UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
         THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended March 31, 2000

                                       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 000-30491

                               APPLE SUITES, INC.
             (Exact name of registrant as specified in its charter)

                   VIRGINIA                                    54-1933472
         (State or other jurisdiction                         (IRS Employer
       of incorporation or organization)                    Identification No.)

             306 EAST MAIN STREET
              RICHMOND, VIRGINIA                                   23219
   (Address of principal executive offices)                      (Zip Code)

                                 (804) 643-1761
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
                 (Former name, former address, and former fiscal
                       year, if changed since last report)

         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
                                             ---  ---

At April 20, 2000, there were  outstanding  4,224,427 shares of common stock, no
par value, of the registrant.

<PAGE>


                               APPLE SUITES, INC.
                                    FORM 10-Q

                                      INDEX

                                                                     Page Number
                                                                     -----------

PART I.           FINANCIAL INFORMATION

         Item 1.      Financial Statements (Unaudited)
                      APPLE SUITES, INC.(The "Company")

                           Consolidated Balance Sheets -   As of          4
                           March 31, 2000 and December 31, 1999

                           Consolidated Statement of Operations -         5
                           Three months ended March 31, 2000

                           Consolidated Statement of Shareholders'        6
                           Equity - Three months ended March 31, 2000

                           Consolidated Statement of Cash Flows -         7
                           Three months ended March 31, 2000

                           Notes to Consolidated Financial Statements     8

                      APPLE SUITES MANAGEMENT, INC. (The "Lessee")

                           Consolidated Balance Sheets-                  13
                           As of March 31, 2000 and December 31, 1999

                           Consolidated Statement of Operations-         14
                           Three months ended March 31, 2000

                           Consolidated Statement of Cash Flows-         15
                           Three months ended March 31, 2000

                           Notes to Consolidated Financial Statements    16

         Item 2.      Management's Discussion and Analysis               18
                      of Financial Condition and Results of
                      Operations

         Item 3.      Quantitative and Qualitative Disclosures           23
                      about  Market Risk

                                       2

<PAGE>

PART II.   OTHER INFORMATION:

         Item 1.      Legal Proceedings (not applicable).

         Item 2.      Changes in Securities and Use of Proceeds          24

         Item 3.      Defaults Upon Senior Securities
                      (not applicable).

         Item 4.      Submission of Matters to a Vote of
                      Security Holders (not applicable).

         Item 5.      Other Information (not applicable)

         Item 6.      Exhibits and Reports on Form 8-K                   25


                                       3

<PAGE>

APPLE SUITES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                        March 31,           December 31,
                                                                                          2000                 1999
                                                                                      -------------        -------------
<S>                                                                                   <C>                  <C>
ASSETS

Investment in hotel -net of accumulated depreciation of
         $1,045,410 and $496,209, respectively                                        $  93,450,963        $  93,719,632
Cash and cash equivalents                                                                 3,781,922              581,344
Restricted cash                                                                             696,869            1,023,721
Rent receivable from Apple Suites Management, Inc.                                        2,641,141            2,123,136
Notes and other receivables  from Apple Suites Management, Inc.                             694,766              717,019
Capital improvement reserve                                                                 753,927              753,927
Prepaid expenses                                                                            263,781              270,229
Other assets                                                                                531,470              300,000
                                                                                      -------------        -------------

Total Assets                                                                          $ 102,814,839        $  99,489,008
                                                                                      =============        =============

LIABILITIES and SHAREHOLDERS' EQUITY

Liabilities
Notes payable-secured                                                                 $  68,569,500        $  68,569,500
Interest payable                                                                                 --              466,140
Accounts payable                                                                            161,258               65,214
Accrued expenses                                                                            554,977              868,668
Account payable-affiliate                                                                   531,285              708,751
Distributions payable                                                                            --              712,735
                                                                                      -------------        -------------

Total Liabilities                                                                        69,817,020           71,391,008

Shareholders' equity
Common stock, no par value, authorized 200,000,000
   shares; issued and outstanding 3,922,923 shares and 3,429,414, respectively        $  32,985,016        $  28,591,260
Class B convertible stock, no par value, authorized 240,000 shares;
   issued and outstanding 240,000  shares                                                    24,000               24,000
Distributions greater than net income                                                       (11,197)            (517,260)
                                                                                      -------------        -------------

Total Shareholders' Equity                                                               32,997,819           28,098,000
                                                                                      -------------        -------------

Total Liabilities and Shareholders' Equity                                            $ 102,814,839        $  99,489,008
                                                                                      =============        =============

</TABLE>


See accompanying notes to consolidated financial statements.


                                       4

<PAGE>

APPLE SUITES INC.
CONSOLIDATED STATEMENT  OF OPERATIONS (UNAUDITED)

                                                                   March 31,
                                                                     2000
                                                                  ----------
REVENUES:

         Lease revenue                                            $3,406,678
         Interest income and other revenue                            48,007

EXPENSES:

         Taxes, insurance and other                                  691,575
         General and administrative                                  254,736
         Depreciation  of real estate owned                          549,201
         Interest                                                  1,453,110
                                                                  ----------

                                      Total expenses               2,948,622
                                                                  ----------

Net income                                                        $  506,063
                                                                  ==========

Basic and diluted earnings per common share                       $     0.14
                                                                  ==========

See accompanying notes to consolidated financial statements.

