<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                -----------------

                                 AMENDMENT NO. 1
                                       TO
                                    FORM 10-K

                       AMENDMENT TO APPLICATION OR REPORT
                 FILED PURSUANT TO SECTION 12, 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934


                            HUDSON HOTELS CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                              AMENDMENT NO. 1

              The undersigned registrant hereby amends its Annual Report for
the fiscal year ended December 31, 1999 on Form 10-K in its entirety as set
forth in the pages attached hereto.

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                -----------------

                                    FORM 10-K/A

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                        For the Year Ended Commission File
                         December 31, 1999 Number 0-17838

                            HUDSON HOTELS CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

               A New York Corporation IRS Employer Identification
                                 No. 16-1312167

                      Address                        Telephone Number
                      -------                        ----------------

             300 Bausch & Lomb Place                  (716) 454-3400
             Rochester, New York 14604

           Securities registered pursuant to Section 12(b) of the Act:

                                                     Name of Exchange on
                 Title of Each Class                   Which Registered
                 -------------------                   ----------------

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

                          Common Stock $.001 Par Value
                          ----------------------------
                              (Title of the Class)

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The Registrant's revenues for the year ended December 31, 1999: $51,271,369.

The aggregate market value of the Common Stock held by non-affiliates of the
Registrant (computed by reference to the closing price as reported by the
National Quotation Bureau, Inc. as of March 28, 2000) was $3,745,796 (3,866,628
shares at $31/32 per share).

The number of shares outstanding of each of the Registrant's classes of common
stock as of March 28, 2000, is as follows:

                        6,496,902 Shares of Common Stock
                            Par Value $.001 per share

Parts of the Proxy Statement for the Registrant's Annual Meeting of Stockholders
to be held June 15, 2000, are incorporated by reference to Part III of the Form
10-K Report.

Index to Exhibits is located on pages _____ through _____.
<PAGE>

                                     PART 1

              ITEMS 1 AND 2. DESCRIPTION OF BUSINESS AND PROPERTIES

Throughout this report, Hudson Hotels Corporation, together with its
consolidated subsidiaries, is referred to as "Hudson" or the "Company".

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this Annual Report on Form 10-K are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes",
"anticipates", "expects" or words of similar import. Similarly, statements that
describe the Company's future plans, objectives or goals are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which are described in close proximity to such
statements and which could cause actual results to differ materially from those
currently anticipated. Shareholders, potential investors and other readers are
urged to consider these factors in evaluating the forward-looking statements and
are cautioned not to place undue reliance on such forward-looking statements.
The forward-looking statements included herein are made as of the date of this
report, and the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.

NARRATIVE DESCRIPTION OF BUSINESS

Hudson Hotels Corporation (the "Company") was organized as Microtel Franchise
and Development Corporation to develop and franchise a national chain of economy
limited service lodging facilities ("Microtels"), using the service mark
"MICROTEL". The Company was incorporated in New York State on June 5, 1987. For
a number of years, the Company has provided development, construction,
operations, marketing, accounting and professional development services for its
own operations and for third party hotel/motel investors.

In 1995, the Company entered into an agreement with US Franchise Systems, Inc.
("USFS") pursuant to which USFS purchased worldwide franchising and
administration for the Microtel hotel chain (the "USFS Agreement"). Following
this transaction, the Company ceased its franchising activities. Although the
agreement was entitled Joint Venture Agreement, the transaction was structured
as an outright sale of the Company's franchising rights. Pursuant to the
Agreement, the Company is entitled to receive royalty payments from properties
franchised by USFS at the rate of 1% of gross room revenues from hotels 1-100;
 .75% of gross room revenues from hotels 101-250 and .5% of gross room revenues
for all hotels in excess of 250.

Following the sale of its franchising system, the Company has focused its
efforts on acquisition, development, and management of various hotel products,
including Microtel Inns, which had been the Company's strength. During 1996,
1997, and 1998, the Company's acquisition and development program included
several acquisitions and development of five (5) Microtel Inns through a joint
venture partnership.

As of December 31, 1999, the Company managed forty-seven (47) hotel properties
located primarily in the Northeast and Southeast United States. Of the
forty-seven (47) hotel properties under management, twenty-five (25) are owned
by the Company. These properties range from super budget "Microtel Inns" to
full-service hotels. The Company competes for management contracts with other
hotel management companies, many of which have significantly larger
organizations and greater financial resources. In some cases, hotel owners may
require the hotel management company to invest in or advance funds to the hotel
in order to obtain the management contract. In these cases, the Company may be
at a competitive disadvantage.

