Form 8-K Amendment

0001193125-15-406099.txt : 20151217 0001193125-15-406099.hdr.sgml : 20151217 20151217150734 ACCESSION NUMBER: 0001193125-15-406099 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20151001 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20151217 DATE AS OF CHANGE: 20151217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONDOR HOSPITALITY TRUST, INC. CENTRAL INDEX KEY: 0000929545 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 521889548 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-34087 FILM NUMBER: 151293370 BUSINESS ADDRESS: STREET 1: 1800 WEST PASEWALK AVE STE 200 CITY: NORFOLK STATE: NE ZIP: 68701 BUSINESS PHONE: 4023712520 MAIL ADDRESS: STREET 1: 1800 WEST PASEWALK AVE STE 200 CITY: NORFOLK STATE: NE ZIP: 68701 FORMER COMPANY: FORMER CONFORMED NAME: SUPERTEL HOSPITALITY INC DATE OF NAME CHANGE: 20050601 FORMER COMPANY: FORMER CONFORMED NAME: HUMPHREY HOSPITALITY TRUST INC DATE OF NAME CHANGE: 19940906 8-K/A 1 d25761d8ka.htm FORM 8-K AMENDMENT Form 8-K Amendment

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K/A

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

October 1, 2015

Date of report (Date of earliest event reported)

Condor Hospitality Trust, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Maryland

(State or Other Jurisdiction

of Incorporation)


1-34087		52-1889548
(Commission File Number)		(IRS Employer Identification No.)

1800 West Pasewalk Avenue, Suite 200 Norfolk, NE		68701
(Address of Principal Executive Offices)		(Zip Code)

(402) 371-2520

(Registrant’s Telephone Number, Including Area Code)

Supertel Hospitality, Inc.

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

On October 7, 2015, Condor Hospitality, Inc. (the “Company”) filed a Form 8-K dated October 1, 2015 to report the acquisition of three hotels. This amendment to the Form 8-K is filed to provide the financial statements and pro forma financial information required to be filed by the Company for the three hotels.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.


Exhibit 99.1		Audited Financial Statements of PHG College Park, LLC for the year ended December 31, 2014

Exhibit 99.2		Audited Financial Statements of PHG JAX Flagler, LLC for the year ended December 31, 2014

Exhibit 99.3		Audited Financial Statements of PHG San Antonio, LLC for the year ended December 31, 2014

Exhibit 99.4		Unaudited Financial Statements of PHG College Park, LLC for the six months ended June 30, 2015

Exhibit 99.5		Unaudited Financial Statements of PHG JAX Flagler, LLC for the six months ended June 30, 2015

Exhibit 99.6		Unaudited Financial Statements of PHG San Antonio, LLC for the six months ended June 30, 2015

(b) Pro Forma Financial Information.

Exhibit 99.7		Pro forma financial information on the acquisition of three hotels

(d) Exhibits.

Exhibit 23.1		Consent of Brady Ware & Company

Exhibit 23.2		Consent of Brady Ware & Company

Exhibit 23.3		Consent of Brady Ware & Company

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	Condor Hospitality Trust, Inc.

Date: December 17, 2015	By:	/s/ Jonathan Gantt
		Name:	Jonathan Gantt
		Title:	Chief Financial Officer

EXHIBIT INDEX


Exhibit 99.1		Audited Financial Statements of PHG College Park, LLC for the year ended December 31, 2014

Exhibit 99.2		Audited Financial Statements of PHG JAX Flagler, LLC for the year ended December 31, 2014

Exhibit 99.3		Audited Financial Statements of PHG San Antonio, LLC for the year ended December 31, 2014

Exhibit 99.4		Unaudited Financial Statements of PHG College Park, LLC for the six months ended June 30, 2015

Exhibit 99.5		Unaudited Financial Statements of PHG JAX Flagler, LLC for the six months ended June 30, 2015

Exhibit 99.6		Unaudited Financial Statements of PHG San Antonio, LLC for the six months ended June 30, 2015

Exhibit 99.7		Pro forma financial information on the acquisition of three hotels

Exhibit 23.1		Consent of Brady Ware & Company

Exhibit 23.2		Consent of Brady Ware & Company

Exhibit 23.3		Consent of Brady Ware & Company

EX-23.1 2 d25761dex231.htm EX-23.1 EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the registration statements (No. 333-180479, 333-138304, and 333-170756) on Form S-3 and (No. 333-134822 and 333-181680) on Form S-8 of Condor Hospitality Trust, Inc. of our report dated December 7, 2015, with respect to the balance sheet of PHG College Park, LLC as of December 31, 2014, and the related statements of operations and members equity, and cash flows for the one-year period ended December 31, 2014 which appear in Form 8-K of Condor Hospitality Trust, Inc.

/s/ Brady Ware & Company

Brady Ware & Company

Atlanta, Georgia

December 16, 2015

EX-23.2 3 d25761dex232.htm EX-23.2 EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the registration statements (No. 333-180479, 333-138304, and 333-170756) on Form S-3 and (No. 333-134822 and 333-181680) on Form S-8 of Condor Hospitality Trust, Inc. of our report dated December 7, 2015, with respect to the balance sheet of PHG JAX Flagler, LLC as of December 31, 2014, and the related statements of operations and members equity, and cash flows for the one-year period ended December 31, 2014 which appear in Form 8-K of Condor Hospitality Trust, Inc.

/s/ Brady Ware & Company

Brady Ware & Company

Atlanta, Georgia

December 16, 2015

EX-23.3 4 d25761dex233.htm EX-23.3 EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the registration statements (No. 333-180479, 333-138304, and 333-170756) on Form S-3 and (No. 333-134822 and 333-181680) on Form S-8 of Condor Hospitality Trust, Inc. of our report dated December 7, 2015, with respect to the balance sheet of PHG San Antonio, LLC as of December 31, 2014, and the related statements of operations and members equity, and cash flows for the one-year period ended December 31, 2014 which appear in Form 8-K of Condor Hospitality Trust, Inc.

/s/ Brady Ware & Company

Brady Ware & Company

Atlanta, Georgia

December 16, 2015

EX-99.1 5 d25761dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

PHG COLLEGE PARK, LLC

FINANCIAL STATEMENTS

Year Ended December 31, 2014

TABLE OF CONTENTS


		Page

INDEPENDENT AUDITORS’ REPORT		1 - 2

FINANCIAL STATEMENTS

Balance Sheet		3

Statement of Operations and Members’ Equity		4

Statement of Cash Flows		5

Notes to Financial Statements		6 - 9

INDEPENDENT AUDITORS’ REPORT

To the Members of

PHG College Park, LLC

Atlanta, GA

We have audited the accompanying financial statements of PHG College Park, LLC, (the “Company”), which comprise the balance sheet as of December 31, 2014, and the related statement of operations and members’ equity and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

INDEPENDENT AUDITORS’ REPORT

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PHG College Park, LLC as of December 31, 2014, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ Brady Ware & Company

Atlanta, Georgia

December 7, 2015

PHG COLLEGE PARK, LLC

BALANCE SHEET

December 31, 2014


	2014

ASSETS

CURRENT ASSETS
Cash	$	141,504
Accounts receivable, net		361,689
Inventory, net		16,209
Prepaid expenses		24,715


Total current assets		544,117

PROPERTY AND EQUIPMENT, NET		6,966,521

OTHER ASSETS
Intangible assets, net		43,467
Deposits		20,000


		63,467


		7,574,105


LIABILITIES AND MEMBERS’ EQUITY

CURRENT LIABILITIES
Current maturities of long-term note payable	$	127,680
Accounts payable		93,199
Accrued expenses		132,978


Total current liabilities		353,857

LONG-TERM LIABILITIES
Note payable, net of current maturities		3,841,402

MEMBERS’ EQUITY		3,378,846


	$	7,574,105

See accompanying notes to financial statements.

PHG COLLEGE PARK, LLC

STATEMENT OF OPERATIONS AND MEMBERS’ EQUITY

Year Ended December 31, 2014


	2014

NET REVENUES
Room revenue	$	3,093,620
Food and beverage revenue		450,725
Other revenue		51,356


		3,595,701

COST OF SALES		213,393


GROSS PROFIT		3,382,308

OPERATING EXPENSES
Hotel operating expenses		2,500,647
General and administrative expenses		723,517


		3,224,164


INCOME FROM OPERATIONS		158,144

OTHER INCOME (EXPENSE)
Interest expense		(180,000	)
Interest income		25


		(179,975	)


NET LOSS		(21,831	)

MEMBERS’ EQUITY

Beginning members’ equity		3,675,689

Distributions		(275,012	)


Ending members’ equity	$	3,378,846

See accompanying notes to financial statements.