                                       5

<PAGE>


APPLE SUITES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)

<TABLE>
<CAPTION>


                                                   Common Stock         Class B Convertible Stock   Distributions
                                              ---------------------------------------------------      Greater          Total
                                               Number                     Number                         Than        Shareholders'
                                              of Shares      Amount      of Shares      Amount        Net Income        Equity
                                              ------------------------------------------------------------------------------------
<S>                                           <C>         <C>             <C>         <C>           <C>             <C>


Balance at December 31, 1999                  3,429,414   $28,591,260     240,000     $  24,000       $(517,260)     $28,098,000

Net proceeds from the sale of common shares     456,873     4,064,541          --            --              --        4,064,541
Net income                                           --            --          --            --         506,063          506,063
Common stock issued through reinvestment
          of distribution                        36,636       329,215          --            --              --          329,215
                                              ---------   -----------     -------     ---------       ---------      -----------
Balance at March 31, 2000                     3,922,923   $32,985,016     240,000     $  24,000       $ (11,197)     $32,997,819
                                              =========   ===========     =======     =========       =========      ===========

</TABLE>







See accompanying notes to consolidated financial statements.


                                       6

<PAGE>

APPLE SUITES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>

                                                                     Three Months Ended
                                                                           March 31,
                                                                             2000
                                                                     ------------------
<S>                                                                     <C>
Cash flow from operating activities:

   Net income                                                           $   506,063
   Adjustments to reconcile net income to net cash
   provided by operating activities
   Depreciation of real estate owned                                        549,201
     Changes in operating assets and liabilities:
       Prepaid expenses                                                       6,448
       Rent and notes receivable from Apple Suites Management, Inc.        (509,566)
       Other assets                                                         (31,395)
       Accounts payable                                                      96,044
       Accounts payable-affiliates                                         (177,466)
       Accrued expenses                                                    (313,691)
       Interest payable                                                    (466,140)
                                                                        -----------

                    Net cash used in  operating activities                 (340,502)

Cash flow from investing activities:

   Payments received on notes receivable                                     13,739
   Capital improvements                                                    (280,532)
   Restricted cash for property improvement plan                            326,852
   Earnest deposit money for pending acquisitions                          (200,000)
                                                                        -----------

                    Net cash used in investing activities                  (139,941)

Cash flow from financing activities:

   Net proceeds from issuance of common shares                            4,394,265
   Cash distributions paid to shareholders                                 (713,244)
                                                                        -----------

                    Net cash provided by financing activities             3,681,021

                    Increase  in cash and cash equivalents                3,200,578

Cash and cash equivalents, beginning of period                              581,344
                                                                        -----------


Cash and cash equivalents, end of period                                $ 3,781,922
                                                                        ===========


</TABLE>

See accompanying notes to consolidated financial statements.

                                       7

<PAGE>



                                APPLE SUITES, INC
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 March 31, 2000

(1)      GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Basis of Presentation

         The accompanying  unaudited consolidated financial statements have been
         prepared in accordance with the  instructions for Form 10-Q and Article
         10 of  Regulation  S-X.  Accordingly,  they do not  include  all of the
         information  required by generally accepted accounting  principles.  In
         the  opinion  of  management,  all  adjustments  (consisting  of normal
         recurring accruals)  considered  necessary for a fair presentation have
         been included.  Operating  results for the three months ended March 31,
         2000 are not necessarily indicative of the results that may be expected
         for the period ended December 31, 2000.  These  consolidated  financial
         statements  should be read in conjunction  with the Company's  December
         31, 1999 Annual Report on Form 10-K.

         The  Company  commenced   operations  in  September  1999,   therefore,
         consolidated  statements  of  operations  and cash  flows for the three
         month period ended March 31, 1999 are not presented.

         Apple Suites,  Inc., (the "Company") leased to Apple Suites Management,
         Inc. or its subsidiary (the "Lessee") all of its hotels acquired during
         1999.

         The  Lessee  hired  Promus  Hotels,  Inc.   ("Promus"),a  wholly  owned
         subsidiary  of Hilton  Hotels  Corporation  ("Hilton")  to  manage  the
         Company's  hotels  under the terms of a  management  agreement  between
         Promus and the Lessee.

         Relationship with Lessee

         The Company  must rely on the Lessee to generate  sufficient  cash flow
         from the  operation of the hotels to enable the Lessee to meet its rent
         obligation  to the  Company  under the  master  hotel  lease  agreement
         ("Percentage  Leases"). At March 31, 2000, the Lessee's rent payable to
         the  Company  amounted  to  $2,641,141.  The  original  terms under the
         Percentage  Leases  allow  monthly  base rent to be paid in arrears and
         quarterly percentage rent to be paid 15 days following the quarter-end.

         The Company did not have any items of  comprehensive  income  requiring
         separate reporting and disclosure for the periods presented.

