Subsequent Events

On July 10, 2013, the Company sold a Masters Inn in Tampa, Florida (East) (117 rooms) for $0.8 million. Proceeds were applied to the line of credit with Great Western Bank.

On July 18, 2013, the Company sold a Quality Inn in Minocqua, Wisconsin (51 rooms) for $1.3 million. Proceeds were used to pay off the associated debt.

Our loan facilities with GE Franchise Finance Commercial LLC require us to maintain a minimum after dividend consolidated fixed charge coverage ratio (FCCR) (as defined in the loan agreement). For the second quarter of 2013, the requirement was 0.95:1. As of June 30, 2013, our after dividend consolidated FCCR (as defined in the loan agreement) was 0.88:1. On August 13, 2013, the Company received a waiver for non-compliance with this covenant as of June 30, 2013 in return for payment of $107,500. In connection with the waiver, our loan facilities with GE were also amended to increase the before dividend FCCR with respect to our GE-encumbered properties from 1:05:1 to 1.20:1, commencing on September 30, 2013.

At the annual meeting of Company shareholders in May 2013, the holders of the Company common stock and the holder of the Series C Preferred Stock, voting as one group, approved an amendment to the Company articles of incorporation to effect a reverse split of the common stock at a reverse split ratio ranging from one-for-four to one-for-eight shares of common stock as determined by the Company board of directors. Earnings, per share and share amounts in this form 10-Q do not reflect the reverse stock split unless otherwise noted. On July 30, 2013, the Board of Directors declared a one-for-eight reverse split of the Company’s issued and outstanding common stock, which will be effected on August 14, 2013. As a result, every eight shares of Company common stock issued and outstanding at the time of the reverse split will be combined into one share of Company common stock and the number of shares of common stock issued and outstanding will be reduced accordingly. On July 29, 2013, the Board of Directors declared a one-for-eight reverse stock split of the Company’s issued and outstanding common stock, which will be effective on August 14, 2013.

The pro forma effect on the June 30, 2013 Condensed Consolidated Balance Sheet of the reverse stock split is to reduce the number of common shares outstanding. Proforma earnings per share and weighted-average shares outstanding, giving retroactive effect to the reverse stock split, are as follows:



	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Net Earnings (Loss) Attributable to
Common Shareholders per Weighted
Average Common Share
Continuing operations - basic	$	0.06	$	(0.09)	$	(0.12)	$	(0.23)
Continuing operations pro forma - basic	$	0.43	$	(0.74)	$	(0.96)	$	(1.84)

Total earnings per share - basic	$	0.07	$	0.07	$	(0.15)	$	(0.13)
Total pro forma - basic	$	0.53	$	0.55	$	(1.16)	$	(1.05)

Continuing operations - diluted	$	(0.01)	$	(0.09)	$	(0.12)	$	(0.23)
Continuing operations pro forma - diluted	$	(0.06)	$	(0.74)	$	(0.96)	$	(1.84)

Total - diluted	$	0.00	$	0.07	$	(0.15)	$	(0.13)
Total pro forma - diluted	$	(0.02)	$	0.55	$	(1.16)	$	(1.05)

Weighted average number of shares outstanding for:
Calculation of earnings per share - basic		23,113,174		23,074,848		23,107,085		23,072,641
Calculation of pro forma earnings per share - basic		2,889,147		2,884,356		2,888,386		2,884,080
Calculation of earnings per share - diluted		53,114,796		23,074,848		23,107,085		23,072,641
Calculation of pro forma earnings per share - diluted		6,639,350		2,884,356		2,888,386		2,884,080