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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-K


	(Mark one)
T	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2021
or
£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______________ to _________________

Commission file number: 001-34087

Condor Hospitality Trust, Inc.

(Exact name of registrant as specified in its charter)


Maryland	52-1889548
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
P.O. Box 153 Battle Creek, Nebraska	68715
(Address of principal executive offices)	(Zip Code)

(301) 861-3305

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]

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. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer [ ]		Accelerated filer [ ]
Non-accelerated filer [X]		Smaller reporting company [X]
		Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of June 30, 2021, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $30.5 million based on the price at which the common stock was last sold on that date as reported on the NYSE American. At January 31, 2022, there were 14,732,764 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS


		Form 10-K
		Report
Item No.		Page
	PART I
1	Business	2
1A.	Risk Factors	4
1B.	Unresolved Staff Comments	6
2	Properties	6
3	Legal Proceedings	6
4	Mine Safety Disclosures	6
	PART II
5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	6
6	Reserved	8
7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
7A.	Quantitative and Qualitative Disclosures about Market Risk	17
8	Financial Statements and Supplementary Data	18
9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	50
9A.	Controls and Procedures	50
9B.	Other Information	50
9C	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	51
	PART III
10	Directors, Executive Officers and Corporate Governance	51
11	Executive Compensation	52
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	53
13	Certain Relationships and Related Transactions, and Director Independence	55
14	Principal Accountant Fees and Services	56
	PART IV
15	Exhibits and Financial Statement Schedules	57
16	Form 10-K Summary	N/A

‎

FORWARD-LOOKING STATEMENTS

Certain information both included and incorporated by reference in this Form 10-K may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks, uncertainties, and other factors which may cause our actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on assumptions that management has made in light of experience in the business in which we operate, as well as management’s perceptions of historical trends, current conditions, expected future developments, and other factors believed to be appropriate under the circumstances. These statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control), and assumptions. Management believes that these forward-looking statements are based on reasonable assumptions.

Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies, and expectations are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative thereof or other variations thereon or comparable terminology. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in economic conditions generally and the real estate market specifically, legislative/regulatory changes (including changes to laws governing the taxation of real estate investment trusts), availability of capital, risks associated with debt financing, interest rates, competition, supply and demand for hotel rooms in our current and proposed market areas, policies and guidelines applicable to real estate investment trusts, risks related to uncertainty and disruption in global economic markets as a result of COVID-19 (commonly referred to as the coronavirus), and other risks and uncertainties described herein, and in our filings with the Securities and Exchange Commission (“SEC”) from time to time. These risks and uncertainties should be considered in evaluating any forward-looking statements contained or incorporated by reference herein. We caution readers not to place undue reliance on any forward-looking statements included in this report which speak only as of the date of this report.

PART I

ITEM 1. BUSINESS

References to the “Company”, “we,” “our,” and “us,” refer to Condor Hospitality Trust, Inc., including, as the context requires, its direct and indirect subsidiaries. The descriptions of the Company in this Part I are as of the filing date of this Form 10-K.

Overview

Condor Hospitality Trust, Inc. was incorporated in Virginia on August 23, 1994 and was reincorporated in Maryland on November 19, 2014. Our common stock began trading on October 30, 1996 and most recently traded under the symbol “CDOR” on the NYSE American stock exchange (the “Exchange”). As the Company would no longer meet continued listing requirements of the Exchange upon the substantial liquidation dividend distribution on December 30, 2021 (see below under “Special Dividend Liquidation Distribution”) and after consultation with the Exchange, on December 10, 2021, the Company, in accordance with the authority granted by the Company’s board of directors, provided written notice to the Exchange of its intention to voluntarily delist its common stock, par value $0.01 (the “Common Stock”), on the Exchange. The Company filed a Form 25 with the Securities and Exchange Commission (“SEC”) and the Exchange relating to the delisting of the Common Stock on December 20, 2021, with the trading of its Common Stock on the Exchange suspended on December 31, 2021. The official delisting of the Common Stock was effective on December 31, 2021.

The Company is a self-administered real estate investment trust (“REIT”) for federal income tax purposes that previously specialized in the investment and ownership of high-quality select-service, limited-service, extended stay, and compact full service hotels. As of December 31, 2021, the Company owned no properties pursuant to the Hotel Purchase and Sale Agreement and the Plan of Liquidation as discussed below.

We were engaged primarily in the business of owning equity interests in hotel properties and therefore our business is disclosed as one reportable segment. See the consolidated financial statements and notes thereto included in Item 8 of this Annual Report on Form 10-K for certain financial information required in this Item 1.

Hotel Purchase and Sale Agreement

On June 21, 2021, the Company announced that its board of directors (the “Company Board”) is evaluating strategic alternatives to enhance shareholder value. Following unanimous approval by the Company Board, on September 22, 2021, the Company and B9 Cowboy Mezz A LLC, a Delaware limited liability company and affiliate of Blackstone Real Estate Partners (the “Buyer”), entered into a Hotel Purchase and Sale Agreement (the “Purchase Agreement”). The Purchase Agreement provides that, upon the terms and subject to the conditions set forth therein, the Buyer will acquire Company’s portfolio of 15 hotels (the “Portfolio”) for a cash purchase price of $305.0 million (the “Portfolio Sale”), subject to certain credits and adjustments. At a special shareholder meeting (the “Special Stockholder Meeting”) commenced on November 12, 2021, the Portfolio Sale was approved by the Company shareholders.

On November 19, 2021, the Company completed the Portfolio Sale, and received cash proceeds, net of payment of related expenses and the repayment of the Company’s debt, totaling approximately $113.9 million.

Plan of Liquidation

On September 20, 2021 the Company Board unanimously approved a plan of complete liquidation and dissolution (the “Plan of Liquidation”) pursuant to which the Company would be liquidated and dissolved, subject to approval of the Plan of Liquidation (the “Liquidation Proposal”), including the liquidation and dissolution of the Company pursuant thereto, by the Company’s shareholders at the Special Stockholder Meeting. At the Special Stockholder Meeting completed on December 1, 2021, the Liquidation Proposal was approved by Company shareholders. Pursuant to the Plan of Liquidation and in accordance with the applicable provisions of law, the Company is authorized to do all other things reasonably necessary or advisable to complete the liquidation and dissolution of the Company. The Company is not required to obtain any further shareholder approval with respect to the liquidation and dissolution of the Company. Under the Plan of Liquidation, the Company Board may modify, amend or abandon the Plan of Liquidation, notwithstanding shareholder approval, to the extent permitted by the Maryland General Corporation Law (the “MGCL”). The Company has no present plans or intentions to modify, amend or abandon the Plan of Liquidation.

Special Dividend Liquidation Distribution

In accordance with the Plan of Liquidation, the Company Board approved a special dividend liquidation distribution of $7.94 per share of Common Stock to its stockholders of record as of the close of business on December 27, 2021. The special dividend liquidation distribution was paid on December 30, 2021. Upon completion of the winding-up process and dissolution, if any funds remain, such funds will be distributed to shareholders.

