DISCONTINUED OPERATIONS

On February 28, 2017, we sold our two hotels located in Sedona, Arizona (“Sedona hotels”) in a combined cash transaction to DiamondRock Hospitality Company (“DiamondRock”) for $97.0 million resulting in a gain on sale of $6.8 million (net of selling costs). While the Company was not actively seeking to dispose of these assets, this sale resulted from an unsolicited offer received from a third party. In considering the offer, the Company determined that the price point was favorable to the Company based on review of available market data and elected to proceed with the transaction. In accordance with ASC 205-20, Presentation of Financial Statements-Discontinued Operations, a component of an entity is reported in discontinued operations after meeting the criteria for held for sale classification if the disposition represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results. While the Company intends to continue to remain active in the hospitality industry through the active pursuit of hospitality acquisition and management opportunities, the Company determined that the disposal of the Sedona hotels is required to be treated as discontinued operations accounting presentation under GAAP.

As such, the historical financial results of the Sedona hotels and the related income tax effects have been presented as discontinued operations for all periods presented of the disposal group and is reported in the balance sheet as assets of discontinued operations, liabilities of discontinued operations and net income (loss) of discontinued operations in the condensed consolidated statements of operations through the date of sale (February 28, 2017).

Balance Sheet

The following table summarizes the carrying amounts of the major classes of assets and liabilities for discontinued operations in the consolidated balance sheets as of September 30, 2017 and December 31, 2016:



	September 30, 2017		December 31, 2016
Assets
Cash and Cash Equivalents	$	435	$	1,747
Funds Held by Lender and Restricted Cash	—		2,063
Operating Properties, net	—		88,734
Other Receivables	80		831
Other Assets	77		737
Total Assets	$	592	$	94,112

Liabilities
Accounts Payable and Accrued Expenses	$	493	$	2,304
Customer Deposits and Funds Held for Others	—		2,170
Notes Payable, Net of Discount	—		49,553
Capital Lease Obligations	—		1,157
Total Liabilities	$	493	$	55,184

Results of Operations

The following table summarizes the results of operations classified as discontinued operations, net of tax, for the three and nine months ended September 30, 2017 and 2016. The table below for the three and nine months ended September 30, 2017 reflects the financial results for Sedona assets operations from January 1, 2017 through February 28, 2017.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016

Revenue	$	—		$	6,870		$	3,425		$	20,101

Expenses:
Operating Property Direct Expenses (exclusive of Interest and Depreciation)	16			5,794			4,014			16,506
Interest Expense	—			1,060			1,075			3,156
Depreciation and Amortization Expense	—			864			278			2,443
Settlement and Related Costs	—			—			129			—
Gain on Disposal of Assets	(46		)	—			(6,837		)	—
Provision for Income Taxes	—			—			—			—
Income (Loss) from Discontinued Operations, Net of Tax	$	30		$	(848	)	$	4,766		$	(2,004	)

Interest expense

The Company allocated interest expense, including amortization of deferred financing fees, to discontinued operations based on the senior mortgage debt that was paid with the proceeds from the sale of the Sedona hotels. The total allocated interest expense for the three and nine months ended September 30, 2017 and 2016 is as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Interest Expense	$	—	$	955	$	628	$	2,840
Amortization of Deferred Financing Fees	—		105		447		316
Total	$	—	$	1,060	$	1,075	$	3,156

Cash Flow Information

The following table presents the total operating and investing cash flows and depreciation, amortization, capital expenditures, and significant operating and investing non-cash items of the discontinued operations for the three and nine months ended September 30, 2017 and 2016:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016

Cash flows from discontinued operating activities:	$	—	$	813	$	278	$	1,580
Depreciation	—		802		274		1,558
Amortization	—		11		4		22

Cash flows from discontinued investing activities:	$	—	$	1,056	$	659	$	4,840
Investment in Real Estate Owned	—		1,056		659		4,840

Non-Cash Investing and Financing Transactions:
Capital Expenditures in Accounts Payable and Accrued Expenses	$	439	$	303	$	461	$	512
Liabilities Assumed in Sale of property	$	—	$	—	$	4,132	$	—