                                       8

<PAGE>


(2)      INVESTMENT IN HOTELS

         At March 31, 2000, the Company owned 11 hotels. Investment in hotels at
         March 31, 2000 consist of the following:

         Land                                                $15,687,640
         Building                                             77,336,538
         Furniture and equipment                               1,472,195
                                                             -----------
                                                             $94,496,373
         Less accumulated depreciation                        (1,045,410)
                                                             -----------
                                                             $93,450,963
                                                             -----------

(3)      NOTES PAYABLE

         In conjunction  with the purchase of 11 hotels,  notes were executed by
         the  Company  made  payable  to the order of  Hilton  in the  amount of
         $68,569,500. The notes bear a fixed interest rate of 8.5% per annum and
         are  cross-collateralized  by  the 11  hotels  owned  by  the  Company.
         Interest  payments are due  monthly.  Notes  amounting  to  $64,185,000
         mature during the fourth quarter of 2000, and the remaining  $4,384,500
         note matures in January 2001.  Principal payments are to be made to the
         extent of net  equity  proceeds  from the  offering  of common  shares.
         Hilton has agreed to defer principal payments until the earlier of June
         30, 2000 or such time as two  additional  hotels have been purchased by
         the  Company.  The Company paid  $1,453,110  in interest for the period
         ended March 31, 2000.

(4)      SHAREHOLDERS' EQUITY

         The Company is raising equity capital through a "best-efforts" offering
         of shares by David Lerner  Associates,  Inc. (the  "Managing  Dealer"),
         which  will  receive  selling   commissions  and  a  marketing  expense
         allowance  based on proceeds of the shares sold.  The Company  received
         gross proceeds of $4,568,723 from the sale of 456,873 shares at $10 per
         share  during the three  month  period  ended March 31,  2000.  The net
         proceeds of the offering, after deducting selling commissions and other
         offering costs were $4,064,541 for the period.

         The  Company  provides a plan which  allows  shareholders  to  reinvest
         distributions  in the  purchase  of  additional  shares of the  Company
         ("Additional  Share Option").  Of the total proceeds raised from common
         shares during the period ended March 31, 2000,  $366,360 (net $329,215)
         was provided through the reinvestment of distributions.

(5)      COMMITMENTS AND RELATED PARTIES

         The Company receives rental income from the Lessee under the Percentage
         Leases  which  expire in 2009,  subject to earlier  termination  by the
         Company with 30 days notice.  The Leases contain two optional five-year
         extensions. The rent due under the Percentage Leases is the sum of base
         rent and percentage rent.  Percentage rent is calculated by multiplying
         fixed percentages by the total amounts of suite revenues with reference
         to  specified  threshold  amounts.  Both the base rent and the  revenue
         thresholds  used in  computing  percentage  rents

                                       9

<PAGE>

         are subject to annual  adjustments  based on  increases in the Consumer
         Price Index  ("CPI").  The Company  earned rents of $3,406,678  for the
         three month period ended March 31, 2000.

         Under the Percentage  Leases, the Company is obligated to pay the costs
         of  real  estate  and  personal  property  taxes,  property  insurance,
         maintenance  of underground  utilities and  structural  elements of the
         hotels. The Company is committed under certain agreements to fund 5% of
         suite revenues per month for capital  expenditures to include  periodic
         replacement or refurbishment of furniture,  fixtures, and equipment. At
         March  31,  2000,  $753,927  was  held  by  Promus  for  these  capital
         improvement  reserves.  In addition,  in accordance  with the franchise
         agreements,  $696,869 was held for the property improvement plan with a
         financial institution and treated as restricted cash.

         The Lessee  engages  Promus as a  third-party  manager  to operate  the
         hotels leased by it and pays the manager  based on a percentage  fee of
         4% of  adjusted  gross  revenues.  During  the  first  two years of the
         management  agreement,  a portion of the  management fee equal to 1% of
         adjusted gross revenues is  subordinated  to the Lessee's  receipt of a
         return  equal to 11% of the  purchase  price of each hotel.  The Lessee
         pays the manager a franchise  fee and a marketing  fee,  equal to 4% of
         gross revenues, respectively.

         The Company loaned the Lessee  $567,900 for franchise fees and $121,800
         for hotel supplies for the 11 hotels. The debt agreements are evidenced
         by  promissory  notes  bearing  interest  at a rate  of 9%  per  annum.
         Principal and interest  payments are due monthly.  The promissory notes
         have various maturity dates through January 2010.

         The  Company  has  contracted  with Apple  Suites  Realty  Group,  Inc.
         ("ASRG") to acquire and dispose of real estate  assets for the Company.
         In  accordance  with the contract ASRG is to be paid a fee of 2% of the
         purchase price of any acquisitions or sale price of any dispositions of
         real estate investments,  subject to certain  conditions.  At March 31,
         2000, the Company owed ASRG $490,238.

         The Company has contracted with Apple Suites Advisors,  Inc. ("ASA") to
         advise and provide day to day  management  services to the Company.  In
         accordance  with the contract,  the Company will pay ASA a fee equal to
         .1% to .25% of total  equity  contributions  received by the Company in
         addition to certain reimbursable  expenses.  For the three months ended
         March 31, 2000, ASA earned $22,533 under this agreement and $41,046 was
         payable at March 31, 2000.

         The Lessee,  ASRG and ASA are 100% owned by Glade M.  Knight,  Chairman
         and  President of the  Company.  ASRG and ASA may purchase in the "best
         efforts"  offering  up to 2.5% of the  total  number  of  shares of the
         Company sold in the offering.