Structure and Tax Status

We conduct our business through a traditional umbrella partnership REIT, or UPREIT, in which our hotel properties were owned by our operating partnership, Condor Hospitality Limited Partnership and its subsidiaries (the “operating partnership”), for which we serve as general partner. As of December 31, 2021, we owned an approximate 99.9% ownership interest in the operating partnership.

In order for the income from our hotel property investments to constitute “rents from real properties” for purposes of the gross income tests required by the Internal Revenue Service (“IRS”) for REIT qualification, the income we earn cannot be derived from the operation of any of our hotels. Therefore, the operating partnership and its subsidiaries leased our hotel properties to the Company’s wholly owned taxable REIT subsidiary, TRS Leasing, Inc., and its wholly owned subsidiaries (“the TRS”). The TRS in turn engaged third-party eligible independent contractors to manage the hotels. Our independent management companies are not affiliated with us or our management team. The operating partnership, the TRS, and their respective subsidiaries are consolidated into the Company’s financial statements.

The Company qualifies and intends to continue to qualify as a REIT under the applicable provisions of the Internal Revenue Code (the “Code”), as amended. In general, under such Code provisions, a trust which has made the required election and, in the taxable year, meets certain requirements and distributes to its shareholders at least 90% of its REIT taxable income, will not be subject to federal income tax to the extent of the income currently distributed to shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will be unable to re-elect REIT status until the

fifth calendar year after the year in which we failed to qualify as a REIT, unless we satisfy certain relief provisions. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. Taxable income from non-REIT activities managed through the TRS, which is taxed as a C-Corporation, is subject to federal, state, and local income taxes.

Employees

At December 31, 2021, the Company had one employee.

Available Information

Our telephone number is (301) 861-3305 and we currently maintain an Internet website located at www.condorhospitality.com. So long as we maintain our internet website, our annual reports on Form 10-K and quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports are available free of charge on our website as soon as reasonably practicable after they are filed with the SEC. We also make available the charters of our board committees and our Code of Business Conduct and Ethics on our website. Copies of these documents are available in print to any shareholder who requests them. Requests should be sent to Condor Hospitality Trust, Inc., P.O Box 153, Battle Creek, Nebraska, Attn: Corporate Secretary.

Our expectation is that in the course of winding up, the Company will discontinue its website. The SEC maintains an internet website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC.

Item 1A. Risk Factors

The following discussion concerns the risks associated with our business and Plan of Liquidation that should be reviewed and considered carefully. Our business faces many risks and the risks described below may not be the only risks we face. Other risks and uncertainties not presently known to us may also materially and adversely affect our business, the value of our shares, and our ability to pay dividends to our shareholders. Additionally, the risks detailed below are interrelated and should be considered as a whole. In connection with the forward-looking statements that appear in this Annual Report on Form 10-K, you should carefully review the section entitled “Forward-Looking Statements.”

Risks Related to the Plan of Liquidation

Our board of directors may amend or terminate the Plan of Liquidation even though it has been approved by shareholders, if it determines that doing so is in the best interest of the Company and our shareholders.

Even though our shareholders have approved the Plan of Liquidation, at any time prior to the filing of the Articles of Dissolution, the Company Board may amend or terminate the Plan of Liquidation without further shareholder approval if it determines that doing so would be in the best interest of the Company and our shareholders. Thus, we may decide to conduct the liquidation differently than described in our filings with the SEC or not at all.

We may fail to continue to qualify as a REIT, which would reduce the amount of any potential distributions.

So long as we qualify as a REIT and distribute all of our taxable income each year, we generally will not be subject to federal income tax. While the Company Board does not presently intend to terminate our REIT status prior to the final liquidating distribution of our assets, if any, and our dissolution, pursuant to the Plan of Liquidation, the Company Board may take actions that would result in such a loss of REIT status. To qualify as a REIT, we must satisfy various ongoing requirements relating to the nature of our gross assets and income, the timing and amount of distributions and the composition of our shareholders. There can be no assurance that the Company will be able to maintain its REIT qualification. We may encounter difficulties satisfying these requirements as part of the liquidation process. If we lose our REIT status, we would be taxable as a corporation for federal income tax purposes and would be liable for federal income taxes, including any applicable alternative minimum tax, at the corporate rate with respect to our entire income from operations and from liquidating sales of our assets for the taxable year in which our qualification as a REIT terminates and in any subsequent years, and we would not be entitled to a tax deduction for distributions that we make. We would also be subject to increased state and local

taxes. As a result of these consequences, our failure to qualify as a REIT could substantially reduce the funds, if any, available for distribution to our shareholders.

We cannot determine at this time the amount or timing of final remaining distributions, if any, to our shareholders in connection with our liquidation because there are many factors, some of which are not within our control, that could affect the amount or timing of any such distributions, if any.

The remaining amounts, if any, that may ultimately be available for distribution to our shareholders are not yet fully known, there are many factors that may affect the amounts available for distribution to our shareholders, including, among other things, the operating costs and amounts to be set aside for claims, liabilities and other obligations prior to and during the liquidation and winding-up process, and the time required to complete our liquidation and winding up.

Additional liabilities and obligations could arise.

Following the sale of our hotels, we retained liabilities that must be satisfied prior to any final distribution to our shareholders, and some of those liabilities are uncertain. Significant time could be required to resolve some of these liabilities, which could impact both the timing and the amount of any potential final distribution to our shareholders. Also, some liabilities may involve third party disputes or may be beyond our control. We may have underestimated our existing obligations and liabilities or unanticipated or contingent liabilities may arise. For the foregoing reasons, among others, there can be no assurance as to the timing and amount of any final distributions, if any, to our shareholders.

If our transaction costs, liquidation costs or unpaid liabilities are greater than we expect, our liquidating distributions may be delayed or reduced.

Before making liquidating distributions, if any, to our shareholders, we will need to pay or arrange for the payment of all of our transaction costs in the liquidation, all other costs and all valid claims of our creditors. The Company Board may also decide to acquire one or more insurance policies covering unknown or contingent claims against us or them, for which we would pay a premium which has not yet been determined. The Company Board may also decide to establish a reserve fund to pay these contingent claims. The amounts of transaction costs in the liquidation are not yet final, so we have used estimates of these costs. To the extent that we have underestimated these costs in calculating our projections or we incur unforeseen additional costs, our actual liquidating distributions may be lower than our estimated range. In addition, if the claims of our creditors are greater than we have anticipated or we decide to acquire one or more insurance policies covering unknown or contingent claims against us, our liquidating distributions may be delayed or reduced. Further, if a reserve fund is established, payment of liquidating distributions, if any, to our shareholders may be delayed or reduced.

Distributing interests in a liquidating trust or conversion of the Company to another form of liquidating entity may cause you to recognize gain prior to the receipt of cash.

The REIT provisions of the Tax Code generally require that each year we distribute as dividends to our shareholders at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and by excluding any net capital gains). Our liquidating distributions generally will not qualify as deductible dividends for this purpose unless, among other things, we make such distributions within 24 months after the adoption of the Plan of Liquidation.

