COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2012

COMMITMENTS AND CONTINGENCIES

NOTE 10 -COMMITMENTS AND CONTINGENCIES

We are involved from time to time in litigation arising in the ordinary course of business; however, we are not currently aware of any actions against us that we believe would materially adversely affect our business, financial condition or results of operations.

We have entered into purchase agreements for the acquisition of several existing hotels and are currently engaged in performing due diligence investigations for some of the properties.

In December 2011 and January 2012, arbitration hearings were held to determine our claim against Choice Hotels International, Inc. (“Choice”) that Choice wrongfully terminated 11 of our franchise agreements, and Choice’s counterclaims of fraudulent inducement, negligent misrepresentation, breach of contract and trademark infringement.On April 4, 2012, the arbitration panel determined, among other things, that Choice improperly terminated the 11 franchise agreements, that Choice is not entitled to recover liquidated damages in connection with the 11 hotels and that the Company did not make any materially false or misleading statements to Choice or omit any material information. The panel awarded the Company damages in the amount of $298,090 as full settlement of all claims submitted in the arbitration.

The Company received these funds on April 30, 2012.   Neither the Company nor Choice was entitled to recover attorney’s fees in connection with the matter.

We have an outstanding agreement to purchase a 178 unit Residence Inn in Salt Lake City, Utah for a purchase price of $20.0 million.