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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 30, 2002, 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) 525-8162
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
_______ ______
Indicate the number of Shares outstanding of each of the Issuer's classes
of Common Stock, as of the close of the period covered by this report.
Class Outstanding at September 30, 2002
______ _______________________________
Common Stock - $.50 par value 1,568,011 shares
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 2002 and JUNE 30, 2002
ASSETS
September 30, June 30,
2002 2002
(Unaudited) (a)
Current Assets:
Cash $ 813,082 $ 803,660
Accounts and notes receivable 97,053 62,867
Inventories 5,902 6,145
Prepaid expenses 43,690 61,173
Deferred tax asset 132,098 132,098
Property held for sale 0 1,770,073
Total current assets 1,091,825 2,836,016
Property, Plant and Equipment:
Land 1,202,786 1,202,786
Building and improvements 7,333,093 7,385,301
Furniture and equipment 1,278,520 1,276,650
Construction in progress 64,484 42,567
Less accumulated
depreciation
and amortization 1,851,475 1,842,424
Property, plant and
equipment - net 8,027,408 8,064,880
Other Assets:
Deposits and other 216,157 228,177
Total Assets $ 9,335,390 $ 11,129,073
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 2002 and JUNE 30, 2002
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30,
2002 2002
(Unaudited) (a)
Current Liabilities:
Accounts payable $ 143,320 $ 181,386
Accrued liabilities 137,577 182,485
Taxes other than Federal
income taxes 249,004 327,869
Current portion of long-term
debt 166,801 253,430
Total current liabilities 696,702 945,170
Long-Term Liabilities:
Notes and mortgages payable 6,945,651 8,542,621
Total liabilities 7,642,353 9,487,791
Stockholders' Equity:
Common stock - par value
$.50 per share; 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 (120,926) (172,681)
Treasury stock, at cost (15,552
Shares in 2002) (10,109) (10,109)
Total stockholders' equity 1,693,037 1,641,282
Total Liabilities and
Stockholders' Equity $ 9,335,390 $11,129,073
(a) Financial information as of June 30, 2002 has been derived from the
audited, consolidated financial statements of the registrant.
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
For the three months ended September 30, 2002 and 2001
2002 2001
Revenues:
Rooms $ 757,509 $ 902,440
Food and beverage 21,540 36,498
Telephone 5,560 7,315
Rents 52,806 54,337
Other 11,886 7,974
Total revenues 849,301 1,008,564
Costs and Expenses:
Operating Departments:
Cost of sales 31,701 39,862
Salaries and wages 201,762 242,807
Other 62,613 66,225
General and Administrative 61,837 61,739
Advertising 64,976 60,041
Utilities 40,086 66,117
Repairs and Maintenance 30,131 25,218
Interest 139,729 185,757
Taxes and licenses 70,802 93,686
Insurance 11,808 18,295
Depreciation and Amortization 82,157 109,157
Total costs and expenses 797,602 968,904
Operating income 51,699 39,660
Other Income:
Interest income 56 -
Total other income 56 -
Net Income before Income
Taxes 51,755 39,660
Income Taxes 0 0
Net Income $ 51,755 $ 39,660
Earnings per Share $ .03 $ .03
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the three months ended September 30, 2002 and 2001
2002 2001
Cash Flows From Operating Activities:
Net income $ 51,755 $ 39,660
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 82,157 109,157
(Increase) decrease in deposits 12,021 (66,450)
(Increase) decrease in current assets:
Accounts receivable (34,186) 21,451
Inventories 243 (132)
Prepaid expenses 17,484 19,496
Increase (decrease) in current
liabilities:
Accounts payable (38,066) (12,495)
Accrued liabilities (44,908) (9,132)
Taxes other than Federal income tax (78,865) 25,765
Total adjustments (84,120) 87,660
Net Cash Provided By Operating Activities $ (32,365) $ 127,320
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the three months ended September 30, 2002, and 2001
2002 2001
Cash Flows From Investing Activities:
Proceeds from sale of real estate $ 1,770,072 $ -
Capital expenditures (44,686) (16,500)
Net cash provided by (used in) 1,725,386 (16,500)
investing activities
Cash Flows From Financing Activities:
Loan proceeds 0 0
Payment on notes and mortgages (1,683,599) (152,136)
Net cash used in
financing activities (1,683,599) (152,136)
Net Increase (Decrease) in Cash
and Cash Equivalents 9,422 (41,316)
Cash and Cash Equivalents at Beginning of Year 803,660 186,912
Cash and Cash Equivalents at End of Period $ 813,082 $ 145,596
Supplemental Disclosures of Cash Flow Information:
Cash Paid During The Period For:
Interest $ 129,982 $ 174,286
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
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UPTOWNER INNS, AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002
1. BASIS OF PRESENTATION
The financial statements presented reflect Uptowner Inns, Inc. and its
consolidated subsidiary, Motel and Restaurant Supply.