Conditions may arise which cause us not to be able to liquidate within such 24-month period. In such event, rather than retain our assets and risk losing our status as a REIT, we may elect, for tax purposes, to transfer our remaining assets and liabilities to a liquidating trust or convert the Company to a liquidating entity that is a limited liability company, partnership or a trust. In addition, the Company Board may cause the Company to transfer its remaining assets and liabilities to a liquidating trust or to convert the Company to another liquidating entity if the Company Board determines, in its discretion, that it is advantageous or appropriate to do so. Such a transfer or conversion would be treated as a distribution of our remaining assets to our shareholders, together with a contribution of the assets to the liquidating trust or other liquidating entity. As a result, you would recognize gain to the extent that your share of the cash and the net fair market value of any assets (less liabilities assumed) received or initially held by the liquidating trust or other liquidating entity was greater than your basis in your Company common stock, regardless of whether you contemporaneously receive a distribution of cash with which to satisfy any resulting tax liability, and

the Company may have withholding tax obligations with respect to foreign shareholders. In addition, it is possible that the fair market value of the assets received or initially held by the liquidating trust or other liquidating entity, as estimated for purposes of determining the extent of your gain at the time at which interests in the liquidating trust or other liquidating entity are distributed to the shareholders, will exceed the cash or fair market value of property received by the liquidating trust or other liquidating entity on a later sale of the assets. In this case, you could recognize a loss in a taxable year subsequent to the taxable year in which the gain was recognized, the deductibility of which may be limited under the Tax Code. The distribution to shareholders of interests in a liquidating trust or the conversion of the Company to a liquidating entity may also cause ongoing adverse tax consequences (particularly to tax-exempt and foreign shareholders, which may be required to file U.S. tax returns with respect to their share of income generated by the liquidating trust or other liquidating entity).

Stockholders may be liable to our creditors for the amount received from us if our reserve fund or the assets transferred to a liquidating trust are inadequate.

In the event that it should not be feasible, in the opinion of the Company Board, for the Company to pay, or adequately provide for, all of our debts and liabilities, or if the Company Board shall determine it is advisable, the Company Board may establish a liquidating trust to which the Company could distribute in kind its unsold assets.

Any reserve fund or assets transferred to a liquidating trust established by us may not be adequate to cover any contingent expenses and liabilities. Under Maryland law, if we make distributions and fail to maintain an adequate reserve fund or fail to transfer adequate assets in a liquidating trust for payment of our contingent expenses and liabilities, each shareholder could be held liable for payment to our creditors of such amounts owed to creditors which we fail to pay. The liability of any shareholder would be limited to the amount of such liquidating distributions previously received by such shareholder from us or the liquidating trust.

Accordingly, in such event, a shareholder could be required to return all such distributions received from the Company or the liquidating trust. If a shareholder has paid taxes on liquidating distributions previously received, a repayment of all or a portion of such amount could result in a shareholder incurring a net tax cost if the shareholder’s repayment of an amount previously distributed does not cause a commensurate reduction in taxes payable.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Company owned no properties as of December 31, 2021.

ITEM 3. LEGAL PROCEEDINGS

Various claims and legal proceedings arise in the ordinary course of business and may be pending against the Company and its properties. We are not currently involved in any material litigation, nor, to our knowledge, is any material litigation threatened against us. The Company has insurance to cover potential material losses and we believe it is not reasonably possible that such matters will have a material impact on our financial condition or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY / RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Company’s common stock began trading on the NYSE American under its current symbol “CDOR” at the open of market trading on July 21, 2017. The Company’s common stock previously traded on the NASDAQ Stock Market under the same symbol. As the Company would no longer meet continued listing requirements of the Exchange upon the substantial liquidation dividend distribution on December 30, 2021 and after consultation with the Exchange, on December 10, 2021, the Company, in accordance with the authority granted by the Company Board, provided written notice to the Exchange of its intention to voluntarily delist its Common Stock on the Exchange. The Company filed a Form 25 with the SEC and the Exchange relating to the delisting of the Common Stock on December 20, 2021, with the trading of its Common Stock on the Exchange suspended on December 31, 2021. The official delisting of the Common Stock was effective on December 31, 2021.

Special Dividend Liquidation Distribution

Shareholder Information

As of January 31, 2022, the approximate number of holders of record of our common stock was 107. However, because the majority of our common shares appear to be held by brokers and other institutions on behalf of shareholders, we believe that there are more beneficial holders of our common shares than record holders.

Distribution Information

Distributions to the extent of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to a shareholder as ordinary income. Distributions in excess of current and accumulated earnings and profits generally will be treated as a nontaxable reduction of the shareholder’s basis in such shareholder’s shares, to the extent thereof, and thereafter as taxable capital gain. Distributions that are treated as a reduction of the shareholder’s basis in its shares will have the effect of increasing the amount of gain, or reducing the amount of loss, recognized upon the sale of the shareholder’s shares.

The actual amount of future dividends will be determined by the Company Board based on expenditure requirements and the annual distribution requirements under the REIT provisions of the Code, and other factors that the Company Board deems relevant.

For income tax purposes, the distribution made in December 2021 (see “Special Dividend Liquidation Distribution” above) was characterized as a cash liquidation distribution. There were no distributions made in 2020. The distributions paid per share for the year ended December 31, 2019 was characterized as follows.


	For the year ended December 31, 2019
	Amount		%
Common Shares:
Ordinary income	$	-	-
Capital gain		-	-
Return of capital		0.585000	100%
Total	$	0.585000	100%

Series E Preferred Stock:
Ordinary income	$	-	-
Capital gain		-	-
Return of capital		0.468750	100%
Total	$	0.468750	100%

The common and preferred share distributions declared on December 11, 2018 and paid on January 3, 2019 and December 31, 2018, respectively, were treated as 2018 distributions for tax purposes.

Shares Authorized for Issuance Under Equity Compensation Plans

See Part III, Item 12 for a description of securities authorized for issuance under our 2016 Stock Plan.

ITEM 6. RESERVED

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated Financial Statement and Notes thereto. This section includes discussion of financial information as of and for the period from January 1, 2021 through December 1, 2021 (the date on which the Liquidation Basis of Accounting was adopted) and the year ended December 31, 2020. Comparisons of 2020 financial information to the same information for 2019 can be found in Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on March 31, 2021.

Hotel Purchase and Sale Agreement

Plan of Liquidation

Special Dividend Liquidation Distribution

Overview

Condor Hospitality Trust, Inc. was incorporated in Virginia on August 23, 1994 and was reincorporated in Maryland on November 19, 2014. Our common stock began trading on October 30, 1996 and most recently traded under the symbol “CDOR” on the NYSE American stock exchange (the “Exchange”). As the Company would no longer meet continued listing requirements of the Exchange upon the substantial liquidation dividend distribution on December 30, 2021 (see above under “Special Dividend Liquidation Distribution”) and after consultation with the Exchange, on December 10, 2021, the Company, in accordance with the authority granted by the Company’s board of directors, provided written notice to the Exchange of its intention to voluntarily delist its common stock, par value $0.01 (the “Common Stock”), on the Exchange. The Company filed a Form 25 with the Securities and Exchange Commission (“SEC”) and the Exchange relating to the delisting of the Common Stock on December 20, 2021, with the trading of its Common Stock on the Exchange suspended on December 31, 2021. The official delisting of the Common Stock was effective on December 31, 2021.