PHG COLLEGE PARK, LLC

STATEMENT OF CASH FLOWS

Year Ended December 31, 2014


	2014

OPERATING ACTIVITIES
Net loss	$	(21,831	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		354,576
Amortization		26,255


		359,000

Changes in operating assets and liabilities:
Accounts receivable, net		(254,577	)
Inventory, net		(7,476	)
Deposits		5,376
Prepaid expenses		(8,041	)
Accounts payable		56,052
Accrued expenses		(18,495	)


Net cash provided by operating activities		131,839

INVESTING ACTIVITIES
Capital additions		(245,843	)


Net cash used by investing activities		(245,843	)

FINANCING ACTIVITIES
Repayments on note payable		(30,918	)
Distributions to members		(275,012	)


Net cash used by financing activities		(305,930	)


NET DECREASE IN CASH		(419,934	)

CASH
Beginning of year		561,438


End of year	$	141,504

See accompanying notes to financial statements.

PHG COLLEGE PARK, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - PHG College Park, LLC (the “Company”) is a Georgia limited liability company formed on August 15, 2013, and organized for the purpose of purchasing and managing a hotel in College Park, Georgia. On September 12, 2013, the Company entered into a management agreement with Peachtree Hospitality Management, LLC (the “Manager”) to act as manager and exclusive agent to manage the hotel. On September 13, 2013, the Company entered into an operating agreement with InterContinental Hotels Group PLC to operate the hotel as “Hotel Indigo Atlanta Airport.”

Financial Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue and Cost Recognition - Revenue is generally recognized as services are performed. Revenues are primarily derived from room rentals and food and beverage sales.

Accounts Receivable - Accounts receivable consist primarily of room charges due from third party reservation agencies and individual guests. An allowance for doubtful accounts is established for possible losses on the collection of amounts based upon periodic review of credit risks. Customers not making payments in accordance with terms offered or historical practices are deemed to be past due. Accounts are written off against the allowance when management determines that probability of collection is remote.

Management has deemed no allowance necessary at December 31, 2014.

Inventories - Inventories are valued at the lower of cost (first-in, first-out method) or market with estimates of quantities and prices used in some cases.

Property and Equipment - Property and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method. Routine repairs and maintenance are charged to expense when incurred. When property and equipment are retired or sold, the related cost and accumulated depreciation are removed from the respective accounts, and the resulting gains and losses are included in income.

The Company reviews for impairment of long-lived assets in accordance with accounting standards. These standards require companies to determine if changes in circumstances indicate that the carrying amount of its long-lived assets may not be recoverable. If a change in circumstances warrants such an evaluation, undiscounted future cash flows from the use and ultimate disposition of the asset, as well as respective market values, are estimated to determine if an impairment exists. Management believes that there has been no impairment of the carrying value of its long-lived assets at December 31, 2014.

Income Taxes - The Company is organized as a limited liability company and is treated as a partnership for tax purposes. In lieu of corporate income taxes, the member of a limited liability company is taxed on his/her proportionate share of the Company’s taxable income. Therefore, no provision of liability for federal or state income taxes has been included in these financial statements.

PHG COLLEGE PARK, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Accounting for Uncertainty in Income Taxes - The Company has adopted accounting rules that prescribe when to recognize, and how to measure, the financial statement effects of income tax positions taken, or expected to be taken, on its income tax returns. These rules require management to evaluate the likelihood that, upon examination by relevant taxing jurisdictions, those income tax positions would be sustained. Based on that evaluation, the Company only recognizes the maximum benefit of each income tax position that is more than 50% likely of being sustained. To the extent that all, or a portion of, the benefits of an income tax position are not recognized, a liability would be recognized for the unrecognized benefits, along with any interest and penalties that would result from disallowance of the position. Should any such penalties and interest be incurred, they would be recognized as operating expenses.

Based on the results of management’s evaluation, no liability has been recognized in the accompanying balance sheets for unrecognized income tax positions. Further, no interest or penalties have been accrued or charged to expense as of December 31, 2014, or for the year then ended. The federal and state income tax returns of the Company for 2011, 2012, and 2013 are subject to examination by taxing authorities, generally for three years after the due date.

Advertising - Advertising costs are expensed as incurred. Advertising expense was $93,714 for the year 2014.

Subsequent Events - In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through December 7, 2015, the date the financial statements were available to be issued.

NOTE 2 - PROPERTY AND EQUIPMENT


	2014

Buildings	$	5,773,496
Furniture and fixtures		930,872
Land		378,290
Land improvements		239,584
Vehicles		55,249


Total cost		7,377,491
Less accumulated depreciation		410,970


	$	6,966,521

Depreciation expense for the year 2014 was $354,576.

NOTE 3 - INTANGIBLE ASSETS

Intangible assets consist of loan fees associated with the Company’s note payable. These fees total $76,577 and are presented net of accumulated amortization of $33,110. The loan fees are being amortized over a period of three years. Total amortization expense for 2014 was $26,255.

PHG COLLEGE PARK, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 4 - NOTE PAYABLE


	2014

Note payable to a bank, secured by a building, and requiring monthly payments of principal and interest in the amount of $25,306. The note bears interest at 4.5% and matures on August 1, 2016. The note is guaranteed by certain members. Effective March 31, 2015, the Company will be required to achieve a debt service coverage ratio of 1.40 to 1, with the ratio increasing to 1.50 to 1 effective March 31, 2016.	$	3,969,082

Current maturities of long-term note payable		(127,680	)


	$	3,841,402


Maturities of long-term liabilities over the subsequent two years are as follows:

2015	$	127,680
2016		3,841,402


	$	3,969,082

Interest expense on notes payable was $180,000 for the year ended 2014.

NOTE 5 - RELATED PARTY TRANSACTIONS

During 2013, the Company entered into a management agreement with the Manager, an affiliated entity. In accordance with the agreement, the Manager is to receive a monthly management fee of 4% of the preceding month’s gross revenues as defined in the agreement. In addition, the Manager is to receive a monthly accounting fee of $1,500. During 2014, the Manager earned management fees of $143,828 and accounting fees of $18,000.

At December 31, 2014, the Company owed the Manager $32,259 in total fees.

NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION


	2014

Cash paid during the year for:

Interest	$	180,000

PHG COLLEGE PARK, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 7 - SUBSEQUENT EVENTS

Subsequent to December 31, 2014, the Company entered into an agreement to sell the hotel to Condor Hospitality Trust, Inc. Upon completion of the sale, Peachtree Hospitality Management, LLC is to remain as the Manager of the hotel.

EX-99.2 6 d25761dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

PHG JAX FLAGLER, LLC

FINANCIAL STATEMENTS

Year Ended December 31, 2014

TABLE OF CONTENTS


		Page

INDEPENDENT AUDITORS’ REPORT		1 - 2

FINANCIAL STATEMENTS

Balance Sheet		3

Statement of Operations and Members’ Equity		4

Statement of Cash Flows		5

Notes to Financial Statements		6 - 9

INDEPENDENT AUDITORS’ REPORT

To the Members of

PHG JAX Flagler, LLC

Atlanta, GA

We have audited the accompanying financial statements of PHG JAX Flagler, LLC, (the “Company”), which comprise the balance sheet as of December 31, 2014, and the related statements of operations and members’ equity and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Auditors’ Responsibility

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

INDEPENDENT AUDITORS’ REPORT

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PHG JAX Flagler, LLC as of December 31, 2014, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ Brady Ware & Company

Atlanta, Georgia

December 7, 2015

PHG JAX FLAGLER, LLC

BALANCE SHEET

December 31, 2014


	2014

ASSETS

CURRENT ASSETS
Cash	$	312,750
Accounts receivable, net		18,709
Inventory, net		8,649
Prepaid expenses		42,609


Total current assets		382,717

PROPERTY AND EQUIPMENT, NET		10,068,964

OTHER ASSETS
Intangible assets, net		93,482
Deposits		31,758


		125,240


	$	10,576,921


LIABILITIES AND MEMBERS’ EQUITY

CURRENT LIABILITIES
Current maturities of long-term note payable	$	188,207
Accounts payable		71,262
Accrued expenses		119,479


Total current liabilities		378,948

LONG-TERM LIABILITIES
Note payable, net of current maturities		7,309,116

MEMBERS’ EQUITY		2,888,857


	$	10,576,921

See accompanying notes to financial statements.

