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 MARCH 31, 2003, 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)
741 5th 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
_______ _______
Indicate the number of Shares outstanding of each of the Issuer's classes
of Common Stock, as of the close of March 31, 2003.
Class Outstanding at March 31, 2003
______ _______________________________
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 MARCH 31, 2003 and JUNE 30, 2002
ASSETS
March 31, June 30,
2003 2002
(Unaudited) (a)
Current Assets:
Cash $ 1,040,721 $ 803,660
Accounts and notes receivable 240,256 62,867
Inventories 5,722 6,145
Prepaid expenses 62,129 61,173
Deferred tax asset 132,098 132,098
Property held for sale - 1,770,073
Assets to be disposed of - 918,535
Total current assets 1,480,926 3,754,551
Property, Plant and Equipment:
Land 1,003,940 1,003,940
Building and improvements 5,990,928 6,041,475
Furniture and equipment 1,361,204 1,180,752
Construction in progress 370,588 42,567
Less accumulated
depreciation
and amortization 1,257,225 1,122,389
Property, plant and
equipment - net 7,469,435 7,146,345
Other Assets:
Deposits and other 219,187 228,177
Total Assets $ 9,169,548 $ 11,129,073
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AT MARCH 31, 2003 and JUNE 30, 2002
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
2003 2002
(Unaudited) (a)
Current Liabilities:
Accounts payable $ 196,478 $ 181,386
Accrued liabilities 97,266 134,024
Taxes other than Federal
income taxes 169,632 327,869
Unearned revenue - 48,461
Current portion of long-term
debt 153,290 236,289
Liabilities to be disposed of - 399,021
Total current liabilities 616,666 1,327,050
Long-Term Liabilities:
Notes and mortgages payable 6,492,670 8,160,741
Total liabilities 7,109,336 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 246,249 (172,681)
Treasury stock, at cost (15,552
Shares) (10,109) (10,109)
Total stockholders' equity 2,060,212 1,641,282
Total Liabilities and
Stockholders' Equity $ 9,169,548 $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 periods of three and nine months ended March 31, 2003 and 2002
Three Months Ended Nine Months Ended
2003 2002 2003 2002
Revenues:
Rooms $ 770,142 $ 695,021 $ 2,225,810 $ 2,348,322
Food and beverage 17,718 22,809 60,628 88,718
Telephone 3,628 29,694 13,765 39,088
Rents 6,024 - 14,025 -
Other 8,911 19,512 21,885 34,056
Total revenues 806,423 767,036 2,336,113 2,510,184
Costs and Expenses:
Operating Departments:
Cost of sales 31,993 60,055 96,147 131,006
Salaries and wages 205,713 187,077 594,993 626,915
Other 48,957 92,249 177,636 224,656
General and Administrative 81,521 90,155 214,277 225,944
Advertising 61,828 55,187 183,563 166,460
Utilities 42,240 59,801 106,518 175,572
Repairs and Maintenance 25,219 13,440 63,193 56,852
Interest 135,208 134,617 411,013 491,428
Taxes and licenses 62,479 96,559 189,733 264,776
Insurance 8,155 15,659 25,719 46,978
Depreciation and Amortization 68,927 97,254 207,944 291,625
Total costs and expenses 772,240 902,053 2,270,736 2,702,212
Operating income (loss) 34,183 (135,017) 65,377 (192,028)
Interest income (26) 221 30 221
Income from continuing operations 34,157 (134,796) 65,407 (191,807)
Discontinued operations
Income from operations of
the discontinued component,
including gain on disposal of
$363,963-3 mo; $379,321-9 mo 352,235 10,802 353,523 23,286
Net Income (Loss) before Income
Taxes 386,392 (123,994) 418,930 (168,521)
Income Taxes 0 0 0 0
Net Income (Loss) $ 386,392 $ (123,994) $ 418,930 $ (168,521)
Earnings (Loss) per Share $ .25 $ (.08) $ .27 $ (.11)
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 nine months ended March 31, 2003 and 2002
2003 2002
Cash Flows From Operating Activities:
Net income (loss) $ 418,930 (168,521)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 231,568 327,799
Gain on sale of assets (379,321) -
(Increase) decrease in deposits 8,991 (51,274)
(Increase) decrease in current assets:
Accounts receivable (177,387) (111,703)
Inventories 423 208
Prepaid expenses (955) (29,006)
Increase (decrease) in current
liabilities:
Accounts payable 15,245 37,652
Accrued liabilities (85,219) (65,672)