The Company is a self-administered real estate investment trust (“REIT”) for federal income tax purposes that specialized in the investment and ownership of high-quality select-service, limited-service, extended stay, and compact full service hotels. As of December 31, 2021, the Company owned no properties pursuant to the Hotel Purchase and Sale Agreement and the Plan of Liquidation as discussed below.

COVID-19 Pandemic

The novel coronavirus (COVID-19) has reduced travel significantly and adversely affected the hospitality industry in general. Since late March 2020, similar to the conditions affecting the hospitality industry as a whole, we experienced occupancy declines at many of our properties which required us to adjust our business operations.

As a result of the above factors, the Company took action at the corporate and hotel level, including, but not limited to:

Obtained significant modifications of its debt agreements.

Asset management working with hotel management companies to reduce all hotels operating expenses including, but not limited to, closing off multiple floors, staffing reductions and furloughs, utility consumption reductions, purchasing reductions and eliminations, contract services reductions and eliminations, food services closures, exercise facilities closures, and certain reduction and elimination of certain marketing expenditures.

Seeking potential alternative revenue sources through health care providers, government agencies, universities and airlines.

Obtaining Paycheck Protection Program (“PPP”) loans authorized under the recently congressionally approved Coronavirus Aid, Relief, and Economic Security (“CARES”) Act totaling $2.3 million, all of which was forgiven in 2021.

Pursuing corporate cost reductions, including staffing reductions, resulting in decreased in general and administrative expenses compared to historical operations.

Capital improvement projects were suspended except for emergency circumstances.

The Company determined that it was advisable and the best business practice to cause a temporary closure of two of its hotels, the Solomons Hilton Garden Inn on April 20, 2020 and the Leawood Aloft on April 9, 2020. These hotels were both reopened on July 1, 2020 and no other hotel closures were deemed necessary.

Hotel Property Portfolio Activity

Acquisitions

During the period from January 1, 2021 through December 1, 2021, there were no hotel acquisitions.

Dispositions

During the period from January 1, 2021 through December 1, 2021, pursuant to the Purchase Agreement discussed above, the Company sold its entire portfolio of 15 hotels for proceeds of $305.0 million, subject to certain credit and adjustments (See “Hotel and Purchase Agreement” above). The following properties were sold:


Hotel Name	City	State	Rooms	Acquisition Date	Company Purchase Price ‎(in thousands)
Hilton Garden Inn	Dowell/Solomons	MD	100	05/25/2012	$11,500
SpringHill Suites	San Antonio	TX	116	10/01/2015	$17,500
Courtyard by Marriott	Jacksonville	FL	120	10/02/2015	$14,000
Hotel Indigo	College Park	GA	142	10/02/2015	$11,000
Aloft ⁽¹⁾	Atlanta	GA	254	08/22/2016	$43,550
Aloft	Leawood	KS	156	12/14/2016	$22,500
Home2 Suites	Lexington	KY	103	03/24/2017	$16,500
Home2 Suites	Round Rock	TX	91	03/24/2017	$16,750
Home2 Suites	Tallahassee	FL	132	03/24/2017	$21,500
Home2 Suites	Southaven	MS	105	04/14/2017	$19,000
Hampton Inn & Suites	Lake Mary	FL	130	06/19/2017	$19,250
Fairfield Inn & Suites	El Paso	TX	124	08/31/2017	$16,400
Residence Inn	Austin	TX	120	08/31/2017	$22,400
TownePlace Suites	Austin	TX	122	01/18/2018	$19,750
Home2 Suites	Summerville	SC	93	02/21/2018	$16,325
Total Rooms			1,908		$287,925

(1)Represents the purchase statistics from the purchase of this hotel by the originally 80% owned unconsolidated Atlanta joint venture that owned the Atlanta Aloft property (the “Atlanta JV”). The Company purchased the remaining 20% interest in the Atlanta JV from our joint venture partner on February 14, 2020 for $7.3 million.

Cash proceeds, net of the payment of related expenses and the repayment of the Company’s debt, totaled approximately $113.9 million.

Operating Performance Metrics

The following table presents our comparative same-store occupancy, ADR, and RevPAR for all our hotels owned at the time of the Portfolio Sale on November 19, 2021. The statistics for the Company’s two hotels that were temporarily closed due to the effects of COVID-19, the Solomons Hilton Garden Inn, which was closed on April 2, 2020 and reopened on July 1, 2020, and the Leawood Aloft, which was closed on April 9, 2020 and reopened on July 1, 2020, include only the periods that the properties were operational. With the exception of these COVID-19 related closures, same-store occupancy, ADR, and RevPAR reflect the performance of hotels during the entire period, regardless of our ownership during the period presented, including 100% of the operating results of the property owned by the Atlanta JV in which the Company had an 80% interest prior to the purchase of the remaining 20% interest on February 14, 2020.


	For the period from January 1 through November 19, 2021					Year ended December 31, 2020
	Occupancy	ADR		RevPAR		Occupancy	ADR		RevPAR
Total Same-Store Portfolio	68.31%	$	108.15	$	73.88	51.49%	$	99.00	$	50.98

Total same-store RevPAR increased by 44.9% in the 2021 period presented, with occupancy increasing by 32.7% and ADR increasing by 9.2%. This increased operating performance reflects the decreased impact of COVID-19 on the 2021 period.

Results of Operations



	For the period from January 1 through December 1, 2021		Year ended December 31, 2020		Variance
Revenue	$	47,827	$	35,188	$	12,639
Hotel and property operations expense		(33,330)		(29,563)		(3,767)
Depreciation and amortization expense		(9,674)		(10,956)		1,282
General and administrative expense		(4,574)		(4,006)		(568)
Strategic alternatives, net		(754)		4,706		(5,460)
Net gain (loss) on disposition of assets		53,014		(18)		53,032
Equity in earnings of joint venture		-		80		(80)

Net gain (loss) on derivatives and convertible debt		6,330		(6,331)		12,661
Other income (expense), net		2,438		(65)		2,503
Interest expense		(9,404)		(8,481)		(923)
Loss on extinguishment of debt		(4,476)		-		(4,476)
Income tax benefit (expense)		(292)		375		(667)
Net earnings (loss)	$	47,105	$	(19,071)	$	66,176

Comparison of the period from January 1, 2021 through December 1, 2021 to the year ended December 31, 2020 (in thousands, except per share amounts)

Revenue

Revenue increased by a total of $12,639, or 35.9%, as a result of the increases in RevPAR resulting from the COVID-19 pandemic as discussed above and increased revenue resulting from the acquisition of the remaining interest in the Atlanta JV in the first quarter of 2020. These increases were partially offset by the decreased period of activity in 2021 as all portfolio hotels were sold on November 19, 2021.

Hotel and property operations expense

Hotel and property operations expense increased by $3,767. Hotel operating expenses were 69.6% of revenue in the 2021 period presented versus 84.0% of revenue in 2020.