PHG JAX FLAGLER, LLC

STATEMENT OF OPERATIONS AND MEMBERS’ EQUITY

Year Ended December 31, 2014


	2014

NET REVENUES
Room revenue	$	2,980,624
Food and beverage revenue		143,518
Other revenue		53,267


		3,177,409

COST OF SALES		105,537


GROSS PROFIT		3,071,872

OPERATING EXPENSES
Hotel operating expenses		1,917,612
General and administrative expenses		869,095


		2,786,707


INCOME FROM OPERATIONS		285,165

OTHER EXPENSE
Loss on disposal of assets		(31,558	)
Interest expense		(337,275	)


		(368,833	)


NET LOSS		(83,668	)

MEMBERS’ EQUITY

Beginning members’ equity		3,322,527

Distributions		(350,002	)


Ending members’ equity	$	2,888,857

See accompanying notes to financial statements.

PHG JAX FLAGLER, LLC

STATEMENT OF CASH FLOWS

Year Ended December 31, 2014


	2014

OPERATING ACTIVITIES
Net loss	$	(83,668	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		600,264
Amortization		13,731
Loss on disposal of assets		31,558


		561,885

Changes in operating assets and liabilities:
Accounts receivable, net		8,541
Inventory, net		(637	)
Prepaid expenses		(23,853	)
Accounts payable		(64,307	)
Accrued expenses		39,589


Net cash provided by operating activities		521,218

INVESTING ACTIVITIES
Capital additions		(975,491	)


Net cash used by investing activities		(975,491	)

FINANCING ACTIVITIES
Proceeds from note payable		802,263
Repayments on note payable		(136,759	)
Distributions to members		(350,002	)


Net cash provided by financing activities		315,502


NET DECREASE IN CASH		(138,771	)

CASH
Beginning of year		451,521


End of year	$	312,750

See accompanying notes to financial statements.

PHG JAX FLAGLER, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - PHG JAX Flagler, LLC (the “Company”) is a Georgia limited liability company formed on January 16, 2013, and organized for the purpose of purchasing and managing a hotel in Jacksonville, Florida. On February 7, 2013, the Company entered into a management agreement with Peachtree Hospitality Management, LLC (the “Manager”) to act as manager and exclusive agent to manage the hotel. On February 7, 2013, the Company entered into an operating agreement with Marriott International, Inc. to operate the hotel as “Courtyard Jacksonville Flagler Center.”

Revenue and Cost Recognition - Revenue is generally recognized as services are performed. Revenues are primarily derived from room rentals and food and beverage sales.

Management has deemed no allowance was necessary at December 31, 2014.

Inventories - Inventories are valued at the lower of cost (first-in, first-out method) or market with estimates of quantities and prices used in some cases.

PHG JAX FLAGLER, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Advertising - Advertising costs are expensed as incurred. Advertising expense was $65,624 for the year

2014.

NOTE 2 - PROPERTY AND EQUIPMENT


	2014

Buildings	$	7,408,509
Furniture and fixtures		1,344,387
Land		1,568,160
Land improvements		716,536


Total cost		11,037,592
Less accumulated depreciation		968,628


	$	10,068,964

Depreciation expense for the year 2014 was $600,264.

NOTE 3 - INTANGIBLE ASSETS

Intangible assets consist of franchise costs paid to Marriott International, Inc. and loan fees associated with the Company’s note payable. The franchise costs total $75,000 and loan fees total $43,656. These amounts are presented net of accumulated amortization of $25,174. The franchise costs are being amortized over the life of the franchise agreement which totals fifteen years. Loan fees are being amortized over a period of five years. Total amortization expense for 2014 was $13,731.

PHG JAX FLAGLER, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 4 - NOTE PAYABLE


	2014

Note payable to a bank, secured by a building, and requiring monthly payments of principal and interest in the amount of $43,478. The note bears interest at 4.5% and matures on February 28, 2018. The note is guaranteed by certain members. The loan requires that the Company maintain a debt service coverage ration of 1.45 to 1 and a debt yield of 10% measured annually. At December 31, 2014, the Company was in compliance with the covenants.	$	7,497,323

Current maturities of long-term notes payable		(188,207	)


	$	7,309,116


Maturities of long-term liabilities over the subsequent four years are as follows:

2015	$	188,207
2016		196,853
2017		205,897
2018		6,906,366


	$	7,497,323

Interest expense on notes payable was $337,275 for the year ended 2014.

NOTE 5 - RELATED PARTY TRANSACTIONS

During 2013, the Company entered into a management agreement with the Manager, an affiliated entity. In accordance with the agreement, the Manager is to receive a monthly management fee of 4% of the preceding month’s gross revenues as defined in the agreement. In addition, the Manager is to receive a monthly accounting fee of $1,000. During 2014, the Manager earned management fees of $127,097 and accounting fees of $12,000.

At December 31, 2014, the Company owed the Manager $5,079 in total fees.

NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION


	2014

Cash paid during the year for:

Interest	$	341,554

PHG JAX FLAGLER, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 7 - SUBSEQUENT EVENTS

EX-99.3 7 d25761dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

PHG SAN ANTONIO, LLC

FINANCIAL STATEMENTS

Year Ended December 31, 2014

TABLE OF CONTENTS


		Page

INDEPENDENT AUDITORS’ REPORT		1 - 2

FINANCIAL STATEMENTS

Balance Sheet		3

Statement of Operations and Members’ Equity		4

Statement of Cash Flows		5

Notes to Financial Statements		6 - 9

INDEPENDENT AUDITORS’ REPORT

To the Members of

PHG San Antonio, LLC

Atlanta, GA

We have audited the accompanying financial statements of PHG San Antonio, LLC, (the “Company”), which comprise the balance sheet as of December 31, 2014, and the related statements of operations and members’ equity and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Auditors’ Responsibility

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

INDEPENDENT AUDITORS’ REPORT

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PHG San Antonio, LLC as of December 31, 2014, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ Brady Ware & Company

Atlanta, Georgia

December 7, 2015

PHG SAN ANTONIO, LLC

BALANCE SHEET

December 31, 2014


	2014

ASSETS

CURRENT ASSETS
Cash	$	41,365
Cash restricted for insurance and real estate tax payments		59,914
Accounts receivable, net		111,266
Inventory, net		3,190
Prepaid expenses		50,512


Total current assets		266,247

PROPERTY AND EQUIPMENT, NET		11,223,646

OTHER ASSETS
Cash restricted for repairs		470,857
Intangible assets, net		277,755
Deposits		750


		749,362


	$	12,239,255


LIABILITIES AND MEMBERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	575,846
Due to member		40,000
Accrued expenses		162,701


Total current liabilities		778,547

LONG-TERM LIABILITIES
Note payable, net of current maturities		11,220,000

MEMBERS’ EQUITY		240,708


	$	12,239,255

See accompanying notes to financial statements.

PHG SAN ANTONIO, LLC

STATEMENT OF OPERATIONS AND MEMBERS’ EQUITY

Year Ended December 31, 2014


	2014

NET REVENUES
Room revenue	$	1,247,049
Food and beverage revenue		12,330
Other revenue		63,628


		1,323,007

COST OF SALES		43,667


GROSS PROFIT		1,279,340

OPERATING EXPENSES
Hotel operating expenses		1,354,934
General and administrative		946,771


		2,301,705


LOSS FROM OPERATIONS		(1,022,365	)

OTHER INCOME (EXPENSE)
Loss on disposal of property and equipment		(253,822	)
Interest expense		(539,098	)
Interest income		209


		(792,711	)


NET LOSS		(1,815,076	)

MEMBERS’ EQUITY

Beginning members’ equity		2,055,791

Distributions		(7	)


Ending members’ equity	$	240,708

See accompanying notes to financial statements.

PHG SAN ANTONIO, LLC

STATEMENT OF CASH FLOWS

Year Ended December 31, 2014


	2014

OPERATING ACTIVITIES
Net loss	$	(1,815,076	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		527,857
Amortization		32,310
Loss on disposal of assets		253,822


		(1,001,087	)

Changes in operating assets and liabilities:
Accounts receivable, net		6,382
Inventory, net		(1,280	)
Prepaid expenses		(11,834	)
Advance from member		40,000
Accounts payable		450,277
Accrued expenses		(64,025	)


Net cash used by operating activities		(581,567	)

INVESTING ACTIVITIES
Capital additions		(4,330,472	)
Increase in restricted cash		(366,899	)


Net cash used by investing activities		(4,697,371	)

FINANCING ACTIVITIES
Proceeds from note payable		5,219,908
Repayments on note payable		(39,587	)
Distributions to members		(7	)


Net cash provided by financing activities		5,180,314


NET DECREASE IN CASH		(98,624	)

CASH
Beginning of year		139,989


End of year	$	41,365

See accompanying notes to financial statements.