                                       10

<PAGE>


(6)      EARNINGS PER SHARE

         The  following  table sets forth the  computation  of basic and diluted
         earnings per share in accordance with FAS 128:

                                                                Three Months
                                                                    Ended
                                                                   3/31/00
                                                                   -------

                Numerator:
                     Net Income
                     Numerator for basic and
                     diluted earnings                            $  506,063
                Denominator:
                     Denominator for basic
                     earnings per share-weighted-
                     average shares                               3,607,458
                Effect of dilutive securities:
                     Stock options                                    2,200
                ----------------------------------------------------------------
                Denominator for diluted earnings
                     per share-adjusted weighted-
                     average shares and assumed
                     conversions                                  3,609,658
                ----------------------------------------------------------------
                Basic and diluted earnings per
                     common share                                $     0.14
                ----------------------------------------------------------------




                                       11

<PAGE>


(7)      ACQUISITIONS

         The  following  unaudited  pro forma  information  for the three months
         ended  March 31,  1999 is  presented  as if the  acquisition  of the 11
         hotels occurred on January 1, 1999. The pro forma  information does not
         purport to represent  what the Company's  results of  operations  would
         actually  have been if such  transactions,  in fact,  had  occurred  on
         January  1,  1999,  nor does it purport  to  represent  the  results of
         operations for future periods.

                                                                   Three Months
                                                                      Ended
                                                                     3/31/99

          Lease revenue                                            $3,398,637

          Net income                                                  748,633

          Net income per share-basic and diluted                         $.22


         The pro  forma  information  applies  the  Company's  Percentage  Lease
         Agreements  to  actual  suite  revenue  and  expenses  of the 11 hotels
         acquired in 1999 for the respective period in 1999 prior to acquisition
         by  the  Company.   Net  income  has  been  adjusted  as  follows:  (1)
         depreciation  has been  adjusted  based on the  Company's  basis in the
         hotels; (2) advisory expenses have been adjusted based on the Company's
         contractual arrangements; (3) interest  expense  has  been  adjusted to
         reflect the  acquisition  as of the  beginning of the periods;  and (4)
         common  stock  raised  during  1999 to purchase  these  hotels has been
         adjusted to reflect issuances as of January 1, 1999.

(8)      SUBSEQUENT EVENTS

         In  April,   2000  the   Company   distributed   to  its   shareholders
         approximately $904,918 ($.25 per share) of which approximately $448,641
         was reinvested in the purchase of additional shares. On April 18, 2000,
         the Company  closed the sale to investors of 301,514  shares at $10 per
         share representing net proceeds to the Company of $2,350,227.

         On May 8, 2000,  the  Company  acquired a Homewood  Suites(R)  hotel in
         Malvern,  Pennsylvania for $15,489,000. The hotel was purchased through
         a combination of equity proceeds from the equity offering and a note in
         the amount of $11,616,750 made payable to the order of Promus. The note
         has a fixed interest rate of 8.5% per annum. Interest  payments are due
         monthly and the maturity date is May,  2001.  This hotel will be leased
         by the Lessee and managed by Promus in substantially the same manner as
         the other 11 Homewood Suites(R) hotels owned at March 31, 2000.


                                       12

<PAGE>

APPLE SUITES MANAGEMENT, INC
CONSOLIDATED BALANCE SHEET (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                March 31,               December 31,
                                                                                  2000                      1999
                                                                               -----------              -----------
<S>                                                                            <C>                      <C>
Current assets

Cash and cash equivalents                                                      $ 2,329,310                2,395,000
Accounts receivables, net                                                        1,514,431                  738,361
Inventories                                                                        125,970                  121,801
Other assets                                                                         2,188                    8,142
                                                                               -----------              -----------

     Total Current Assets                                                        3,971,899                3,263,304

Non-current assets

Deferred franchise fees                                                            555,753                  562,851
                                                                               -----------              -----------

Total Assets                                                                   $ 4,527,652              $ 3,826,155
                                                                               ===========              ===========

Liabilities and Shareholders' Deficit

Current liabilities

Account payable                                                                $   105,247                   48,586
Rent payable to Apple Suites, Inc.                                               2,641,141                2,123,136
Due to third party manager                                                         482,084                  454,147
Due to Apple Suites, Inc.                                                           20,552                   28,991
Accrued expenses                                                                   704,153                  624,346
Current portion of note payable to Apple Suites, Inc.                               58,350                   56,939
                                                                               -----------              -----------

     Total Current liabilities                                                   4,011,527                3,336,145

Non-current  liabilities

Note payable to Apple Suites, Inc.                                                 615,864                  631,014
                                                                               -----------              -----------

Total Liabilities                                                                4,627,391                3,967,159

Shareholders' deficit

Common Stock, no par value,  5,000 authorized;
  10 shares issued and outstanding                                                     100                      100
Retained deficit                                                                   (99,839)                (141,104)
                                                                               -----------              -----------

Total Shareholders' deficit                                                        (99,739)                (141,004)
                                                                               -----------              -----------

Total Liabilities and Shareholders' Deficit                                    $ 4,527,652              $ 3,826,155
                                                                               ===========              ===========

</TABLE>

See accompanying notes to financial statements.

                                       13

<PAGE>

APPLE SUITES MANAGEMENT, INC
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)


                                                            Three Months
                                                                Ended
                                                           March 31, 2000
                                                           --------------

REVENUE

Suite revenue                                                $7,682,355
Other revenue                                                   420,816
                                                             ----------

   Total revenue                                              8,103,171

EXPENSES

Operating expense                                             2,295,392
General and administrative                                      670,943
Advertising and promotion                                       662,647
Utilities                                                       283,263
Franchise fees                                                  307,294
Management fees                                                 322,766
Rent expense-Apple Suites, Inc.                               3,406,678
Interest expense                                                 15,275
Other                                                            96,212
                                                             ----------

   Total expenses                                             8,060,470

Income before income taxes                                       42,701

Income tax expense                                                   --
                                                             ----------

Net income                                                   $   42,701
                                                             ==========


See accompanying notes to consolidated financial statements.