The foregoing statements are unaudited; however, in the opinion of
management, all adjustments (comprising only normal recurring accruals)
necessary for a fair presentation of the financial statements have been
included. The results of operations for interim periods are not
necessarily indicative of the results that may be expected for a full
year or any other interim period. A summary of the Corporation's
significant accounting policies is set forth in Note 1 to the Consolidated
Financial Statements in the Corporation's Annual Report to shareholders
and Form 10-K for June 30, 2002.
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UPTOWNER INNS, AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002
2. CONTINGENCY
None.
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UPTOWNER INNS, INC. AND SUBSIDIARY
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain matters disclosed herein may be forward-looking
statements that involve risks and uncertainties, including the facilities
utilization, costs associated with maintaining the operations, liquidity
issues, and other risks. Actual strategies and results in the future
may differ materially from those management currently expects.
Forward-looking statements represent management's judgment as of the
current date. The Company disclaims, however, any intent or obligation
to update any forward-looking statements contained in this Form 10-Q.
RESULTS OF OPERATION
Due to the closing of the Travelodge property in January 2002, room
revenues have declined 16.1% in the three months ended September 30, 2002
relative to the comparable period in 2001. The decision was made to
close down the Travelodge property due to the cash drain for the last
several years. Also, the location of this property did not warrant
keeping the property open. At one time this was an ideal location, but
with the build up of interstate hotels and increased competition in the
market, it was not economically feasible to keep the property open. The
41.0% decrease in food and beverage revenue in the quarter ended September
30, 2002 relative to the comparable period in 2001, is attributed to the
closing of the hotel lounge at the Travelodge property. The restaurant
facility had been losing money for several years and a decision was made
to close down the facility to help generate additional cash flow.
Total cost and expenses have decreased 17.7% primarily due to
interest expense attributed to the refinancing of the Holiday Inn Hotel
and Suites property in January 2002 and the payoff of the loans related to
the Travelodge property sold July 3, 2002. In addition an overall
decrease in expenses is related to the closing and sale of the Travelodge
property.
LIQUIDITY
The liquidity ratio, as measured by current assets divided by current
liabilities, has decreased from 3.00 at June 30, 2002 to 1.57 at September
30, 2002. This decline is a result of selling the Travelodge property in
July of 2002. On June 30, 2002, this property was being classified as
Property Held for Sale in the current asset section of the balance sheet.
Existing loans with balances totaling $1,633,521 as of June 30, 2002 were
paid off upon closing.