The management contracts are entered into on variations of the Company's
standard form management contract, for terms which vary from month to month
to ten years, some of which may be cancelled with penalty upon sale of the
property. They provide for a full range of hotel management services,
including operations management, personnel and staffing, sales and marketing,
business systems, financial management, and food and beverage management, for
a fee, typically a percentage of gross revenues.

<PAGE>

The Company's portfolio of managed properties, owned, partially owned through
partnerships in which the Company has a minority equity position, and those
owned by unrelated parties, is made up of the following franchise
affiliations:

<TABLE>
<CAPTION>
                                                                        PERCENT OF
                                                          NUMBER OF   COMPANY'S TOTAL
FRANCHISE                              NUMBER OF HOTELS  GUEST ROOMS    GUEST ROOMS
---------                              ----------------  -----------    -----------
<S>                                            <C>          <C>             <C>
OWNED

Fairfield Inn                                   8             949           18.2%
                                                                            20.8%
Hampton Inn                                     9           1,085

Comfort Inn                                     2             184            3.5%

Econo Lodge                                     1              65            1.2%
                                                                             2.8%
Red Roof Inn                                    1             147

Independent                                     4             458            8.9%
                                            -----           -----        -------

                                               25           2,888           55.4%
                                            -----           -----        -------


MANAGED WITH A FINANCIAL INTEREST

Microtel Inn                                    8             842           16.1%

Econo Lodge                                     1             102            2.0%

Holiday Inn                                     1             146            2.8%


Hampton Inn                                     1             133            2.6%


Comfort Suites                                  1             100            1.9%
                                            -----           -----        -------


                                               12           1,323           25.4%
                                            -----           -----        -------


OTHER MANAGED
Holiday Inn Express                             1              80            1.5%
Microtel Inn                                    3             304            5.8%
Best Western                                    1              70            1.3%
                                                                             3.7%
Comfort Inn                                     2             193

Clarion Inn & Suites                            1             101            1.9%
Independent                                     2             258            5.0%
                                            -----           -----        -------

                                                                            19.2%
                                                               10          1,006
                                                            -----        -------

                 TOTAL                         47           5,217            100%
                                            =====           =====        =======
</TABLE>

The Company has a minority equity position, either as a general or a limited
partner, in nine (9) entities that own hotel properties. In addition, it is a
general partner in Watertown Hotel Properties II, L.P., an entity which
previously owned a hotel property and holds a mortgage upon the property,
representing a portion of the sale price of this property, and in Hudson
Tonawanda Partners, L.P., which owns a parcel of land in Tonawanda, New York.

The Company's owned and managed properties are located in the following areas of
the United States and had the indicated capital renovation, average occupancy,
and average daily rate during the fiscal year ended December 31, 1999.
<PAGE>

<TABLE>
<CAPTION>
                                                      1999               1999       1999
                                 Number of     Planned & Completed     Average     Average
     Hotel Type and Region      Guest Rooms  Renovation Expenditures  Occupancy   Daily Rate
     ---------------------      -----------  -----------------------  ---------   ----------
<S>                                  <C>           <C>                   <C>       <C>
Northeastern Region
    Luxury                           134           $  263,500            59.6%     $ 97.74
    Midrange                         914              915,700            75.4%     $ 67.05
    Budget                           586              280,600            71.7%     $ 46.53
                                   -----           ----------         -------      -------
    Sub-Total                      1,634            1,459,800            72.8%     $ 62.50

Southeastern Region
    Luxury                            70              337,700            82.1%     $132.89
    Midrange                        1713            1,565,500            64.6%     $ 55.39
    Budget                           890              365,500            65.8%     $ 45.37
                                   -----           ----------         -------      -------
    Sub-Total                      2,673            2,268,700            65.4%     $ 54.57

Midwest
    Luxury                          --                   --              --           --
    Midrange                         269              250,900            69.0%     $ 73.01
    Budget                           107                 --              60.5%       54.00
                                   -----           ----------         -------      -------
    Sub-Total                        376              250,900            67.3%     $ 69.77

Southwest
    Luxury                          --                   --              --           --
    Midrange                         534              284,800            58.6%     $ 61.58
    Budget                          --                   --              --           --
                                   -----           ----------         -------      -------
    Sub-Total                        534              284,800            58.6%     $ 61.58
                                   -----           ----------         -------      -------
    TOTAL                          5,217           $4,264,200            67.3%     $ 58.76
                                   =====           ==========         =======      =======
</TABLE>

----------

5% of room revenue for the owned hotels is projected to be used for the
collective renovations of the owned hotels annually.