                                       14

<PAGE>

APPLE SUITES MANAGEMENT, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>

                                                                       Three Months Ended
                                                                            March 31,
                                                                              2000
                                                                       ------------------
<S>                                                                       <C>
Cash flow from operating activities:

   Net income                                                             $   42,701
   Adjustments to reconcile net income to net cash
   used in operating activities
      Amortization of deferred franchise fees                                  7,098
      Changes in operating assets and liabilities:
       Receivables                                                          (776,070)
       Other assets                                                              349
       Due to  Apple Suites, Inc.                                             (8,439)
       Rent payable to Apple Suites, Inc.                                    518,005
       Accounts payable                                                       56,661
       Due to  third party manager                                            27,937
       Accrued expenses                                                       79,807
                                                                          ----------

                      Net cash used in  operating activities                 (51,951)

Cash flow from financing activities:

       Repayments of notes payable                                           (13,739)
                                                                          ----------

                      Net cash used in financing activities                  (13,739)

                      Decrease  in cash and cash equivalents                 (65,690)

Cash and cash equivalents, beginning of period                             2,395,000
                                                                          ----------


Cash and cash equivalents, end of period                                  $2,329,310
                                                                          ==========

</TABLE>

See accompanying notes to consolidated financial statements.

                                       15

<PAGE>

                          APPLE SUITES MANAGEMENT, INC
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 March 31, 2000

(1)      GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization

         Apple Suites  Management,  Inc. (the "Lessee") operates in one business
         segment.  Each hotel is leased by the  Company  to the  Lessee  under a
         master hotel lease  agreement  ("Percentage  Lease")  having an initial
         term of ten years,  subject to earlier termination at the option of the
         Company  upon 30 days  notice.  The lease  agreement  provides  for two
         optional five-year extensions.  The Percentage Leases require base rent
         payments  to be made to the Company on a monthly  basis and  additional
         quarterly  payments  to be made  based  upon  percentages  of suite and
         sundry revenue.  Promus Hotels, Inc. or an affiliate ("Promus") manages
         the hotels under a management agreement with the Lessee. Promus Hotels,
         Inc.  is  a  wholly-owned   subsidiary  of  Hilton  Hotel   Corporation
         ("Hilton"). The hotels are located throughout the United States and are
         licensed with Homewood Suites(R) by Hilton.

         The  Lessee   commenced   operations  in  September  1999,   therefore,
         consolidated  statements  of  operations  and cash  flows for the three
         month period ended March 31, 1999 are not presented.

(2)      PERCENTAGE LEASES

         The Percentage Leases expire in 2009, subject to earlier termination by
         the Company upon 30 days notice.  The Percentage Leases provide for two
         optional five-year  extensions.  The rent due for each hotel is the sum
         of a base rent and a percentage rent.  Percentage rent is calculated on
         a quarterly basis by multiplying fixed percentages by the total amounts
         of  year-to-date  suite revenues with reference to specified  threshold
         amounts known as  breakpoints.  Both the base rent and the  breakpoints
         used in computing  percentage  rents are subject to annual  adjustments
         based on increases in the Consumer Price Index ("CPI").

         The Lessee has entered into license  agreements  with Promus to operate
         the hotels as Homewood Suites(R) by Hilton properties. These agreements
         have terms of 20 years and expire in 2019. These agreements require the
         Lessee to, among other things,  pay monthly  franchise fees equal to 4%
         of suite revenue.  License and franchise  agreements  contain  specific
         standards for, and  restrictions  and limitations on, the operation and
         maintenance  of the hotels which are  established by Promus to maintain
         uniformity  in the  system  for  Homewood  Suites(R)  by  Hilton.  Such
         standards  generally regulate the appearance of the hotel,  quality and
         type of goods and services offered,  signage,  and protection of marks.
         Compliance   with  such   standards  may  from  time  to  time  require
         significant  expenditures for capital  improvements which will be borne
         by the Company.  In addition,  the agreements  provide that Promus will
         manage the daily  operations of the hotels and provide  advertising and
         promotion  to include  access to the  reservation  system for  Homewood
         Suites(R) by Hilton. The Lessee pays Promus 4% of monthly suite

                                       16

<PAGE>


         revenue  for  each of these  functions,  respectively.  Total  expenses
         incurred by the Lessee for franchise  fees,  advertising  and promotion
         fees,  and  management  fees for the three  months ended March 31, 2000
         totaled $937,354.

(3)      SHAREHOLDER'S EQUITY

         The Lessee  requires or may require funds to capitalize its business to
         satisfy its obligations  under Percentage  Leases with the Company.  To
         meet these objectives, the Lessee has two funding commitment agreements
         of $1 million each from Mr. Knight and Apple Suites Realty Group, Inc.,
         ("ASRG"),  respectively,  (together  "Payor").  ASRG  is  owned  by Mr.
         Knight.  The funding  commitments  are  contractual  obligations of the
         Payor to provide  funds to the Lessee.  Funds paid to the Lessee  under
         the  commitments  are to be used to satisfy any  capitalization  or net
         worth  requirements  applicable  to the Lessee or the Lessee's  payment
         obligations  under  the lease  agreements  and does not  represent  any
         indebtedness.  The funding commitments terminate upon the expiration of
         the  Percentage  Leases,  written  agreement  between the Payor and the
         Lessee,  or  payment  of all  commitments  amounts  by the Payor to the
         Lessee.  As of March 31, 2000, no  contributions  have been made by the
         Payor to the Lessee.