PHG SAN ANTONIO, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - PHG San Antonio, LLC (the “Company”) is a Georgia limited liability company formed on May 6, 2010, and organized for the purpose of purchasing and managing a hotel in San Antonio, Texas. On July 22, 2010, the Company entered into a management agreement with Peachtree Hospitality Management, LLC (the “Manager”) to act as manager and exclusive agent to manage the hotel. On July 22, 2010, the Company entered into an operating agreement with The Sheraton LLC., to operate the hotel as “Four Points by Sheraton San Antonio Airport.” Effective November 8, 2014, the Company entered into an operating agreement with Marriott to operate the hotel as “SpringHill Suites San Antonio Downtown/Riverwalk.”

Revenue and Cost Recognition - Revenue is generally recognized as services are performed. Revenues are primarily derived from room rentals and food and beverage sales.

Management has deemed no allowance was necessary at December 31, 2014.

Inventories - Inventories are valued at the lower of cost (first-in, first-out method) or market with estimates of quantities and prices used in some cases.

PHG SAN ANTONIO, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Advertising - Advertising costs are expensed as incurred. Advertising expense was $12,611 for the year

2014.

NOTE 2 - PROPERTY AND EQUIPMENT


	2014

Buildings	$	8,381,053
Furniture and fixtures		1,408,391
Land		1,935,810
Land improvements		274,765


Total cost		12,000,019
Less accumulated depreciation		776,373


	$	11,223,646

Depreciation expense for the year 2014 was $527,857.

NOTE 3 - INTANGIBLE ASSETS

Intangible assets consist of franchise costs paid to Marriott International, Inc. and loan fees associated with the Company’s note payable. The franchise costs total $40,000 and loan fees total $248,641. These amounts are presented net of accumulated amortization of $10,886. The franchise costs are being amortized over the life of the franchise agreement which totals twenty years. Loan fees are being amortized over a period of fifteen years. Total amortization expense for 2014 was $32,310.

PHG SAN ANTONIO, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 4 - NOTES PAYABLE


	2014

Note payable to a bank, secured by a building, currently requiring interest only payments. Principal payments of $12,000 a month begin in May 2016 with a lump sum of all remaining principal due at maturity on May 1, 2018. The note bears interest at LIBOR plus 6.25%, an effective rate of 6.44% at December 31, 2014.	$	11,220,000


There is no current portion of the note as the first principal payments are not due until 2016. Long-term maturities of the note payable are as follows:

2016	$	96,000
2017		144,000
2018		10,980,000


	$	11,220,000

Interest expense on notes payable was $539,098 for the year ended 2014.

NOTE 5 - RELATED PARTY TRANSACTIONS

During 2013, the Company entered into a management agreement with the Manager, an affiliated entity. In accordance with the agreement, the Manager is to receive a monthly fee of 4% of the preceding month’s gross revenues as defined in the agreement. In addition, the Manager is to receive a monthly accounting fee of $1,000. During 2014, the Manager earned management fees of $52,929 and accounting fees of $12,000. At December 31, 2014, The Company owed the Manager $112,893 in fees.

Due to member in the amount $40,000 consists of funds advanced from Peachtree Hotel Group, II, LLC. These amounts are due on demand. The Company also owed an additional $302,393 to Peachtree Hotel Group II, LLC, which is included in accounts payable at December 31, 2014.

NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION


	2014

Cash paid during the year for:

Interest	$	510,429


Noncash transactions:

Note payable paid off through issuance of new note payable	$	5,751,452


Loan fees paid from note payable proceeds	$	248,641

PHG SAN ANTONIO, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 7 - SUBSEQUENT EVENTS

EX-99.4 8 d25761dex994.htm EX-99.4 EX-99.4

Exhibit 99.4

PHG COLLEGE PARK, LLC

FINANCIAL STATEMENTS

Six Months Ended June 30, 2015 and 2014

PHG COLLEGE PARK, LLC

BALANCE SHEETS

June 30, 2015 and 2014


	June 30, 2015		June 30, 2014
ASSETS

CURRENT ASSETS
Cash	$	308,928	$	582,263
Accounts receivable, net of an allowance of doubtful accounts of $111,457 and $1,500		280,231		221,605
Inventory, net		14,710		16,821
Prepaid expenses		38,634		26,619

Total current assets		642,503		847,308

PROPERTY AND EQUIPMENT, NET		6,814,442		6,950,921

OTHER ASSETS
Intangible assets, net		30,339		56,594
Deposits		20,000		20,375

Total other assets		50,339		76,969

Total assets	$	7,507,284	$	7,875,198


LIABILITIES AND MEMBERS’ EQUITY

CURRENT LIABILITIES
Current maturities of long-term note payable	$	130,580	$	94,157
Accounts payable		35,155		45,793
Accrued expenses		307,742		219,364


Total current liabilities		473,477		359,314

LONG-TERM LIABILITIES
Note payable, net of current maturities		3,775,374		3,905,843

MEMBERS’ EQUITY		3,258,433		3,610,041

Total liabilities and members’ equity	$	7,507,284	$	7,875,198

See notes to financial statements.

PHG COLLEGE PARK, LLC

STATEMENTS OF OPERATIONS AND MEMBERS’ EQUITY

Six Months Ended June 30, 2015 and 2014


	June 30, 2015			June 30, 2014

NET REVENUES
Room revenue	$	1,769,515		$	1,512,649
Food and beverage revenue		171,600			247,859
Other revenue		21,929			25,716


		1,963,044			1,786,224

COST OF SALES		65,062			98,319


GROSS PROFIT		1,897,982			1,687,905

OPERATING EXPENSES
Hotel operating expenses		1,377,086			1,173,547
General and administrative expenses		352,774			339,991


		1,729,860			1,513,538


INCOME FROM OPERATIONS		168,122			174,367

OTHER EXPENSE
Interest expense		(88,535	)		(90,000	)


NET INCOME		79,587			84,367

MEMBERS’ EQUITY

Beginning members’ equity		3,378,846			3,675,686

Distributions		(200,000	)		(150,012	)


Ending members’ equity	$	3,258,433		$	3,610,041

See notes to financial statements.

PHG COLLEGE PARK, LLC

STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2015 and 2014


	June 30, 2015			June 30, 2014
OPERATING ACTIVITIES
Net income	$	79,587		$	84,367
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		181,989			203,340
Amortization		13,127			13,127


		274,703			300,834

Changes in operating assets and liabilities:		81,458			(114,493	)
Accounts receivable, net
Inventory		1,499			(8,088	)
Deposits		—			5,000
Prepaid expenses		(13,919	)		(9,945	)
Accounts payable		(58,044	)		8,646
Accrued expenses		174,765			67,893


Net cash provided by operating activities		460,462			249,847

INVESTING ACTIVITIES
Capital additions		(29,910	)		(79,010	)


Net cash used by investing activities		(29,910	)		(79,010	)

FINANCING ACTIVITIES
Repayments on note payable		(63,128	)		—
Distributions to members		(200,000	)		(150,012	)


Net cash used by financing activities		(263,128	)		(150,012	)


NET INCREASE IN CASH		167,424			20,825

CASH
Beginning of year		141,504			561,438


End of year	$	308,928		$	582,263

See notes to financial statements.

PHG COLLEGE PARK, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - PHG College Park, LLC (the “Company”) is a Georgia limited liability company formed on August 15, 2013, and organized for the purpose of purchasing and managing a hotel in College Park, Georgia. On September 12, 2013, the Company entered into a management agreement with Peachtree Hospitality Management, LLC (the “Manager”) to act as manager and exclusive agent to manage the hotel. On September 13, 2013, the Company entered into an operating agreement with InterContinental Hotels Group PLC to operate the hotel as “Hotel Indigo Atlanta Airport.”

Revenue and Cost Recognition - Revenue is generally recognized as services are performed. Revenues are primarily derived from room rentals and food and beverage sales.

The balance of the allowance was $111,457 and $1,500 at June 30, 2015 and 2014.

Inventories - Inventories are valued at the lower of cost (first-in, first-out method) or market with estimates of quantities and prices used in some cases.

PHG COLLEGE PARK, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Based on the results of management’s evaluation, no liability has been recognized in the accompanying balance sheet for unrecognized income tax positions. Further, no interest or penalties have been accrued or charged to expense as of June 30, 2015, or for the six months then ended. The federal and state income tax returns of the Company for 2012, 2013, and 2014 are subject to examination by taxing authorities, generally for three years after the due date.

Advertising - Advertising costs are expensed as incurred. Advertising expense was $63,444 and

$33,072 for the six months ended June 30, 2015 and 2014.

Subsequent Events - In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through December 16, 2015, the date the financial statements were available to be issued.