RECENT DEVELOPMENTS

In December 1998 and the first quarter of 1999, the Company sold certain assets
and used the proceeds thereof for working capital purposes. Those actions
constituted a default under its $35mm Mezzanine Loan. In April, 1999, the
Company entered into an Agreement with the holder of its Mezzanine Loan pursuant
to which the holder agreed to forbear from exercising its rights and remedies as
a result of those defaults until April 11, 2000. A condition of the forbearance
is that the Company repay a total of $5,508,567 on April 11, 2000. The Company
did not have the capital reserves to make this payment.

When the forbearance period ended on April 11, 2000, the lender, Nomura Asset
Capital Corporation, seized the cash in the cash collateral accounts
amounting to $1,504,120. Although not required under the mezzanine loan
agreement to do so, Nomura released $1,504,120 to the Company for its
immediate operating needs.

As a further condition to the forbearance, the Company in April 1999 engaged
Chase Securities as its investment banker to pursue all strategic alternatives
on behalf of the Company. Chase Securities throughout 1999 solicited proposals
for equity contributions to the Company, refinance of the Company's debt, or
sale of Company assets. Ultimately, RHD Capital Ventures, LLC, an affiliate of a
large shareholder of the Company, proposed to purchase the Mezzanine Loan from
Nomura Asset Capital Corporation. On April 14, 2000, RHD closed on the purchase
of the Mezzanine Loan. The Company and RHD have extended the forbearance
agreement through April 11, 2001.

Equity Inns, LP is the holder of a Promissory Note from Hudson Hotels Properties
Corp., guaranteed by the Company, with a current principal balance of
$2,634,052.23. During 1999, the Company defaulted in payments of principal under
that Note. Equity Inns served notice of default upon the Company, but declined
to take any other actions to collect upon the Note. Equity Inns is entitled to
take 2,000,000 shares of common stock of Hudson Hotels Corporation which were
pledged as security for the Note. On April 12, 2000, Equity Inns and the
Company executed a Note Modification Agreement which modified the terms of
repayment and reinstated the Note in good standing. The Note Modification
Agreement became effective upon the Purchase of the Mezzanine Loan by RHD
Capital Ventures.

<PAGE>

Oppenheimer Convertible Securities Fund was the holder of the Company's
$3,000,000 Convertible Debenture, due April 15, 2000. This Note resulted from
the recasting in July 1999 of the Company's prior Debenture to Oppenheimer in
the amount of $7,500,000. The Company did not have the capital resources to
pay the current Debenture at maturity. On April 13, 2000, Oppenheimer and the
Company executed an agreement pursuant to which it agreed to convert the
principal of the Debenture into 1,666,667 shares of common stock of the
Company, in accordance with the terms of the Debenture, in partial
consideration of the Company's agreement to register with the SEC all of the
shares issued upon conversion. The Agreement was contingent upon the Company
paying outstanding interest upon the Debenture through April 15, 2000. On
April 14, 2000 the Company paid the interest. Oppenheimer delivered notice
of conversion to the Company on April 20, 2000.

During 1999 and the first quarter of 2000, the Company has taken a number of
steps to reduce its corporate overhead and return the Company to profitability.
The Chief Financial Officer of the Company resigned as of September 1, 1999, and
the Company's President resigned as of March 1, 2000. In addition, the Chief
Accounting Officer left the Company in February 2000 to pursue other
opportunities. The company currently plans to use existing personnel to fulfill
the duties of these departed officers. Finally, in March 2000 the Company
reduced its office space and the rental therefor. As a result of these changes,
the Company anticipates that its corporate overhead will be reduced by
approximately $1,000,000 annually.

During 1999, the Company's stock was removed from The Nasdaq National Market and
listed on The Nasdaq SmallCap Market because of the reduction of its
shareholders' equity, resulting from losses recognized in 1998. The Company was
notified by Nasdaq-Amex Market Group on February 11, 2000 that unless the bid
price of its stock was greater than or equal to $1.00 for ten consecutive
trading days before May 11, 2000, then its stock will be delisted from the
Nasdaq SmallCap Market on May 15, 2000. There can be no assurance that the
Company's stock will trade at or above $1.00 for the requisite period for the
Company to avoid delisting.