Depreciation and amortization expense

Depreciation and amortization expense decreased by $1,282 as a result of the decreased period of activity in the 2021 period presented as all portfolio hotels were sold on November 19, 2021.

General and administrative expense

General and administrative expense increased by $568 driven by consulting and legal fees incurred in the 2021 period presented in preparation for the winding down of the Company.

Strategic alternatives, net

During both the 2021 period presented and 2020, significant expenses were recognized as strategic alternatives expenses, or costs incurred related to the Company’s strategic alternatives initiative. Additionally, during the third and fourth quarters of 2020, expense reimbursements and termination fees totaling $7,500 were received and credited against strategic alternatives expense, net related to a Merger Agreement that was terminated on September 18, 2020 by and among the Company, Condor Hospitality Limited Partnership, NHT Operating Partnership, LLC, NHT REIT Merger Sub, LLC and NHT Operating Partnership II, LLC.

Net gain/loss on disposition of assets

The gain on the disposition of assets in 2021 during the period presented related to the portfolio sale of all of the Company’s hotel properties which occurred on November 19, 2021.

Equity in earnings of joint venture

Equity in earnings of joint venture decreased by $80 between the periods as a result of the acquisition of the remaining interest in the Atlanta JV during the first quarter of 2020, after which point the results from the Atlanta JV were fully consolidated and no longer recorded as an equity method investment.

Net gain/loss on derivatives and convertible debt

The increase in net gain on derivatives and convertible debt of $12,661 was driven by changes in the fair value of the Company’s convertible notes, largely of the 2020 Notes, due to increases and decreases in the Company’s stock price between the issuance of the 2020 Notes and period ends.

Other income/expense, net

The increase in other income was a result of a gain on the forgiveness of PPP loans totaling $2,299 during the second quarter of 2021.

Interest expense

Interest expense increased in total by $923 largely as a result of the issuance of the $10,000 face value 2020 Convertible Notes in November of 2020.

Loss on extinguishment of debt

The Company incurred a loss on extinguishment of debt in 2021 during the period presented as a result of the early repayment of debt as part of the portfolio sale on November 19, 2021.

Income Tax Expense (Benefit)

Income tax expense in both periods was driven primarily by income (loss) earned by the TRS as well as miscellaneous state taxes owed by the Company. Management believes the combined federal and state income tax rate for the TRS will be approximately 24%. Beginning in 2020, after an assessment of the realizability of deferred tax assets based on projected reversals of deferred income tax liabilities, projected future taxable income, and tax planning strategies, the Company recognized a full valuation allowance against net deferred tax assets in the TRS, leading to a valuation allowance of $1,742 recorded as of December 31, 2020. This valuation allowance was maintained in 2021 with the majority of income tax expense in the 2021 period presented related to limitations placed on the use of operating losses against current period income.

Non-GAAP Financial Measures

Non-GAAP financial measures are measures of our historical financial performance that are different from measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We report Funds from Operations (“FFO”), Adjusted FFO (“AFFO”), Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”), EBITDA for real estate (“EBITDAre”), Adjusted EBITDAre, and Hotel EBITDA as non-GAAP measures that we believe are useful to investors as key measures of our operating results and which management uses to facilitate a periodic evaluation of our operating results relative to those of our peers. Our non-GAAP measures should not be considered as an alternative to U.S. GAAP net earnings as an indication of financial performance or to U.S. GAAP cash flows from operating activities as a measure of liquidity. Additionally, these measures are not indicative of funds available to fund cash needs or our ability to make cash distributions as they have not been adjusted to consider cash requirements for capital expenditures, property acquisitions, debt service obligations, or other commitments.

Funds from Operations (“FFO”) and Adjusted FFO (“AFFO”)

We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), which defines FFO as net earnings or loss computed in accordance with GAAP, excluding gains or losses from sales of real estate assets, impairment, and the depreciation and amortization of real estate assets. FFO is calculated both for the Company in total and as FFO attributable to common shares and common units, which is FFO reduced by preferred stock dividends. AFFO is FFO attributable to common shares and common units adjusted to exclude items we do not believe are representative of the results from our core operations, including non-cash gains or losses on derivatives and convertible debt, stock-based compensation expense, amortization of certain fees, losses on debt extinguishment, and in-kind dividends above stated rates, and cash charges for acquisition and terminated transaction and strategic alternatives costs, net of related receipts. All

REITs do not calculate FFO and AFFO in the same manner; therefore, our calculation may not be the same as the calculation of FFO and AFFO for similar REITs.

We consider FFO to be a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a meaningful indication of our performance. We believe that AFFO provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net earnings and FFO, is beneficial to an investor’s understanding of our operating performance.

The following table reconciles net earnings (loss) to FFO and AFFO for the period from January 1, 2021 to December 1, 2021 and the years ended December 31, 2020 and 2019 (in thousands). All amounts presented include only our portion of the results of our unconsolidated Atlanta JV prior to our acquisition of the remaining 20% interest from our joint venture partner on February 14, 2020.


	For the period from January 1 through December 1,		Year ended December 31,
Reconciliation of Net Earnings (Loss) to FFO and AFFO	2021		2020		2019
Net earnings (loss)	$	47,105	$	(19,071)	$	(5,067)
Depreciation and amortization expense		9,674		10,956		9,568
Depreciation and amortization expense from JV		-		145		1,195
Net loss (gain) on disposition of assets		(53,014)		18		36
Net loss on disposition of assets from JV		-		-		2
FFO		3,765		(7,952)		5,734
Dividends declared and undeclared on preferred stock		(383)		(617)		(578)
FFO attributable to common shares and common units		3,382		(8,569)		5,156
Net loss (gain) on derivatives and convertible debt		(6,330)		6,331		1,071
Net loss on derivatives from JV		-		-		1
Acquisitions and terminated transactions expense		-		-		38
Strategic alternatives expense, net		754		(4,706)		2,110
Loss on extinguishment of debt		4,476		-		-
Loss on extinguishment of debt from JV		-		-		138
Stock-based compensation expense		450		173		1,026
Amortization of deferred financing fees		910		1,210		1,267
Amortization of deferred financing fees from JV		-		93		444
AFFO attributable to common shares and common units	$	3,642	$	(5,468)	$	11,251

Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBTIDA”), EBITDAre, Adjusted EBITDAre, and Hotel EBITDA

We calculate EBITDA, EBITDAre, and Adjusted EBITDAre by adding back to net earnings or loss certain non-operating expenses and certain non-cash charges which are based on historical cost accounting that we believe may be of limited significance in evaluating current performance. We believe these adjustments can help eliminate the accounting effects of depreciation and amortization and financing decisions and facilitate comparisons of core operating profitability between periods. In calculating EBITDA, we add back to net earnings or loss interest expense, loss on debt extinguishment, income tax expense, and depreciation and amortization expense. NAREIT adopted EBITDAre in order to promote an industry-wide measure of REIT operating performance. We adjust EBITDA by adding back net gain/loss on disposition of assets and impairment charges to calculate EBITDAre. To calculate Adjusted EBITDAre, we adjust EBITDAre to add back acquisition and terminated transactions expense and strategic alternatives costs, net of related receipts, which are cash charges. We also add back stock –based compensation expense and gain/loss on derivatives and convertible debt, which are non-cash charges. EBITDA, EBITDAre, and Adjusted EBITDAre, as presented, may not be comparable to similarly titled measures of other companies.

