $114,491.
8. Commitments:
On June 28, 2000, the Uptowner Inns, Inc. entered into a franchise
agreement for construction of a new Holiday Inn Express Hotel & Suites in
the amount of $50,000. This agreement states specific requirements for
completion of the hotel and approval before opening, the new requirement
being that the hotel opening be no later than June 28, 2002.
-28-
UPTOWNER INNS, INC. AND SUBSIDIARIES
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
----------------------------------------------------------
NONE
-29-
UPTOWNER INNS, INC. AND SUBSIDIARIES
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The information required by Item 10, Part III, will be set forth in
the definitive proxy statement to be filed by the registrant, pursuant to
Regulation 14A, under the captions "Election of Directors" and "Executive
Officers of the Company" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information required by Item 11, Part III, will be set forth in
the definitive proxy statement to be filed by the registrant, pursuant to
Regulation 14A, under the caption "Remuneration of Directors and Executive
Officers", and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
(a) The registrant has issued only one type of security, namely,
common capital stock. The following table sets forth certain information
as to the persons and groups who are known to the registrant to be the
beneficial owners of more than five percent of its voting securities.
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership of Class
----- ------------------ -------------------- --------
<s> <c> <c> <c>
Common Violet Midkiff 573,267 Direct and 36.2
922 Eleventh Street Indirect
Huntington, West Virginia
Common Carl Midkiff 245,311 Direct and 15.5
2619 Raceview Drive Indirect
Ona, West Virginia
-30-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(Cont'd)
--------------------------------------------------------------
(b) The following table sets forth certain information as to
each class of equity securities of the registrant beneficially owned
by all directors and officers of the registrant as a group.
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership of Class
----- ------------------ -------------------- --------
<s> <c> <c> <c>
Common Arthur J. Huber -0- -0-
Common James R. Camp 8,371 Direct .5
Common Violet Midkiff 573,267 Direct and 36.2
Indirect
Common Louis Abraham 3,656 Direct .2
Common Carl Midkiff 245,311 Direct and 15.5
Indirect
Common Olive Hager 21,870 Direct 1.4
Common Six Officers and 852,475 Direct and 53.8
Directors as an Indirect
Group
(c) There is no arrangement, known to the registrant, the
operation of which may at a subsequent date result in a change in
control of the registrant.
-31-
PART IV
UPTOWNER INNS, INC. AND SUBSIDIARIES
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(2) Schedules:
Schedule VIII -- Valuation of Qualifying Accounts
(A)(3) Exhibits:
(22) Subsidiaries of Uptowner Inns, Inc.:
All other required exhibits are incorporated in the Registration
Statement Number 2-90194 of Uptowner Inns, Inc.
No reports on Form 8-K have been filed during the period covered
by this report.
-32-
UPTOWNER INNS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Schedule VIII
------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
Balance at Charged to Charged to Deductions Balance at
Beginning Profit and Other From End of
Description Period Loss Accounts Reserves Period
----------- ------ ---- -------- -------- ------
<s> <c> <c> <c> <c> <c>
As to Uptonwer Inns, Inc.:
Year ended June 30,2000:
Reserve for doubtful
accounts $3,000 $ - $ - $3,000 $6,000
===== ====== ====== ===== =====
Year ended June 30,1999:
Reserve for doubtful
accounts $3,000 $ - $ - $ - $3,000
===== ====== ====== ===== =====
Year ended June 30,1998:
Reserve for doubtful
accounts $3,000 $ - $ - $ - $3,000
===== ====== ====== ===== =====
-33-
UPTOWNER INNS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Schedule VIII (Cont'd)
------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
Balance at Charged to Charged to Deductions Balance at
Beginning Profit and Other From End of
Description Period Loss Accounts Reserves Period
----------- ------ ---- -------- -------- ------
<s> <c> <c> <c> <c> <c>
As to Uptonwer Inns, Inc.
And Subsidiaries:
Year ended June 30,2000:
Reserve for doubtful
accounts $3,000 $ - $ - $3,000 $6,000
===== ====== ====== ===== =====
Year ended June 30,1999:
Reserve for doubtful
accounts $3,000 $ - $ - $ - $3,000
===== ====== ====== ===== =====
Year ended June 30,1998:
Reserve for doubtful
accounts $3,000 $ - $ - $ - $3,000
===== ====== ====== ===== =====
-34-
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) UPTOWNER INNS, INC.
By /s/ Violet Midkiff
---------------------------------
Violet Midkiff, President
October 31, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/ Arthur Huber
---------------------------------
Arthur Huber, Vice President
October 31, 2001
By /s/ James R. Camp
---------------------------------
James R. Camp, Treasurer and
Director
October 31, 2001
By /s/ Olive Hager
------------------------------------
Olive Hager, Secretary and
Director
October 31, 2001
By /s/ Carl E. Midkiff
------------------------------------
Carl E. Midkiff, Director
October 31, 2001
By /s/ Louis Abraham
------------------------------------
Louis Abraham, Director
October 31, 2001
-35-