(4)      SUBSEQUENT EVENTS

         Effective  May 8,  2000,  the  Company  acquired  a hotel  property  in
         Malvern,  Pennsylvania.  This  hotel  will be leased by the  Lessee and
         managed  by Promus  in  substantially  the same  manner as the other 11
         Homewood Suites(R) hotels.

                                       17

<PAGE>


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

    This  report  contains  forward-looking  statements  within  the  meaning of
    Section 27A of the  Securities  Act of 1993, as amended,  and Section 21E of
    the Securities  Exchange Act of 1934, as amended.  Such  statements  involve
    known and unknown  risks,  uncertainties,  and other factors which may cause
    the  actual  results,  performance,  or  achievements  of the  Company to be
    materially  different  from any future  results,  performance or achievement
    expressed  or  implied  by such  forward-looking  statements.  Such  factors
    include the ability of the Company to implement its acquisition strategy and
    operating strategy;  the Company's ability to manage planned growth; changes
    in economic cycles;  competitors within the extended-stay  industry; and the
    liquidity of the Lessee.  Although the Company believes that the assumptions
    underlying the forward-looking  statements  contained herein are reasonable,
    any of the  assumptions  could be inaccurate,  and therefore there can be no
    assurance that such statements  included in this quarterly report will prove
    to be accurate.  In light of the significant  uncertainties  inherent in the
    forward-looking   statements   included   herein,   the  inclusion  of  such
    information should not be regarded as a representation by the Company or any
    other person that the results or conditions  described in such statements or
    the objectives and plans of the Company will be achieved.

    General

    During 1999,  Apple  Suites,  Inc. (the  "Company")  acquired 11 hotels with
    1,218  suites  from  Promus  Hotels,  Inc.  (or its  affiliates),  which was
    subsequently  acquired by Hilton Hotels Corporation  ("Hilton") and is now a
    wholly-owned subsidiary of Hilton. All of the Company's hotels are leased to
    Apple Suites Management,  Inc., or its subsidiary (the "Lessee") pursuant to
    the master hotel lease  agreements  ("Percentage  Leases").  Each Percentage
    Lease obligates the lessee to pay rent equal to the sum of a base rent and a
    percentage  rent based on suite  revenues and sundry other  revenues of each
    hotel.  The Lessee's ability to make payments to the Company pursuant to the
    Percentage Leases is dependent  primarily upon the operations of the hotels.
    See Note 5 to the  consolidated  financial  statements  of the  Company  for
    further lease information.

    The Lessee holds the franchise and market reservation  agreement for each of
    the hotels,  which are operated as Homewood  Suites(R) by Hilton. The Lessee
    engages a third-party manager,  Promus Hotels, Inc., ("Promus"),  to operate
    the hotels.  The Company is externally advised and has contracted with Apple
    Suites  Advisors,  Inc. (the "Advisor") to manage its day-to-day  operations
    and make investment decisions.  The Company has contracted with Apple Suites
    Realty Group, Inc. ("ASRG") to provide brokerage and acquisition services in
    connection with its hotel  acquisitions.  The Lessee, the Advisor,  and ASRG
    are all owned by Mr. Glade Knight, the Company's Chairman. See Note 5 to the
    consolidated  financial statements of the Company for further information on
    related-party transactions.

                                       18

<PAGE>

    RESULTS OF OPERATIONS

    APPLE SUITES, INC. - THE COMPANY

    Revenues

    As  operations  of the Company  commenced  effective  September  1, 1999,  a
    comparison to 1999 is not possible.  During the three months ended March 31,
    2000,  the Company had revenues of  $3,454,685.  All of the Company's  lease
    revenue  is  derived  from the  Percentage  Leases  covering  the  hotels in
    operations with the Lessee.

    The  Company's  other income  consists of $32,732 of interest  income earned
    from the  investments  of its cash and cash  reserves and 15,275 of interest
    earned from the  promissory  notes with the Lessee for  franchise  and hotel
    supplies.

    Expenses

    The expenses of the Company  consist of property taxes,  insurance,  general
    and administrative  expenses,  interest on notes payable and depreciation on
    the hotels. Total expenses, exclusive of interest and depreciation,  for the
    three months ended March 31, 2000 were $946,311 or 27% of total revenue.

    Interest  expense was  $1,453,110  for the three months ended March 31, 2000
    and  represented  interest  on  short-term  notes  payable  to  Hilton at an
    interest rate of 8.5%.

    Depreciation expense was $549,201 for the three months ended March 31, 2000.

    Taxes,  insurance,  and other was  $691,575 for the three months ended March
    31, 2000 or 20% of total revenue.

    General  and  administrative  expense  totaled 7% of total  revenues.  These
    expenses  represent  the  administrative   expenses  of  the  Company.  This
    percentage is expected to decrease as the Company's asset base grows.