NOTE 2 - PROPERTY AND EQUIPMENT


	June 30, 2015		June 30, 2014

Buildings	$	5,774,697	$	5,628,046
Construction in process		28,709		15,615
Furniture and fixtures		930,872		893,875
Land		378,290		378,290
Land improvements		239,584		239,584
Vehicles		55,249		55,249


Total cost		7,407,401		7,210,659
Less accumulated depreciation		592,959		259,738


	$	6,814,442	$	6,950,921

Depreciation expense for the six months ended June 30, 2015 and 2014 was $181,989 and $203,340.

PHG COLLEGE PARK, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 3 - INTANGIBLE ASSETS

Intangible assets consist of loan fees associated with the Company’s note payable. These fees total $76,577 and are presented net of accumulated amortization of $46,238 and $19,983 for the six months ended June 30, 2015 and 2014. The loan fees are being amortized over a period of three years. Total amortization expense for the six months ended June 30, 2015 and 2014 was $13,127.

NOTE 4 - NOTE PAYABLE


	June 30, 2015		June 30, 2014

Note payable to a bank, secured by a building, and requiring monthly payments of principal and interest in the amount of $25,306. The note bears interest at 4.5% and matures on August 1, 2016. The note is guaranteed by certain members. Effective March 31, 2015, the Company is required to achieve a debt service coverage ratio of 1.40 to 1, with the ratio increasing to 1.50 to 1 effective March 31, 2016.		$3,905,954	$	4,000,000

Current maturities of long-term note payable		130,580		94,157


	$	3,775,374	$	3,905,843


Maturities of long-term liabilities over the subsequent two years are as follows:

2016			$	130,580
2017				3,775,374


			$	3,905,954

Interest expense on notes payable was $88,535 and $90,000 for the six months ended June 30, 2015 and 2014.

NOTE 5 - RELATED PARTY TRANSACTIONS

During 2013, the Company entered into a management agreement with the Manager, an affiliated entity. In accordance with the agreement, the Manager is to receive a monthly management fee of 4% of the preceding month’s gross revenues as defined in the agreement. In addition, the Manager is to receive a monthly accounting fee of $1,500. For the six months ended June 30, 2015 and 2014, the Manager earned management fees of $78,521 and $71,450 and accounting fees of $9,000.

At June 30, 2015 and 2014, the Company owed the Manager $12,025 and $10,925 in total fees.

PHG COLLEGE PARK, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION


	June 30, 2015		June 30, 2014

Cash paid during the six months ended June 30 for:

Interest	$	88,535	$	90,353

NOTE 7 - SUBSEQUENT EVENTS

Subsequent to June 30, 2015, the Company entered into an agreement to sell the hotel to Condor Hospitality Trust, Inc. Upon completion of the sale, Peachtree Hospitality Management, LLC is to remain as the Manager of the hotel.

EX-99.5 9 d25761dex995.htm EX-99.5 EX-99.5

Exhibit 99.5

PHG JAX FLAGLER, LLC

FINANCIAL STATEMENTS

Six Months Ended June 30, 2015 and 2014

PHG JAX FLAGLER, LLC

BALANCE SHEETS

June 30, 2015 and 2014


	June 30, 2015		June 30, 2014

ASSETS

CURRENT ASSETS
Cash	$	173,399	$	328,675
Cash restricted for tax payments		154,722		45,205
Accounts receivable, net of allowance of doubtful accounts of $0 and $400		28,615		21,174
Inventory, net		10,073		8,808
Prepaid expenses		47,050		37,235


Total current assets		413,859		441,097

PROPERTY AND EQUIPMENT, NET		9,765,292		10,202,276

OTHER ASSETS
Intangible assets, net		86,616		100,348
Deposits		31,758		31,758


Total other assets		118,374		132,106


Total assets	$	10,297,525	$	10,775,479


LIABILITIES AND MEMBERS’ EQUITY

CURRENT LIABILITIES
Current maturities of long-term note payable	$	192,482	$	188,381
Accounts payable		28,636		52,251
Accrued expenses		185,540		167,580


Total current liabilities		406,658		408,212

LONG-TERM LIABILITIES
Note payable, net of current maturities		7,212,664		7,396,230

MEMBERS’ EQUITY		2,678,203		2,971,037


Total liabilities and members’ equity	$	10,297,525	$	10,775,479

See notes to financial statements.

PHG JAX FLAGLER, LLC

STATEMENTS OF OPERATIONS AND MEMBERS’ EQUITY

Six Months Ended June 30, 2015 and 2014


	June 30, 2015			June 30, 2014

NET REVENUES
Room revenue	$	1,884,998		$	1,457,870
Food and beverage revenue		98,383			54,034
Other revenue		28,003			26,277


		2,011,384			1,538,181

COST OF SALES		62,407			47,233


GROSS PROFIT		1,948,977			1,490,948

OPERATING EXPENSES
Hotel operating expenses		1,067,516			951,320
General and administrative expenses		444,501			623,601

		1,512,017			1,574,921


INCOME (LOSS) FROM OPERATIONS		436,960			(83,973	)

OTHER EXPENSE
Interest expense		(172,614	)		(167,515	)


NET INCOME		264,346			(251,488	)

MEMBERS’ EQUITY

Beginning members’ equity		2,888,857			3,322,527

Distributions		(475,000	)		(100,002	)


Ending members’ equity	$	2,678,203		$	2,971,037

See notes to financial statements.

PHG JAX FLAGLER, LLC

STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2015 and 2014


	June 30, 2015			June 30, 2014

OPERATING ACTIVITIES
Net income (loss)	$	264,346		$	(251,488	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		319,036			483,741
Amortization		6,866			6,865

		590,248			239,118

Changes in operating assets and liabilities:
Accounts receivable, net		(9,906	)		6,076
Inventory, net		(1,424	)		(796	)
Prepaid expenses		(4,441	)		(18,479	)
Accounts payable		(42,626	)		(83,318	)
Accrued expenses		66,061			87,689


Net cash provided by operating activities		597,912			230,290

INVESTING ACTIVITIES
Capital additions		(15,364	)		(960,721	)
Increase in restricted cash		(154,722	)		—


Net cash used by investing activities		(170,086	)		(960,721	)

FINANCING ACTIVITIES
Proceeds from note payable		—			802,263
Repayments on note payable		(92,177	)		(49,471	)
Distributions to members		(475,000	)		(100,002	)


Net cash provided (used) by financing activities		(567,177	)		652,790


NET DECREASE IN CASH		(139,351	)		(77,641	)

CASH
Beginning of year		312,750			406,316


End of year	$	173,399		$	328,675

See notes to financial statements.

PHG JAX FLAGLER, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - PHG JAX Flagler, LLC (the “Company”) is a Georgia limited liability company formed on January 16, 2013, and organized for the purpose of purchasing and managing a hotel in Jacksonville, Florida. On February 7, 2013, the Company entered into a management agreement with Peachtree Hospitality Management, LLC (the “Manager”) to act as manager and exclusive agent to manage the hotel. On February 7, 2013, the Company entered into an operating agreement with Marriott International, Inc. to operate the hotel as “Courtyard Jacksonville Flagler Center.”

Revenue and Cost Recognition - Revenue is generally recognized as services are performed. Revenues are primarily derived from room rentals and food and beverage sales.

Management has deemed no allowance was necessary at June 30, 2015. The balance of the allowance was $400 at June 30, 2014.

Inventories - Inventories are valued at the lower of cost (first-in, first-out method) or market with estimates of quantities and prices used in some cases.

PHG JAX FLAGLER, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Advertising - Advertising costs are expensed as incurred. Advertising expense was $38,856 and $30,956 for the six months ended June 30, 2015 and 2014.

Subsequent Events - In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through December 16, 2015, the date the financial statements were available to be issued.

NOTE 2 - PROPERTY AND EQUIPMENT


	June 30, 2015		June 30, 2014

Buildings	$	7,408,509	$	6,392,933
Construction in process		12,893		1,478,211
Furniture and fixtures		1,346,857		899,349
Land		1,568,160		1,568,160
Land improvements		716,536		716,536


Total cost		11,052,955		11,055,189
Less accumulated depreciation		1,287,663		852,913


	$	9,765,292	$	10,202,276

Depreciation expense for the six months ended June 30, 2015 and 2014 was $319,036 and $483,741.

PHG JAX FLAGLER, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 3 - INTANGIBLE ASSETS

Intangible assets consist of franchise costs paid to Marriott International, Inc. and loan fees associated with the Company’s note payable. The franchise costs total $75,000 and loan fees total $43,656. These amounts are presented net of accumulated amortization of $32,040 and $18,309 for the six months ended June 30, 2015 and 2014. The franchise costs are being amortized over the life of the franchise agreement which totals fifteen years. Loan fees are being amortized over a period of five years. Total amortization expense for the six months ended June 30, 2015 and 2014 was $6,866.