Taxes other than Federal income tax (158,236) (30,289)
Total adjustments (544,891) 77,715
Net Cash Used in Operating Activities (125,961) (90,806)
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the nine months ended March 31, 2003 and 2002
2003 2002
Cash Flows From Investing Activities:
Proceeds from sale of real estate $ 3,044,147 $ -
Capital Expenditures (531,033) (175,900)
Net cash provided by (used in)
investing activities 2,513,114 (175,900)
Cash Flows From Financing Activities:
Loan proceeds 0 979,104
Payment on notes and mortgages (2,150,092) (80,188)
Net cash provided by (used in)
financing activities (2,150,092) 898,916
Net Increase (Decrease) in Cash
and Cash Equivalents 237,061 632,210
Cash and Cash Equivalents at Beginning of Year 803,660 186,912
Cash and Cash Equivalents at End of Period $ 1,040,721 819,122
Supplemental Disclosures of Cash Flow Information:
Cash Paid During The Period For:
Interest $ 438,380 $ 576,568
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
March 31, 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
March 31, 2002
2. CONTINGENCY
On February 19, 2003, Uptowner Inns, Inc. received notice from the
Huntington Municipal Development Authority that a law suit had been filed
for Breach of Contract-Failure to Purchase, Breach of Contract-
Confidentiality, Bad Faith, and Intentional Interference with Business
Relations. The Huntington Municipal Development Authority is seeking
judgment against Uptowner Inns, Inc. in the amount of all general,
compensatory, incidental and consequential damages caused by breach of
contract enumerated above, in the approximate amount of $5,560,000 with
the exact amount to be determined at trial; together with pre-judgment
interest as provided by law. On March 11, 2003, an "Answer and
Counterclaim" was filed by Uptowner Inns, Inc. denying each and every
allegation set forth in the Plantiff's Complaint and demanded strict proof
thereof. On March 14, 2003, Judge David M. Pancake set a Pre-trial
conference date of September 14, 2004 and a Trial date of September 21,
2004.
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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. You can identify these statements by such
forward-looking words as "may," "will," "expect," "plan" and similar
words. 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
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
The Holiday Inn Hotel and Suites room revenues increased 13.7% in the
three months ended March 31, 2003 relative to the comparable period in
2002 (not taking into consideration the room revenue generated by the
Travelodge property). The Holiday Inn Hotel and Suites' average occupancy
percentage for the three months ended March 31, 2003 was 78.4%, an
increase of 9.13% relative to the comparable period in 2002. This
increase is due largely in part to the booking of a consulting group which
started staying in the Huntington area in December, 2002. This group is
renting approximately 300 room nights per month. This group will be in
Huntington for several months, but the number of rooms they will rent
cannot be determined due to the changing of their consulting engagement.
The 22.3% decrease in food and beverage revenues in the quarter ended
March 31, 2003 relative to the comparable period in 2002, is largely due
to the complimentary meals provided to hotel guests as an incentive to
stay at the property.
Total cost and expenses have decreased 14.4% primarily due to taxes
and depreciation attributed to the Travelodge property, which was sold in
July, 2002. In addition, an overall decrease in expenses is related to
the closing and sale of the Travelodge property.
The gain on sale of assets for $363,963 (included in discontinued
operation amount) was generated from the sale of the majority of rental
properties owned by Uptowner Inns, Inc. The remaining rental activity of
the company are not material to the financial statements. Rental assets
are less than 10% of total assets, rental revenues are less than 10% of
total revenue, rental expenses are less than 10% of total expenses, and
net rental income is less than 10% of net income.