We believe EBITDA, EBITDAre, and Adjusted EBITDAre to be useful additional measures of our operating performance, excluding the impact of our capital structure (primarily interest expense), our asset base (primarily depreciation and amortization expense), and other items we do not believe are representative of the results from our core operations.

The Company further excludes general and administrative expenses, other non-operating income or expense, and certain hotel and property operations expenses that are not allocated to individual properties in assessing hotel performance (primarily certain general liability and other insurance costs, land lease costs, and office and banking fees) from Adjusted EBITDAre to calculate Hotel EBITDA. Hotel EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

Hotel EBITDA is intended to isolate property level operational performance over which the Company’s hotel operators have direct control. We believe Hotel EBITDA is helpful to investors as it better communicates the comparability of our hotels’ operating results for all of the Company’s hotel properties and is used by management to measure the performance of the Company’s hotels and the effectiveness of the operators of the hotels.

The following table reconciles net earnings (loss) to EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA for the period from January 1, 2021 through December 1, 2021 and the years ended December 31, 2020 and 2019 (in thousands). All amounts presented include only our portion of the results of our unconsolidated Atlanta JV prior to our acquisition of the remaining 20% interest from our joint venture partner on February 14, 2020.


	For the period from January 1 through December 1,		Year ended December 31,
Reconciliation of Net earnings (loss) to EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA	2021		2020		2019
Net earnings (loss)	$	47,105	$	(19,071)	$	(5,067)
Interest expense		9,404		8,481		7,976
Interest expense from JV		-		225		2,140
Loss on extinguishment of debt		4,476		-		-
Loss on extinguishment of debt from JV		-		-		138
Income tax expense (benefit)		292		(375)		937
Depreciation and amortization expense		9,674		10,956		9,568
Depreciation and amortization expense from JV		-		145		1,195
EBITDA		70,951		361		16,887
Net (gain) loss on disposition of assets		(53,014)		18		36
Net loss on disposition of assets from JV		-		-		2
EBITDAre		17,937		379		16,925
Net (gain) loss on derivatives and convertible debt		(6,330)		6,331		1,071
Net loss on derivative from JV		-		-		1
Stock-based compensation expense		450		173		1,026
Acquisition and terminated transactions expense		-		-		38
Strategic alternatives expense, net		754		(4,706)		2,110
Adjusted EBITDAre		12,811		2,177		21,171
General and administrative expense, excluding stock-based compensation expense		4,124		3,833		4,674
Other expense (income), net		(2,438)		65		104
Unallocated hotel and property operations expense		423		339		227
Hotel EBITDA	$	14,920	$	6,414	$	26,176

Revenue	$	47,827	$	35,188	$	61,052
JV revenue		-		1,218		10,133
Total Company and JV revenue	$	47,827	$	36,406	$	71,185
Hotel EBITDA as a percentage of revenue		31.2%		17.6%		36.8%

Liquidity, Capital Resources, and Equity Transactions

Liquidity Requirements

At December 31, 2021, the Company had $6.5 million of cash and cash equivalents, which the Company believes is sufficient to cover any future payments required to wind up the operations of the Company pursuant to the Plan of Liquidation, including our known liabilities and any unknown or contingent liabilities. We can provide no assurance on the amount or timing of any future liquidating distributions, if any. The actual amount of any future distributions, if any,

will be determined by the Company Board based on our actual wind up expenses and other factors that the Company Board deems relevant.

Significant Equity Transactions

The Company received put right notices from all holders of 6.25% Series E Cumulative Convertible Preferred Stock (“Series E Preferred Stock”) of the Company effective June 29, 2021 pursuant to which the holders of the Series E Preferred Stock gave notice of their election to exercise their right to require the Company to redeem all 925,000 shares of the Company’s outstanding Series E Preferred Stock held by them at a value per share equal to 130% of the $10 liquidation preference of the Series E Preferred Stock, plus accrued and unpaid dividends, on July 29, 2021. On July 29, 2021, the Company redeemed the Series E Preferred Stock with common stock by issuing 2,686,571 shares of common stock to the holders of the Series E Preferred Shares pursuant to the terms of the shares, based on the weighted market sale price average of the common stock for the 30 trading days through June 29, 2021 of $4.9021 per share. The Common Stock was issued in reliance on the exemption from registration set forth in Section 4(a)(2) of the Securities Act of 1933, as amended.

As the Company would no longer meet continued listing requirements of the Exchange upon the substantial liquidation dividend distribution on December 30, 2021 (see above under “Special Dividend Liquidation Distribution”) and after consultation with the Exchange, on December 10, 2021, the Company, in accordance with the authority granted by the Company Board, provided written notice to the Exchange of its intention to voluntarily delist its common stock, par value $0.01, on the Exchange. The Company filed a Form 25 with the SEC and the Exchange relating to the delisting of the Common Stock on December 20, 2021, with the trading of its Common Stock on the Exchange suspended on December 31, 2021. The official delisting of the Common Stock was effective on December 31, 2021.

Sources and Uses of Cash

Cash provided by (used in) Operating Activities. Our cash provided by (used in) operations was $0.4 million and ($0.8) million for the period from January 1, 2021 through December 1, 2021 and the year ended December 31, 2020, respectively, an increase of $1.2 million. This change in operating cash flow was driven by an increase in net income, after adjusting for non-cash items, of $2.0 million. Changes in operating assets and liabilities between the periods were individually insignificant.

Cash provided by (used in) Investing Activities. Our cash provided by (used in) investing activities was $300.6 million and ($7.3) million for the period from January 1, 2021 through December 1, 2021 and the year ended December 31, 2020, respectively. The increase was driven by net cash receipts, after the payment of related expenses, of $301.3 million from the Portfolio Sale during the 2021 period presented and $7.2 million spent on the purchase of the remaining interest in the Atlanta JV during the first quarter of 2020.

Cash provided by (used in) Financing Activities. Our cash provided by (used in) financing activities was ($181.1) million and $7.2 million for the period from January 1, 2021 through December 1, 2021 and the year ended December 31, 2020, respectively. This change was driven primarily by the Company’s repayment of all its outstanding debt during the 2021 period presented following the Portfolio Sale as well as the issuance of $10.0 million in convertible notes in 2020.

Outstanding Indebtedness

At December 31, 2021, the Company has no outstanding debt. At December 31, 2020, excluding the Company’s two issuances of outstanding convertible debt, we had long-term debt of $168.3 million with a weighted average term to maturity of 2.1 years and a weighted average interest rate of 3.79%. Of this total, $24.8 million was fixed rate debt with a weighted average term to maturity of 2.3 years and a weighted average interest rate of 4.09% and $143.5 million was variable rate debt with a weighted average term to maturity of 2.0 years and a weighted average interest rate of 3.74%.

Significant Debt Transactions

During the second quarter of 2021, the Company’s three PPP loans, with balances totaling $2.3 million, were forgiven by the SBA.