NOTE 4 - NOTE PAYABLE


	June 30, 2015			June 30, 2014

Note payable to a bank, secured by a building, and requiring monthly payments of principal and interest in the amount of $43,478. The note bears interest at 4.5% and matures on February 28, 2018. The note is guaranteed by certain members. The loan requires that the Company maintain a debt service coverage ration of 1.45 to 1 and a debt yield of 10% measured annually.	$	7,405,146		$	7,584,611

Current maturities of long-term notes payable		(192,482	)		(188,381	)


	$	7,212,664		$	7,396,230


Maturities of long-term liabilities over the subsequent three years are as follows:

2016				$	192,482
2017					201,324
2018					7,011,340


				$	7,405,146

Interest expense on notes payable was $172,614 and $167,515 for the six months ended June 30, 2015 and 2014.

NOTE 5 - RELATED PARTY TRANSACTIONS

During 2013, the Company entered into a management agreement with the Manager, an affiliated entity. In accordance with the agreement, the Manager is to receive a monthly management fee of 4% of the preceding month’s gross revenues as defined in the agreement. In addition, the Manager is to receive a monthly accounting fee of $1,000. For the six months ended June 30, 2015 and 2014, the Manager earned management fees of $80,456 and $61,528 and accounting fees of $6,000.

At June 30, 2015 and 2014, the Company owed the Manager $11,994 and $11,085 in total fees.

PHG JAX FLAGLER, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION


	June 30, 2015		June 30, 2014

Cash paid during the six months ended June 30 for:

Interest	$	172,614	$	167,056

NOTE 7 - SUBSEQUENT EVENTS

EX-99.6 10 d25761dex996.htm EX-99.6 EX-99.6

Exhibit 99.6

PHG SAN ANTONIO, LLC

FINANCIAL STATEMENTS

Six Months Ended June 30, 2015 and 2014

PHG SAN ANTONIO, LLC

BALANCE SHEETS

June 30, 2015 and 2014


	June 30, 2015		June 30, 2014
ASSETS

CURRENT ASSETS
Cash	$	110,348	$	63,344
Cash restricted for insurance and real estate tax		168,958		346,417
Accounts receivable, net of an allowance for doubtful accounts of $4,796 and $2,400		63,406		52,185
Inventory, net		4,120		3,125
Prepaid expenses		54,165		68,452


Total current assets		400,997		533,523

PROPERTY AND EQUIPMENT, NET		11,277,864		8,508,302

OTHER ASSETS
Intangible assets, net		268,591		238,531
Deposits		750		40,750


Total other assets		269,341		279,281


Total assets	$	11,948,202	$	9,321,106


LIABILITIES AND MEMBERS’ EQUITY

CURRENT LIABILITIES
Current maturities of long-term note payable	$	24,000	$	—
Accounts payable		333,989		1,304,513
Due to member		40,000		25,000
Accrued expenses		209,889		151,781


Total current liabilities		607,878		1,481,294

LONG-TERM LIABILITIES
Note payable, net of current maturities		11,196,000		6,700,000

MEMBERS’ EQUITY		144,324		1,139,812


Total liabilities and members’ equity	$	11,948,202	$	9,321,106

See notes to financial statements.

PHG SAN ANTONIO, LLC

STATEMENTS OF OPERATIONS AND MEMBERS’ EQUITY

Six months Ended June 30, 2015 and 2014


	June 30, 2015			June 30, 2014

NET REVENUES
Room revenue	$	1,702,767		$	786,680
Food and beverage revenue		22,826			4,973
Other revenue		107,158			37,772

		1,832,751			829,425
COST OF SALES		46,302			15,259


GROSS PROFIT		1,786,449			814,166

OPERATING EXPENSES
Hotel operating expenses		1,010,504			635,087
General and administrative		498,277			900,400

		1,508,781			1,535,487


INCOME (LOSS) FROM OPERATIONS		277,668			(721,321	)

OTHER INCOME (EXPENSE)
Interest expense		(374,196	)		(194,728	)
Interest income		144			70

		(374,052	)		(194,658	)


NET LOSS		(96,384	)		(915,979	)

MEMBERS’ EQUITY

Beginning members’ equity		240,708			2,055,791


Ending members’ equity	$	144,324		$	1,139,812

See notes to financial statements.

PHG SAN ANTONIO, LLC

STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2015 and 2014


	June 30, 2015			June 30, 2014
OPERATING ACTIVITIES
Net loss	$	(96,384	)	$	(915,979	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		319,810			688,954
Amortization		9,164			24,105


		232,590			(202,920	)
Changes in operating assets and liabilities:
Accounts receivable, net		47,860			65,463
Inventory, net		(930	)		(1,215	)
Prepaid expenses		(3,653	)		(29,774	)
Due to member		—			25,000
Accounts payable		(241,857	)		1,178,944
Accrued expenses		47,186			(74,948	)


Net cash provided by operating activities		81,196			960,550

INVESTING ACTIVITIES
Capital additions		(374,027	)		(1,522,401	)
Decrease (increase) in restricted cash		361,814			(182,545	)


Net cash used by investing activities		(12,213	)		(1,704,946	)

FINANCING ACTIVITIES
Proceeds from note payable		—			707,338
Repayments on note payable		—			(39,587	)


Net cash provided by financing activities		—			667,751


NET INCREASE (DECREASE) IN CASH		68,983			(76,645	)

CASH
Beginning of year		41,365			139,989


End of year	$	110,348		$	63,344

See notes to financial statements.

PHG SAN ANTONIO, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - PHG San Antonio, LLC (the “Company”) is a Georgia limited liability company formed on May 6, 2010, and organized for the purpose of purchasing and managing a hotel in San Antonio, Texas. On July 22, 2010, the Company entered into a management agreement with Peachtree Hospitality Management, LLC (the “Manager”) to act as manager and exclusive agent to manage the hotel. On July 22, 2010, the Company entered into an operating agreement with The Sheraton LLC., to operate the hotel as “Four Points by Sheraton San Antonio Airport.” Effective November 8, 2014, the Company entered into an operating agreement with Marriott to operate the hotel as “SpringHill Suites San Antonio Downtown/Riverwalk.”

Revenue and Cost Recognition - Revenue is generally recognized as services are performed. Revenues are primarily derived from room rentals and food and beverage sales.

The balance of the allowance was $4,796 and $2,400 at June 30, 2015 and 2014.

Inventories - Inventories are valued at the lower of cost (first-in, first-out method) or market with estimates of quantities and prices used in some cases.

PHG SAN ANTONIO, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Advertising - Advertising costs are expensed as incurred. Advertising expense was $44,868 and $2,179 for the six months ended June 30, 2015 and 2014.

Subsequent Events - In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through December 16, 2015, the date the financial statements were available to be issued.

NOTE 2 - PROPERTY AND EQUIPMENT


	June 30, 2015		June 30, 2014
Buildings	$	8,381,053	$	5,453,899
Construction in process		374,027		1,614,794
Furniture and fixtures		1,408,391		1,433,529
Land		1,935,810		1,935,810
Land improvements		274,765		231,420


Total cost		12,374,046		10,669,452
Less accumulated depreciation		1,096,182		2,161,150

	$	11,277,864	$	8,508,302

Depreciation expense for the six months ended June 30, 2015 and 2014 was $319,810 and $688,954.

PHG SAN ANTONIO, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 3 - INTANGIBLE ASSETS

Intangible assets consist of franchise costs paid to Marriott International, Inc. and loan fees associated with the Company’s note payable. The franchise costs total $40,000 and loan fees total $248,640. These amounts are presented net of accumulated amortization of $20,050 and $2,680 for the six months ended June 30, 2015 and 2014. The franchise costs are being amortized over the life of the franchise agreement which totals twenty years. Loan fees are being amortized over a period of fifteen years. Total amortization expense for the six months ended June 30, 2015 and 2014 was $9,164 and $24,105.

NOTE 4 - NOTES PAYABLE


	June 30, 2015			June 30, 2014

Note payable to a bank, secured by a building, currently requiring interest only payments. Principal payments of $12,000 a month begin in May 2016 with a lump sum of all remaining principal due at maturity on May 1, 2018. The note bears interest at LIBOR plus 6.25%, an effective rate of 6.44% at June 30, 2015.	$	11,220,000		$	6,700,000

Current maturities of long-term note payable		(24,000	)		—


	$	11,196,000		$	6,700,000


Maturities of long-term liabilities over the subsequent three years are as follows:

2016				$	24,000
2017					144,000
2018					11,052,000


				$	11,220,000

Interest expense on notes payable was $374,196 and $194,728 for the six months ended June 30, 2015 and 2014.