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RESULTS OF OPERATION, CON'T.
No provision for income tax expense for the three months ended March
31, 2003 is reflected due to the large amount of net operating loss
carryforward ($ 1,770,809) to be applied to taxable income, which has been
provided for in previous periods and included in deferred tax assets.
NINE MONTHS ENDED MARCH 31, 2003 AND 2002
Room revenues have decreased by 5.2% in the nine months ended
March 31, 2003 relative to the comparable period in 2002. Food and
Beverage revenues have decreased by 31.7% in the nine months ended
March 31, 2003 relative to the comparable period in 2002. These
differences, as well as the variances in expenses, are due to the
explanations above for the three month period ending March 31, 2003.
LIQUIDITY
Liquidity, as measured by current assets divided by current
liabilities, has decreased from 2.83 at June 30, 2002 to 2.40 at March 31,
2003. This decline is a result of selling the Travelodge property in July
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.
CAPITAL RESOURCES
The company's cash has increased 29.5% for the nine months ended
March 31, 2003. The increase is due to the sale of the majority of the
company's rental property. There is also a reduction in liabilities due
to the debt that was retired upon selling the majority of rental
properties.
A Letter of Intent between Uptowner Inns, Inc. and Huntington Area
Development Corporation was signed on November 16, 2001, for the purchase
of 2.2 acres of land. The company planned on constructing a hotel on the
site. The company made a $10,000 deposit on the property. The Purchaser
had 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 company paid the sum of $50,000
as an additional deposit. The projected operational date was set at July,
2004, before problems were found with the land fill at the construction
site. In February, 2003, Uptowner Inns, Inc. pulled out of the project.
In addition to the $60,000 deposit, Uptowner Inns, Inc. had incurred other
expenses related to the property for approximately $99,0000, and also lost
the $50,000 they paid to Holiday Inn for the franchise agreement. On
February 19, 2003, Uptowner Inns, Inc. received notice from the Huntington
Municipal Development Authority that a law suit had been filed. See
"Contingency" in notes to Consolidated Financial Statements for additional
information on the law suit.
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CAPITAL RESOURCES, CON'T.
In February, 2003, the company spent $200,000 acquiring .688 acre &
a 10' easement for additional expansion. There is no current commitments
or obligations that exist for this property.
ITEM 4: 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.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
On February 19, 2003, the Huntington Municipal Development Authority
instituted a lawsuit in the Circuit Court of Cabell County, West Virginia
against the company alleging breach of contract-failure to purchase,
breach of contract-confidentiality, bad faith, and intentional
interference with business relations. The Huntington Municipal
Development Authority is seeking judgment against the company for general,
compensatory, incidental and consequential damages caused by breach of
contract enumerated above, in an approximate amount of $5,560,000 together
with pre-judgment interest. The company filed its answer and counterclaim
on March 11, 2003, denying the allegations contained in the complaint. In
its counterclaim, the company admits that, based upon express
representations made by or on behalf of the Plaintiff, the parties entered
into the agreement. However the company alleges Plaintiff breached its
obligations contained in the agreement and further negligently and/or
fraudulently misrepresented material facts and concealed information from
Uptowner for the express purpose of inducing Uptowner to enter into the
agreement, and therefore, the language contained in the agreement is not
controlling. The company seeks damages in the amount of $2,500,000 or an
amount that will fully and fairly compensate Uptowner Inns, Inc. as a
result of the acts and omission of the Plaintiff. A pre-trial conference
is scheduled for September 14, 2004 and a trial date is scheduled for
September 21, 2004.
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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 March 31, 2003.
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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
May 13, 2003
By /s/ David Robinson,
CFO and Treasurer
May 13, 2003
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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 material 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;
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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
May 13, 2003
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CERTIFICATIONS
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, David Robinson, Chief Financial 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 material 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;
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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/ David Robinson
Chief Financial Officer
May 13, 2003
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