On August 12, 2021, the Company entered into the tenth amendment to its credit facility with KeyBank which, among other things:

Provided that the Company may borrow up to $500,000 under the credit facility without lender approval, which is exclusive of the ability of the Company to borrow additional amounts with lender approval.

Increased the interest rate for the credit facility to LIBOR plus 4.00% or a base rate plus 3.00% as of August 31, 2021. The LIBOR rate is subject to a floor of 0.50%.

Waived the event of default that occurred as a result of the convertible notes issued in 2020 (see Note 7) not being converted to common stock or paid in full by July 1, 2021.

Amended the foregoing event of default provision to provide that it is an event of default if the convertible notes are not either converted to common stock or paid in full by October 31, 2021 (which was extended to November 30, 2021 on October 15, 2021).

Provided that the lenders will not declare a default, accelerate our indebtedness or otherwise take enforcement action on or before November 1, 2021 (which was later extended to November 30, 2021 on October 15, 2021) as a result of the cross-default that occurred as of May 27, 2021 due to the defaults under our loan agreement with OSK X, LLC, subject to the continuing satisfaction of certain conditions, including no breach or default of certain agreements, active pursuit of good faith defenses, the absence of certain legal proceedings or bankruptcy events and the maintenance of $6.0 million of liquidity.

On November 19, 2021, all of the Company’s debt was repaid concurrent with the execution of the Hotel Purchase and Sale Agreement. The Company’s debt repayment also included repayment of its outstanding Convertible Notes.

Contractual Obligations

The Company expects that it will have no significant obligations that will require capital as of December 31, 2021.

Off Balance Sheet Financing Transactions

We have not entered into any off balance sheet financing transactions.

Critical Accounting Policies

Our consolidated financial statements have been prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that effect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. While we do not believe the reported amounts would be materially different, application of these policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on experience and on various other assumptions that are believed to be reasonable under the circumstances.

Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management’s most difficult, complex, or subjective judgments. We have identified the following principal accounting policies that have a material effect on our consolidated financial statements.

Subsequent to the adoption of the Liquidation Basis of Accounting on December 1, 2021, we are required to estimate all costs and income we expect to incur and earn through the end of liquidation including the estimated amount of cash we expect to collect on the disposal of our assets and the estimated costs to dispose of our assets.

Investment in Hotel Properties

At the time of acquisition, the Company allocates the purchase price of assets to asset classes based on the fair value of the acquired real estate, furniture, fixtures, and equipment, and intangible assets, if any, and the fair value of liabilities assumed, including debt. Acquisition date fair values are determined based on replacement costs, appraised values, and estimated fair values using methods similar to those used by independent appraisers including discounted cash flows and capitalization rates.

Effective January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2017-01, Clarifying the Definition of a Business. As such, if substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business. When we conclude that an acquisition meets this threshold, acquisition costs will be capitalized as part of our allocation of the purchase price of the acquired hotel properties. This guidance is applied prospectively. We concluded that all hotel acquisitions in 2018 and the Company’s purchase of the remaining 20% of the Atlanta JV completed in 2020 were acquisitions of assets and as such acquisition costs were capitalized as part of these transactions.

The Company’s investments in hotel properties are recorded at cost and are depreciated using the straight-line method over an estimated useful life of 15 to 40 years for buildings and improvements and 3 to 12 years for furniture and equipment.

Renovations and/or replacements that improve or extend the life of the hotel properties are capitalized and depreciated over their useful lives. Repairs and maintenance are expensed as incurred.

The initial fees incurred to enter into the franchise agreements are capitalized and amortized over the life of the franchise agreements using the straight-line method. Amortization expense is included in depreciation and amortization in the consolidated statements of operations.

On an ongoing basis, the Company reviews the carrying value of each held for use hotel to determine if certain circumstances, known as triggering events, exist indicating impairment to the carrying value of the hotel or that depreciation periods should be modified. These triggering events include a significant change in the cash flows of or a significant adverse change in the business climate for a hotel. If facts or circumstances support the possibility of impairment, the Company will prepare an estimate of the undiscounted future cash flows, without interest charges, of the specific hotel and determine if the investment in such hotel is recoverable based on these undiscounted future cash flows. In the evaluation of impairment of its hotel properties, the Company makes many assumptions and estimates including projected cash flows both from operations and eventual disposal, expected useful life and holding period, future required capital expenditures, and terminal capitalization rates. If the investment is not recoverable based on this analysis, an impairment charge will be taken, if necessary, to reduce the carrying value of the hotel to the hotel’s estimated fair value.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, and other market changes that effect market-sensitive instruments. At December 31, 2021, given the Company’s progress through its Plan of Liquidation, no significant market risk remains.

Condor Hospitality Trust, Inc. and Subsidiaries

Index to Consolidated Financial Statements and Schedule III



	Page
Report of Independent Registered Public Accounting Firm KPMG (PCAOB ID 185)	19

Consolidated Statement of Net Assets (Liquidation Basis) at December 31, 2021	20
Consolidated Balance Sheet (Going Concern Basis) as of December 31, 2020	21

Consolidated Statement of Changes in Net Assets (Liquidation Basis) for the period from December 1, 2021 through December 31, 2021	22

Consolidated Statements of Operations (Going Concern Basis) for the period from January 1, 2021 through December 1, 2021 and years ended December 31, 2020 and 2019	23

Consolidated Statements of Equity (Going Concern Basis) for the period from January 1, 2021 through December 1, 2021 and the years ended December 31, 2020 and 2019	24

Consolidated Statements of Cash Flows (Going Concern Basis) for the period from January 1, 2021 through December 1, 2021 and the years ended December 31, 2020 and 2019	25

Notes to Consolidated Financial Statements	26

Schedule III – Real Estate and Accumulated Depreciation	49

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Condor Hospitality Trust, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Condor Hospitality Trust, Inc. and subsidiaries (the Company) as of December 31, 2020, the related consolidated statements of operations, equity, and cash flows for each of the years in the two-year period ended December 31, 2020 and the period from January 1, 2021 to December 1, 2021, the consolidated statement of net assets in liquidation as of December 31, 2021, the related consolidated statement of changes in net assets in liquidation for the period from December 1, 2021 to December 31, 2021, and the related notes and financial statement schedule III – Real Estate and Accumulated Depreciation (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020 and the period from January 1, 2021 to December 1, 2021, its net assets in liquidation as of December 31, 2021, and the changes in its net assets in liquidation for the period from December 1, 2021 to December 31, 2021, in conformity with U.S. generally accepted accounting principles applied on the bases described below.

Adoption of Liquidation Basis

As discussed in Note 1 to the consolidated financial statements, the shareholders of the Company approved a Plan of Liquidation on December 1, 2021, and the Company commenced liquidation shortly thereafter. As a result, the Company has changed its basis of accounting for periods subsequent to December 1, 2021 from the going-concern basis to a liquidation basis.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risk of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements; and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters

(signed) KPMG LLP

We have served as the Company’s auditor since 2001.

