914373--3/6/2006--JAMESON_INNS

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{loan, real, estate}

{debt, indebtedness, cash}

{condition, economic, financial}

{provision, law, control}

{regulation, change, law}

{capital, credit, financial}

{competitive, industry, competition}

{personnel, key, retain}

{operation, natural, condition}

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Risks Relating to Our Business Due to the geographic concentration of our Inns, our results of operations and financial condition are subject to fluctuations in regional economic conditions. Our hotel refurbishment and rebranding for our Signature Inns may be more costly than we anticipate. We have incurred a substantial amount of debt, and we may incur additional indebtedness in the future, all of which increases our expenses and the risks of unprofitable operations. Our lack of industry diversification makes us more vulnerable to economic downturns. Our franchising program depends upon third party owners/operators who may not fulfill their franchising obligations, including failing to make timely payments to us and failing to maintain quality control consistent with the Jameson Inn standards. Our business could be harmed if key personnel terminate their employment with us. We have common stock ownership limitations in our articles of incorporation which could restrict the marketability or liquidity of our common stock. Provisions in our charter documents may make it difficult for a third party to acquire us and could limit the price of our common stock. Our business is seasonal in nature, and we are likely to experience fluctuations in our results of operations and financial condition. The costs of defending and paying claims asserted against us could be substantial and reduce the funds we would otherwise have available to meet our other working capital needs. We may experience material losses in excess of insurance coverage which could hurt our prospects for profitability. Risks Relating to the Lodging Industry Generally Our operating results are subject to various operating risks common to the lodging industry, many of which are beyond our control. If we are unable to compete successfully, our business may be materially harmed. Our expenses may remain constant even if revenues decline, thus restricting our prospects for profitability. We are subject to governmental regulations affecting the lodging industry; the costs of complying with governmental regulations, or our failure to comply with such regulations, could affect our financial position and results of operations. Failure of the U.S. lodging industry to exhibit continued improvement may impede our ability to execute our business plan. The increasing use of third party travel websites by consumers may hurt our profitability. The uncertainty of future terrorist attacks and military actions may negatively impact the travel and lodging industries. The existence of mold in our owned Inns could result in substantial costs or restrictions on the use of our Inns. Risks Related to the Real Estate Industry Our inability to sell real estate when appropriate may hurt our financial condition. Risks associated with real estate ownership may restrict revenues or increase expenses. Risks Relating to Common Stock Ownership The market price for our common stock may be volatile, and you may not be able to sell our stock at a favorable price or at all. Substantial sales of our common stock or other securities that may be convertible into our common stock, or the perception that such sales might occur, could depress the market price of our common stock. Because we do not expect to pay cash dividends on our common stock, our stock may be less desirable as an investment and have a lower market price than it might if we paid dividends. We may issue additional shares of common stock upon conversion of our convertible notes which could dilute other stockholders ownership of our common stock. We are subject to environmental risks that could be costly.

Full 10-K form ▸

914373--3/6/2006--JAMESON_INNS_INC