    APPLE SUITES MANAGEMENT, INC. - (THE LESSEE)

    Revenues

    As operations commenced effective September 1, 1999, a comparison to 1999 is
    not  possible.  Total  revenues  were  $8,103,171.  Total  revenues  consist
    primarily of suite revenue,  which was $7,682,355 for the three months ended
    March 31, 2000

    For the three  months  ended March 31, 2000 the average  occupancy  rate was
    78%,  average  daily rate  ("ADR") was $89, and revenue per  available  room
    ("REVPAR") was $69.

                                       19

<PAGE>

    Expenses

    Total  expenses for the three  months ended March 31, 2000 were  $8,060,470.
    Rent expense represents $3,406,678 or 42% of total revenue.

    The Lessee contracts with Promus to manage the day-to-day  operations of the
    hotels.  The  Lessee  pays  Promus  fees of 4% of suite  revenue  for  these
    functions.  The Lessee  also pays  Promus a fee of 4% of suite  revenue  for
    franchise  licenses  to  operate as a  Homewood  Suites(R)  by Hilton and to
    participate  in its  reservation  system.  Total expensee for these services
    were $937,354 during the period.

    LIQUIDITY AND CAPITAL RESOURCES

    During the first quarter of 2000,  the Company sold 493,509 at $10 per share
    of its common  stock to its  investors.  The total gross  proceeds  from the
    shares sold were  $4,935,083,  which netted  $4,393,756 to the Company after
    the payment of selling commissions and other offering costs.

    The Lessee's  obligations  under the Percentage  Leases are  unsecured.  The
    Lessee has limited capital resources,  and,  accordingly its ability to make
    lease payments under the Percentage Leases is substantially dependent on the
    ability of the Lessee to generate  sufficient  cash flow from  operations of
    the hotels.  The company has certain  abilities to cancel the lease with the
    Lessee if the Lessee does not perform under the terms of the lease.

    To support the Lessee's obligations,  the Lessee has two funding commitments
    of $1  million  each  from  Mr.  Knight  and  ASRG,  respectively  (together
    "Payor").  The funding commitments are contractual  obligations of the Payor
    to pay funds to the Lessee.  Funds paid to the Lessee under the  commitments
    are to be used to  satisfy  any  capitalization  or net  worth  requirements
    applicable to the Lessee or the Lessee's payment obligations under the lease
    agreements, do not represent indebtedness,  and are not subject to interest.
    The funding  commitments  terminate  upon the  expiration of the  Percentage
    Leases  agreements,  written  agreement between the Payor and the Lessee, or
    payment of all  commitment  amounts by the Payor to the Lessee.  As of March
    31, 2000, no  contributions  have been made by the Payor to the lessee under
    the funding commitments.

    Notes payable

    In  conjunction  with purchase of the 11 hotels,  notes were executed by the
    Company  made payable to the order of Hilton  Hotels,  Inc. in the amount of
    $68,569,500.  The notes bear an effective  interest  rate of 8.5% per annum.
    Interest  payments are due monthly.  Principal  payments are to be made from
    net proceeds  from the  offering of common  shares.  Hilton  agreed to defer
    principal  payments  until the  earlier of June 30, 2000 or such time as two
    additional hotels have been purchased by the Company. At March 31, 2000, the
    Company borrowings were $68,569,500.

                                       20

<PAGE>


    The Company has $68.6 million in notes payable with Hilton Hotels, Inc. with
    principal  payments of $34 million due on October 1, 2000, $30.2 million due
    on November 1, 2000,  and $4.4  million due on January 1, 2001.  The Company
    plans to pay  these  notes  with the  proceeds  form  its  continuous  "best
    efforts"  offering of common shares.  However,  based on the current rate at
    which equity is being raised by the  offering,  the Company may have to seek
    other  measures  to repay these  loans.  The  Company is  currently  holding
    discussions  with several lenders to obtain  financing for its hotels and is
    exploring both  unsecured and secured  financing  arrangements.  Although no
    firm financing  commitments  have been received,  the Company  believes that
    based on discussions with lenders and other market  indicators it can obtain
    sufficient financing prior to maturity of the notes.  Obtaining  refinancing
    is dependent upon a number of factors, including: (1) continued operation of
    the  hotels  at or near  current  occupancy  and  room  rate  levels  as the
    Company's  leases  are based on a  percentage  of hotel  suite  income,  (2)
    general  level of interest  rates  including  credit  spreads of real estate
    based on lending, and (3) general economic conditions. For each of the notes
    payable, all of the Company's 11 hotels serve as collateral.

    Cash and cash equivalents
    Cash and cash equivalents totaled $3,781,922 at March 31, 2000.

    Capital requirements
    The  Company  has  an  ongoing  capital   commitment  to  fund  its  capital
    improvements.  The Company is required under the  Percentage  Leases to make
    available  to the Lessee for the repair,  replacement,  or  refurbishing  of
    furniture,  fixtures,  and  equipment an amount equal to 5% of suite revenue
    monthly on a  cumulative  basis,  provided  that such amount may be used for
    capital  expenditures  made by the Company with  respect to the hotels.  The
    Company  expects  that this amount  will be  adequate  to fund the  required
    repair,  replacement,  and  refurbishments  and to maintain  its hotels in a
    competitive condition.  The Company capitalized  improvements of $280,532 in
    2000. At March 31, 2000 $696,869 was held by Hilton,  restricted for funding
    of these improvements.