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UPTOWNER INNS, INC. AND SUBSIDIARY
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
CAPITAL RESOURCES
A Letter of Intent between Uptowner Inns, Inc. ("Purchaser") and
HADCO ("Seller") was signed on November 16, 2001, for the purchase of 2.2
acres of land at the Kinetic Park Commercial Area for a purchase price of
$350,000 per acre. A real estate purchase and sale agreement was signed
on August 19, 2002 by and between Huntington Municipal Development
Authority ("Seller"), and Uptowner Inns, Inc. ("Purchaser") for the
purchase of the above mentioned property. The purchase price for the
property will be $875,000, payable at closing. The Purchaser has
delivered the sum of $10,000 as a deposit. The Purchaser shall have the
right and option for a period of 45 days commencing on August 19, 2002, to
enter the property to conduct physical inspections. At the expiration of
the inspection period, the Purchaser will pay the sum of $50,000 as an
additional deposit. The closing of the transaction shall take place at
the offices of Huddleston, Bolen, Beatty, Porter & Copen, L.L.P., located
at 611 Third Avenue, Huntington, West Virginia 25701, on a mutually
acceptable date on or before 45 days from the expiration of the inspection
period. This closing is scheduled for November 22, 2002. Uptowner Inn,
Inc. is planning on constructing an additional hotel at the Kinetic Park
site. The projected cost of the project is $5,809,000, with $4,500,000
being financed. The projected operational date of the project is July,
2004.
The apartment building located at 1340 Fourth Avenue, in Huntington,
West Virginia was sold at auction on September 12, 2002, for $361,000, and
is expected to close in November, 2002.
The apartment building located at 1416-18 Fourth Avenue, in
Huntington, West Virginia, was sold at auction on September 12, 2002, for
$160,000, and closed in October, 2002. The property was 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 $1,031 at June 30,
2002.
The apartment building located at Fourth Avenue, in Huntington, West
Virginia, was sold at auction on September 12, 2002, for $752,000, and is
expected to close in November, 2002. The property was 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 was $399,021 at June 30, 2002.
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ITEM 4: CONTROLS AND PROCEDURES
PART I: EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the company
carried out an evaluation, under the supervision and with the
participation of the company's management, including the company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the company's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the
Chief Executive Officer and the Chief Financial Officer concluded that the
company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the company (including
its consolidated subsidiaries) required to be included in the company's
periodic SEC filings.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
99.1 Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 for Carl E. Midkiff, Chief Executive
Officer.
99.2 Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 for David Robinson, Chief Financial
Officer.
b. The Company was not required to file Form 8-K for the quarter
ended September 30, 2002.
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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/ Carl Midkiff,
CEO and Secretary
November 15, 2002
By /s/ David Robinson,
Treasurer and Principal
Financial and Accounting
Officer
November 15, 2002
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CERTIFICATIONS
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Carl E. Midkiff, Chief Executive Officer, certify that:
1. I have reviewed this report on Form 10-Q of Uptowner Inns,
Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all materials respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in
this quarterly report.
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries
is made known to us by others within those
entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
- - 13 -
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of the
registrant's board of directors:
a) all significant deficiencies in the design or
operation of internal controls which could
adversely affect the registrant's ability to
record, process, summarize and report
financial data and have identified for the
registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a
significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated
in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
/s/ Carl E. Midkiff
Chief Executive Officer
November 15, 2002
- - 14 -
CERTIFICATIONS
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, David Robinson, Chief Financial Officer, certify that:
2. I have reviewed this report on Form 10-Q of Uptowner Inns,
Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all materials respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in
this quarterly report.
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and have:
d) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries
is made known to us by others within those
entities, particularly during the period in which
this quarterly report is being prepared;
e) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
f) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
- - 15 -
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of the
registrant's board of directors:
c) all significant deficiencies in the design or
operation of internal controls which could
adversely affect the registrant's ability to
record, process, summarize and report
financial data and have identified for the
registrant's auditors any material weaknesses in
internal controls; and
d) any fraud, whether or not material, that involves
management or other employees who have a
significant role in the registrant's internal
controls; and
7. The registrant's other certifying officer and I have indicated
in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
/s/ David Robinson
Chief Financial Officer
November 15, 2002
- - 16 -