Chicago, Illinois
‎February 4, 2022

Condor Hospitality Trust, Inc. and Subsidiaries

Consolidated Statement of Net Assets

(Liquidation Basis)

(In thousands, except share and per share data)


		As of December 31,
	2021

Assets
Cash and cash equivalents	$	6,507
Accounts receivable, net		297
Total Assets	$	6,804

Liabilities
Accounts payable, accrued expenses, and other liabilities	$	6,308
Total Liabilities	$	6,308

Net Assets in Liquidation	$	496

See accompanying notes to consolidated financial statements.

Condor Hospitality Trust, Inc. and Subsidiaries

Consolidated Balance Sheet

(Going Concern Basis)

(In thousands, except share and per share data)


		As of December 31,
	2020

Assets
Investment in hotel properties, net	$	265,831
Cash and cash equivalents		3,686
Restricted cash, property escrows		3,794
Accounts receivable, net		652
Prepaid expenses and other assets		1,230
Total Assets	$	275,193

Liabilities and Equity

Liabilities
Accounts payable, accrued expenses, and other liabilities	$	5,372
Dividends and distributions payable		762
Land option liability		8,497
Derivative liabilities, at fair value		880
Convertible debt, at fair value		16,875
Long-term debt, net of deferred financing costs		166,526
Total Liabilities		198,912

Equity
Shareholders' Equity
Preferred stock, 40,000,000 shares authorized:
6.25% Series E, 925,000 shares authorized, $.01 par value, 925,000 shares outstanding, liquidation preference of $10,012		10,050
Common stock, $.01 par value, 200,000,000 shares authorized;12,014,743 shares outstanding		120
Additional paid-in capital		233,332
Accumulated deficit		(167,263)
Total Shareholders' Equity		76,239
Noncontrolling interest in consolidated partnership (Condor Hospitality Limited Partnership), redemption value of $17		42
Total Equity		76,281

Total Liabilities and Equity	$	275,193

See accompanying notes to consolidated financial statements.

Condor Hospitality Trust, Inc. and Subsidiaries

Changes in Consolidated Statement of Net Assets

(Liquidation Basis)

(In thousands, except share and per share data)



	For the period from December 1, 2021 to December 31, 2021

Net Assets in Liquidation, December 1, 2021	$	117,474
Declaration and payment of cash liquidating distribution		(116,978)
Net Assets in Liquidation, December 31, 2021	$	496

See accompanying notes to consolidated financial statements.

Condor Hospitality Trust, Inc. and Subsidiaries

Consolidated Statements of Operations

(Going Concern Basis)

(In thousands, except per share data)

asd


	For the period from January 1 through December 1,		Year ended December 31,
	2021		2020		2019
Revenue
Room rentals and other hotel services	$	47,827	$	35,188	$	61,052
Operating Expenses
Hotel and property operations		33,330		29,563		38,769
Depreciation and amortization		9,674		10,956		9,568
General and administrative		4,574		4,006		5,700
Acquisition and terminated transactions		-		-		38
Strategic alternatives, net		754		(4,706)		2,110
Total operating expenses		48,332		39,819		56,185
Operating income (loss) before net gain (loss) on disposition of assets		(505)		(4,631)		4,867
Net gain (loss) on disposition of assets		53,014		(18)		(36)
Operating income (loss)		52,509		(4,649)		4,831
Equity in earnings (loss) of joint venture		-		80		190
Net gain (loss) on derivatives and convertible debt		6,330		(6,331)		(1,071)
Other income (expense), net		2,438		(65)		(104)
Interest expense		(9,404)		(8,481)		(7,976)
Loss on extinguishment of debt		(4,476)		-		-
Earnings (loss) before income taxes		47,397		(19,446)		(4,130)
Income tax benefit (expense)		(292)		375		(937)
Net earnings (loss)		47,105		(19,071)		(5,067)
(Income) loss attributable to noncontrolling interest		(12)		7		19
Net earnings (loss) attributable to controlling interests		47,093		(19,064)		(5,048)
Dividends declared and undeclared on preferred stock		(383)		(617)		(578)
Net earnings (loss) attributable to common shareholders	$	46,710	$	(19,681)	$	(5,626)



Earnings (Loss) per Share
Total - Basic Earnings (Loss) per Share	$	3.59	$	(1.59)	$	(0.48)
Total - Diluted Earnings (Loss) per Share	$	2.47	$	(1.59)	$	(0.48)

See accompanying notes to consolidated financial statements.

Condor Hospitality Trust, Inc. and Subsidiaries

Consolidated Statements of Equity

(Going Concern Basis)

(In thousands, except per share data)


	For the period from January 1, 2021 through December 1, 2021 and years ended December 31, 2020 and 2019
	Shares of preferred stock		Preferred stock		Shares of common stock		Common stock		Additional paid-in capital		Accumulated deficit		Total shareholders' equity		Noncontrolling interest		Total equity
Balance at December 31, 2018		925	$	10,050		11,886	$	119	$	231,805	$	(134,970)	$	107,004	$	848	$	107,852
Stock-based compensation		-		-		54		-		670		-		670		-		670
Dividends and distributions declared and undeclared
Common Stock ($0.585 per share)		-		-		-		-		-		(6,986)		(6,986)		-		(6,986)
Series E Preferred Stock		-		-		-		-		-		(578)		(578)		-		(578)
Common Units ($0.011 per unit)		-		-		-		-		-		-		-		(23)		(23)
Redemption of common units		-		-		54		1		714		-		715		(757)		(42)
Net loss		-		-		-		-		-		(5,048)		(5,048)		(19)		(5,067)
Balance at December 31, 2019		925	$	10,050		11,994	$	120	$	233,189	$	(147,582)	$	95,777	$	49	$	95,826
Stock-based compensation		-		-		21		-		143		-		143		-		143
Dividends and distributions undeclared
Series E Preferred Stock		-		-		-		-		-		(617)		(617)		-		(617)
Net loss		-		-		-		-		-		(19,064)		(19,064)		(7)		(19,071)
Balance at December 31, 2020		925	$	10,050		12,015	$	120	$	233,332	$	(167,263)	$	76,239	$	42	$	76,281
Stock-based compensation		-		-		20		-		421		-		421		-		421
Dividends and distributions undeclared		-		-		-		-		-		-		-		-		-
Series E Preferred Stock		-		-		-		-		-		(383)		(383)		-		(383)
Redemption of Series E Preferred stock		(925)		(10,050)		2,686		27		11,168		-		1,145		-		1,145
Redemption of common units		-		-		-		-		9		-		9		(9)		-
Net earnings		-		-		-		-		-		47,093		47,093		12		47,105
Balance at December 1, 2021		-	$	-		14,721	$	147	$	244,930	$	(120,553)	$	124,524	$	45	$	124,569

See accompanying notes to consolidated financial statements.

Condor Hospitality Trust, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Going Concern Basis)

(In thousands)


	For the period from January 1 through December 1,		Year ended December 31,
	2021		2020		2019
Cash flows from operating activities:
Net earnings (loss)	$	47,105	$	(19,071)	$	(5,067)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization expense		9,674		10,956		9,568

CONDOR HOSPITALITY TRUST, INC. 10-K