NOTE 5 - RELATED PARTY TRANSACTIONS

During 2013, the Company entered into a management agreement with the Manager, an affiliated entity. In accordance with the agreement, the Manager is to receive a monthly fee of 4% of the preceding month’s gross revenues as defined in the agreement. In addition, the Manager is to receive a monthly accounting fee of $1,000. For the six months ended June 30, 2015 and 2014, the Manager earned management fees of $73,316 and $33,180 and accounting fees of $6,000.

At June 30, 2015 and 2014, due to member in the amounts of $40,000 and $25,000 consists of funds advanced from Peachtree Hotel Group, II, LLC. These amounts are due on demand. At June 30, 2015 and 2014, the Company owed the Manager $11,397 and $1,391 in total fees. The Company also owed $302,393 and $25,250 to Peachtree Hotel Group II, LLC, one of the members of the Company which is included in accounts payable at June 30, 2015 and 2014.

PHG SAN ANTONIO, LLC

NOTES TO FINANCIAL STATEMENTS

NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION


	2015		2014

Cash paid during the six months ended June 30 for:

Interest	$	374,196	$	186,945

Noncash transactions:

Note payable paid off through issuance of new note payable	$	—	$	5,751,452


Loan fees paid off through issuance of new note payable	$	—	$	241,210

NOTE 7 - SUBSEQUENT EVENTS

EX-99.7 11 d25761dex997.htm EX-99.7 EX-99.7

Exhibit 99.7

CONDOR HOSPITALITY TRUST, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited pro forma consolidated financial statements gives effect to our acquisition of the San Antonio, Texas Springhill Suites by Marriott on October 1, 2015 and the Atlanta, Georgia Hotel Indigo and Jacksonville, Florida Courtyard by Marriott on October 2, 2015, as well as the disposition of two non-core hotel properties that closed on July 13, 2015, by application of the pro forma adjustments to our historical consolidated financial statements. The total purchase price allocated to the acquired hotels is based on preliminary estimates and is subject to change.

The unaudited pro forma consolidated balance sheet as of June 30, 2015 gives effect to each of the transactions referred to above as if the transactions had occurred as of June 30, 2015. The unaudited pro forma consolidated statements of operations for the six months ended June 30, 2015 and for the year ended December 31, 2014 give effect to each of the transactions referred to above as if they had occurred on January 1, 2014. In the opinion of management, all adjustments necessary to reflect the effects of these transactions have been made.

These unaudited pro forma consolidated financial statements are presented for informational purposes only and are not necessarily indicative of what our actual consolidated financial position or results of operations would have been had the transactions occurred on the dates indicated, or of future results of operations or financial condition, and should not be viewed as indicative of future results of operations or financial condition.

These unaudited pro forma consolidated financial statements should be read in conjunction with, and are qualified in their entirety by, our historical consolidated financial statements and the related notes thereto, which appear in the Annual Report on Form 10-K as of and for the year ended December 31, 2014, filed with the Securities and Exchange Commission (SEC) on March 23, 2015, and the Quarterly Report on Form 10-Q as of and for the three and six month periods ended June 30, 2015, filed with the SEC on August 13, 2015, as well as the Company’s Current Reports on Form 8-K related to these acquisitions filed with the SEC on October 7, 2015 and related to these dispositions filed with the SEC on July 17, 2015, the notes to the unaudited pro forma consolidated financial statements included in this Form 8-K/A, and the historical financial statements and related notes of the acquired hotels included as Exhibits to this filing.

Condor Hospitality Trust, Inc. and Subsidiaries

Unaudited Pro Forma Consolidated Balance Sheet

June 30, 2015

(In thousands, except share amounts and per share data)


	[A] Historical Condor			[B] Acquisition of 3 Hotels			[C] Disposition of 2 Hotels			Pro Forma Condor
ASSETS
Investments in hotel properties	$	116,684		$	42,747		$	—		$	159,431
Less accumulated depreciation		48,483			—			—			48,483

		68,201			42,747			—			110,948
Cash and cash equivalents		4,124			(14,923	)		10,068			(731	) [D]
Accounts receivable, net of allowance for doubtful accounts of $10		1,542			257			—			1,799
Prepaid expenses and other assets		5,116			38			—			5,154
Deferred financing costs, net		1,381			393			(33	)		1,741
Investment in hotel properties, held for sale, net		51,028			—			(18,079	)		32,949

	$	131,392		$	28,512		$	(8,044	)	$	151,860


LIABILITIES AND EQUITY
LIABILITIES
Accounts payable, accrued expenses and other liabilities	$	7,474		$	—		$	—		$	7,474
Derivative liabilities, at fair value		20,224			—			—		$	20,224
Debt related to hotel properties held for sale		27,999			—			(8,300	)	$	19,699
Long-term debt		50,921			28,682			—		$	79,603

		106,618			28,682			(8,300	)		127,000


Redeemable preferred stock
10% Series B, 800,000 shares authorized; $.01 par value, 332,500 shares outstanding, liquidation preference of $8,312		7,662			—			—			7,662

EQUITY
Shareholders’ equity
8% Series A Preferred Stock, 2,500,000 authorized, $0.01 par value, 803,270 shares outstanding, liquidation preference of $8,033		8			—			—			8

6.25% Series C Preferred Stock, 3,000,000 shares authorized, $0.01 par value, 3,000,000 shares outstanding, liquidation preference of $30,000		30			—			—			30

Common stock, $.01 par value, 200,000,000 shares authorized; 4,927,797 shares outstanding		49			—			—			49
Additional paid-in capital		138,367			—			—			138,367
Accumulated deficit		(121,429	)		(559	)		231			(121,757	)

Total shareholders’ equity		17,025			(559	)		231			16,697
Noncontrolling interest
Noncontrolling interest in consolidated partnership, redemption value $1,367 (actual) $1,953 (as adjusted)		87			389			25			501

Total equity		17,112			(170	)		256			17,198

	$	131,392		$	28,512		$	(8,044	)	$	151,860

See Accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements

NOTES AND MANAGEMENT ASSUMPTIONS TO UNAUDITED

PRO FORMA CONSOLIDATED BALANCE SHEET

(IN THOUSANDS, EXCEPT SHARE AMOUNTS AND PER SHARE DATA)

[A] Represents the Company’s consolidated balance sheet as of June 30, 2015 as filed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.

[B] The acquisition of the San Antonio, Atlanta, and Jacksonville hotels will be recorded under the purchase method of accounting. The total consideration being paid to the seller of these hotels will be allocated to the hotel assets acquired and liabilities assumed at their fair value on the date of acquisition in accordance with Financial Accounting Standards Board Accounting Standards Codification 805, Business Combinations. The allocation of fair value detailed in the table below is based on the Company’s preliminary estimates and is subject to change based on the final determination of the fair value of assets and liabilities acquired.


	Total Acquisitions
Assets related to hotel acquisitions
Land	$	4,497
Building and improvements		33,893
Furniture and equipment		4,036
Franchise fees		321

Total investment in hotel properties		42,747
Accounts receivable, net		257
Prepaid expenses and other assets		38
Deferred financing costs		393

Total assets related to hotel acquisitions	$	43,435


Liabilities related to hotel acquisitions
Draw on revolver credit agreement	$	2,362
Long-term debt		26,320

Total debt financing for hotel acquisitions		28,682


Equity:
Acquisition related expenses allocated to:
Accumulated deficit		(559	)
Noncontrolling interest		(61	)
Newly issued noncontrolling interest		450

Total of assets, liabilities, noncontrolling interest, and acquisition costs related to three hotels—Total cash and cash equivalents utilized in the acquisitions	$	14,923

The purchase of the San Antonio hotel was financed, in part, through the assumption of a mortgage loan payable to LMREC 2015-CREI, Inc. (Latitude). On October 1, 2015, the assumed mortgage had a principal amount of $11,220. The Latitude loan requires monthly interest payments and, commencing in May 2016, monthly principal payments of $12. The principal balance is due and payable on May 1, 2018. The loan bears interest at a variable rate of 30-day Libor (subject to a floor of 0.1522%) plus 6.25%. Financing costs totaling $144 were incurred in relation to the assumption of this loan.

The purchase of the Atlanta and Jacksonville hotels was financed, in part, with the proceeds of mortgage loans provided by GE Capital Franchise Finance Corporation (GE). The loan agreements were dated October 2, 2015 with principal amounts of $5,000 for the loan secured by the Atlanta hotel and $10,100 for the loan secured by the Jacksonville hotel. The loan

agreement related to the Atlanta hotel also provides for a $2,000 earn out option which may be borrowed in the third and fourth years after the loan is outstanding if certain financial tests and other conditions are satisfied. The GE loans require monthly principal and interest payments based on a 25-year amortization with the principal balance due and payable on November 1, 2020. The loans bear interest at a variable rate of 90-day Libor plus 3.25%. Financing costs totaling $249 were incurred in relation to the origination of these loans.