    The Company  expects to acquire  additional  hotels during 2000. The Company
    plans to have monthly equity  closings in 2000,  until the offering is fully
    funded,  or  until  such  time as the  Company  may opt to  discontinue  the
    offering.  It is  anticipated  that the  equity  funds will be  invested  in
    additional hotels and used to make principal  payments on the notes incurred
    in conjunction with the existing acquisitions.

    Capital  resources  are expected to grow with the future sale of its shares.
    Approximately  46%  of the  2000  common  stock  dividend  distribution,  or
    $329,215  was  reinvested  in  additional  common  shares.  In general,  the
    Company's  liquidity  and  capital  resources  are  believed to be more than
    adequate  to meet its cash  requirements  during  2000,  given  current  and
    anticipated financing arrangements.

    Seasonality
    The hotel  industry  historically  has been  seasonal in nature,  reflecting
    higher  occupancy  rates  primarily  during the first three  quarters of the
    year.  Seasonal  variations in occupancy at the  Company's  hotels may cause
    quarterly fluctuations in the Company's lease revenues,  particularly during
    the fourth quarter,  to the extent that it receives  percentage rent. To the

                                       21

<PAGE>

    extent that cash flow from  operations is  insufficient  during any quarter,
    due to  temporary or seasonal  fluctuations  in lease  revenue,  the Company
    expects to utilize  cash on hand or funds from  equity  raised  through  its
    "best efforts" offering to make distributions.

                                       22

<PAGE>


    ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    There  have been no  material  changes  since  December  31,  1999.  See the
    information  provided in the Company's Annual Report on Form 10-K under Item
    7-Management's Discussion and Analysis of Financial Condition and Results of
    Operations.


                                       23

<PAGE>

Part II, Item 2.  Changes in Securities and Use of Proceeds

The following table set forth information concerning the Offering and the use of
proceeds from the Offering as of March 31, 2000:

<TABLE>
<CAPTION>

<S>                                <C>                                                        <C>
Common Shares Registered:
              1,666,666.67         Common Shares $  9 per Common Share                        $ 15,000,000

             28,500,000.00         Common Shares $10 per Common Share                         $285,000,000
             -------------

Totals:      30,166,666.67         Common Shares
             -------------


Common Shares Sold:
              1,666,666.67         Common Shares      $ 9 per Common Share                   $  15,000,000

              2,256,256.00         Common Shares     $10 per Common Share                    $  22,562,559
              ------------                                                                   -------------

Totals:       3,922,922.67         Common Shares                                             $  37,562,559
              ------------

Expenses of Issuance and Distribution of Common Shares

        1.   Underwriting discounts and commissions                                          $   3,756,246
        2.   Expenses of underwriter                                                         $          --
        3.   Direct or indirect payments to directors or officers
             of the Company or their associates, to ten percent
             shareholders, or to affiliates of the Company                                   $          --
        4.   Fees and expenses of third parties                                              $     821,297
                                                                                             -------------
        Total Expenses of Issuance and Distribution of
             Common Shares                                                                   $   4,577,543

        Net Proceeds to the Company                                                          $  32,985,016

        1.   Purchase of real estate (including repayment of
             Indebtedness incurred to purchase real estate)                                  $  22,856,500
        2.   Interest on indebtedness                                                        $   2,698,154
        3.   Working capital                                                                 $   5,555,735
        4.   Fees to the following (all affiliates of officers of the Company):
             a.  Apple Suites Advisors, Inc.                                                 $      46,107
             b. Apple Suites Realty Group, Inc.                                              $   1,828,520

        5.   Fees and expenses of third parties:                                             $          --
             a.  Legal                                                                       $          --
             b.  Accounting                                                                  $          --

        6.   Other (specify                 )                                                $          --
                            ----------------                                                 -------------
        Total of Application of Net Proceeds to the Company                                  $  32,985,016


</TABLE>


                                       24

<PAGE>


                Part II, Item 6. Exhibits and Reports on Form 8-K

   (a)   Exhibits - Exhibit 27- Financial Data Schedule

   (b)   Reports on Form 8-K

         The following  table lists the reports on Form 8-K filed by the Company
         during the quarter  ended March 31,  2000,  the items  reported and the
         financial statements included in such filings.

<TABLE>
<CAPTION>

         Type and Date                          Items
         of Reports                            Reported            Financials Statements Filed

         <S>                                   <C>                 <C>
         Form 8-K dated                        2 and 7             Historical  Balance  Sheets  as of
         December 22, 1999 and                                     December   31,   1998  and   1997;
         filed January 6, 2000                                     Historical  Income  Statements for
                                                                   the year ended  December  31, 1998
                                                                   and 1997; Historical Statements of
                                                                   Cash  Flows  for  the  year  ended
                                                                   December  31,  1998 and 1997;  and
                                                                   Historical      Statements      of
                                                                   Shareholders'  Equity for the year
                                                                   ended  December  31, 1998 and 1997
                                                                   (pertaining to  Jackson-Ridgeland,
                                                                   Mississippi hotel).

</TABLE>







                                       25


<PAGE>

                                              SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                               Apple Suites, Inc.
                               ------------------
                                  (Registrant)

DATE:   5-15-00                         BY:   /s/ Glade M. Knight
     ----------------------------             ----------------------------------
                                              Glade M. Knight
                                              President

                                        BY:   /s/ Stanley J. Olander
                                              ----------------------------------
                                              Stanley J. Olander
                                              Secretary and Treasurer

                                       26