In addition, as partial consideration for the purchase price of the hotels, Supertel Limited Partnership (SLP), a limited partnership 93% owned by Condor Hospitality Trust, Inc., issued limited partnership units with a value of $450. On October 1, 2015, 727,273 limited partnership units were issued in connection with the San Antonio hotel purchase and on October 2, 2015, 1,571,606 limited partnership units were issued in connection with the Atlanta and Jacksonville hotel purchases.

The pro forma adjustments also include $620 of estimated acquisition costs related to the acquisitions described above, which have been reflected as an adjustment split between accumulated deficit and noncontrolling interest based on the post-acquisition noncontrolling interest percentage ownership of 9.88%.

The hotel purchase prices, deferred financing fees, and acquisition costs not funded through the issuance or assumption of debt or the issuance of SLP limited partnership units was funded primarily with the use of $14,923 in cash on hand at the date of acquisition with the remaining $2,362 funded through the Company’s existing revolving credit agreement.

[C] Represents the required adjustments to reflect the sale of two hotels, which includes the sale of assets with a net book value at June 30, 2015 of $18,079, the repayment of the related consolidated mortgage debt with an aggregate principal balance of $8,300, costs related to the disposition and the reversal of previously recorded impairment expense totaling $256, and net proceeds of $10,068 after the repayment of debt.

[D] The cash utilized in the hotel acquisitions was partially funded with cash generated from transactions between July 1, 2015 and the acquisition dates that are not reflected in these pro forma financial statements, causing a negative cash balance for purposes of this pro forma presentation only.

Condor Hospitality Trust, Inc. and Subsidiaries

Unaudited Pro Forma Consolidated Statement of Operations

For the Year Ended December 31, 2014

(In thousands, except share amounts and per share data)


	[AA] Historical Condor			[BB] Acquisition of 3 Hotels			[CC] Disposition of 2 Hotels			Pro Forma Condor
REVENUES
Room rentals and other hotel services	$	57,409		$	8,096		$	(5,366	)	$	60,139


EXPENSES
Hotel and property operations		43,256			7,032			(4,111	)		46,177
Depreciation and amortization		6,437			1,680			(623	)		7,494
General and administrative		4,192			—			—			4,192
Acquisition expense		—			—			—			—
Terminated equity transactions		76			—			—			76

		53,961			8,712			(4,734	)		57,939

EARNINGS BEFORE NET GAIN ON DISPOSITIONS OF ASSETS, OTHER INCOME, INTEREST EXPENSE AND INCOME TAXES		3,448			(616	)		(632	)		2,200
Net gain on dispositions of assets		1			—			1			2
Unrealized derivative loss		(14,430	)		—			—			(14,430	)
Other income		116			—			—			116
Interest expense		(7,019	)		(1,476	)		1,392			(7,103	)
Loss on debt extinguishment		(158	)		—			—			(158	)
Impairment loss		(1,269	)		—			—			(1,269	)

EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(19,311	)		(2,092	)		761			(20,642	)
Income tax expense		—			—			—			—

EARNINGS (LOSS) FROM CONTINUING OPERATIONS		(19,311	)		(2,092	)		761			(20,642	)
Loss attributable to noncontrolling interest		23			452.49			(1	)		475

NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS		(19,288	)		(1,640	)		760			(20,167	)
Preferred stock dividends declared and undeclared		(3,452	)		—			—			(3,452	)

NET EARNINGS (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(22,740	)	$	(1,640	)	$	760		$	(23,619	)

Weighted average shares outstanding—basic and diluted		3,897,092									3,897,092

NET EARNINGS (LOSS) PER COMMON SHARE—BASIC AND DILUTED
EPS from continuing operations basic and diluted	$	(5.84	)							$	(6.06	)

See Accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements

Condor Hospitality Trust, Inc. and Subsidiaries

Unaudited Pro Forma Consolidated Statement of Operations

For the Six Months Ended June 30, 2015

(In thousands, except share amounts and per share data)


	[AA] Historical Condor			[BB] Acquisition of 3 Hotels			[CC] Disposition of 2 Hotels			Pro Forma Condor
REVENUES
Room rentals and other hotel services	$	28,710		$	5,806		$	(3,190	)	$	31,326


EXPENSES
Hotel and property operations		21,325			4,012			(2,256	)		23,081
Depreciation and amortization		2,737			840			(109	)		3,468
General and administrative		2,732			—			—			2,732
Acquisition expense		17			—			—			17
Terminated equity transactions		—			—			—			—

		26,811			4,852			(2,365	)		29,298

EARNINGS BEFORE NET GAIN ON DISPOSITIONS OF ASSETS, OTHER INCOME, INTEREST EXPENSE AND INCOME TAXES		1,899			954			(825	)		2,028
Net loss on dispositions of assets		(122	)		—			—			(122	)
Unrealized derivative gain		113						—			113
Other income		126			—			—			126
Interest expense		(3,017	)		(735	)		689			(3,063	)
Loss on debt extinguishment		(7	)		—			—			(7	)
Impairment loss		(3,830	)		—			1,309			(2,521	)

EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(4,838	)		219			1,173			(3,446	)
Income tax expense		—			—			—			—

EARNINGS (LOSS) FROM CONTINUING OPERATIONS		(4,838	)		219			1,173			(3,446	)
Loss attributable to noncontrolling interest		3			102			(2	)		104

NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS		(4,835	)		321			1,171			(3,342	)
Preferred stock dividends declared and undeclared		(1,793	)		—			—			(1,793	)

NET EARNINGS (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(6,628	)	$	321		$	1,171		$	(5,135	)

Weighted average shares outstanding—basic and diluted		4,836,856									4,836,856

NET EARNINGS (LOSS) PER COMMON SHARE—BASIC AND DILUTED
EPS from continuing operations basic and diluted	$	(1.37	)							$	(1.06	)

See Accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements

NOTES AND MANAGEMENT ASSUMPTIONS TO UNAUDITED

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS AND PER SHARE DATA)

[AA] Represents the Company’s unaudited consolidated statement of operations for the six months ended June 30, 2015 as filed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 and the Company’s audited consolidated statement of operations for the year ended December 31, 2014 as filed in our Annual Report on Form 10-K for the year ended December 31, 2014, both excluding discontinued operations.

[BB] Represents the operations of the three acquired hotels giving effect to the acquisitions as if they had occurred on January 1, 2014. Revenues and hotel and property operations expenses are based on historical financial statements for the hotels for the respective periods after adjusting those numbers for specific verifiable and continuing changes in operating expenses as detailed below:


	Six months ended June 30, 2015			Year ended December 31, 2014
Hotel and property operations expenses:
Historical operating expenses	$	4,074			7,117
(i) Management fees		(67	)		(90	)
(ii) Insurance		5			5

Adjusted hotel and property operations expenses:	$	4,012		$	7,032

(i)	Reflects differences in management fees charged to the hotels historically and the post-acquisition contracts entered into by the Company

(ii)	Reflects differences in the cost of insurance coverage for the hotels by the seller and the Company

Pro forma depreciation and amortization is based on the post-acquisition depreciable basis of the investment in hotel properties as discussed in Note [B] above and assumed asset lives of 40 years for building and improvements, five years for furniture and equipment, and the remaining term of the franchise agreement for franchise fees.

Interest expense adjustments include interest expense as well as the amortization of deferred financing costs related to the loans entered into and assumed at the time of acquisition as described in Note [B] above. Pro forma interest expense on the assumed Latitude loan at the current variable interest rate of 6.5% totaled $361 and $728 and deferred financing cost amortization totaled $29 and $58 for the six months ended June 30, 2015 and the year ended December 31, 2014, respectively. Pro forma interest expense on the GE loans, at current variable interest rates of 3.58%, totaled $267 and $534 and deferred financing cost amortization totaled $25 and $50 for the six months ended June 30, 2015 and the year ended December 31, 2014, respectively. The proceeds from the drawdown of the revolver used in the acquisitions is assumed to incur interest expense under the Company’s fixed rate revolver at 4.5%, with interest expense totaling $53 and $106 for the six months ended June 30, 2015 and the year ended December 31, 2014, respectively.

If the variable rates of the GE and Latitude mortgage loans were to increase by 1/8%, the six month and annual increase in interest expense would be $16 and $33, respectively.

[CC] Represents the required adjustments to reflect the sale of two hotels as if they had occurred on January 1, 2014, resulting in a reduction of $1,173 and $761 in loss from continuing operations for the six months ended June 30, 2015 and the year ended December 31, 2014, respectively.