Not withstanding the foregoing, the Company's long-term success will be
dependent in part upon its ability to restructure its mezzanine debt before
the forbearance expires. There can be no assurances that in 2001 the
Company's restructuring efforts will be successful, or that its lenders will
agree to a course of action consistent with the Company's requirements in
restructuring the obligations. Even if such agreement is reached it may
require agreements of other creditors and shareholders of the Company, none
of which is assured. Furthermore, there can be no assurance that
restructuring of the Company's debt can be successfully accomplished on terms
acceptable to the Company. Under current circumstances,the Company's ultimate
ability to remain viable depends upon the successful restructuring of its
debt obligations. If the Company is unsuccessful in these efforts, it may be
unable to make its future obligations associated with its principal payments,
as well as other obligations, making it necessary to undertake such other
actions including seeking court protection as may be appropriate to preserve
asset value.

EMPLOYEE RELATIONS

At December 31, 1999, the Company had approximately 1,600 employees working at
the hotels it owns or manages or in its corporate office. None of these
employees are subject to collective bargaining agreements. The Company believes
that all of its relations with these employees are good.

COMPANY PROPERTIES

The Company currently owns twenty-five (25) hotel properties in addition to
having a minority equity interest in entities that own hotel properties. There
are 2,888 questrooms in these twenty-five (25) properties.

                            DESCRIPTION OF PROPERTIES

At fiscal year end, the Company owned one (1) parcel of land, which was being
held for sale.

Investment in land/real estate under development or held for sale is summarized
as follows:

TONAWANDA, NEW YORK: This land is north of Buffalo, New York, off Interstate 290
in proximity to major businesses, universities and shopping centers. The Company
owns about 7 acres at a cost of $780,822 or $113,657 an acre. The parcel is
zoned for hotel and restaurant development. This parcel of land is adjacent to a
parcel owned by Hudson Tonawanda Partners, L.P. (see below). These properties
are being marketed for sale.

<PAGE>

The Company, through its equity investments, owns minority interests in the
following:

THE MONTGOMERY GROUP: This limited partnership owns an 84 room Comfort Inn
located in Montgomeryville, Pennsylvania. The Company's ownership percentage
is 2.083%. The hotel was opened in 1991, and is in very good condition. The
total outstanding mortgage balance at December 31, 1999, was approximately
$3.0 million. The Company does not manage this hotel.

950 JEFFERSON ROAD ASSOCIATES, L.P.: This limited partnership owns a 102 room
Econo Lodge located in Henrietta, New York. The Company's ownership percentage
is 2%. The hotel was built in 1984 and is in fair condition. The partnership has
a first mortgage with a balance of approximately $2.5 million at December 31,
1999.

MICROTEL GATLINBURG L.P.: This limited partnership owns a 102 room Microtel Inn
located in Gatlinburg, Tennessee. The hotel is located adjacent to the Great
Smoky Mountain National Park and a short distance from Dollywood in Pigeon
Forge, Tennessee. The Company's ownership percentage is 10%. The hotel was built
in 1994 and is in excellent condition. The partnership has a first mortgage with
a balance of approximately $2.1 million at December 31, 1999.

FISHERS ROAD HOTEL PROPERTIES, L.P.: This limited partnership owns a 99 room
Microtel Inn located in Victor, New York, adjacent to Interstate 90. The
Company's ownership percentage is 22.5%. The hotel was built in 1994 and is in
excellent condition. The partnership has a first mortgage with a balance of
approximately $2.1 million at December 31, 1999.

ESSEX MICROTEL LERAY, L.P.: This limited partnership owns a 100 room Microtel
Inn located in Watertown, New York, which opened in 1990. The Company's
ownership interest as a special limited partner is 5.3532%. The first mortgage
on the property totals approximately $1.1 million and is held by Watertown Hotel
Properties II, L.P., a partnership in which the Company has the general
partnership interest. The Company does not manage this hotel.

ROCHESTER HOSPITALITY PARTNERS, L.P.: This limited partnership owns six Microtel
Inns. The Company's ownership percentage is 20%. The hotels opened between 1995
and 1997, varying from 99 to 122 rooms. All of these properties are in excellent
condition. The partnership has an aggregate first mortgage on the six (6)
properties, with a balance of approximately $15.2 million at December 31, 1999.
The Company currently manages four (4) of these properties.

HH BRIDGE, L.P.: This limited partnership owns a 146-room Holiday Inn in
Cleveland, Ohio; a 133-room Hampton Inn in Cheektowaga, New York; and a 100-room
Comfort Suites in Cheektowaga, New York. These properties are in good to
excellent condition. The partnership has a first mortgage with a balance of
$18.3 million at December 31, 1999. The Company owns a non-controlling 1%
general partnership interest in the limited partnership.

HUDSON TONAWANDA PARTNERS, L.P.: This limited partnership owns 2.87 acres of
land in Tonawanda, New York. The Company's ownership percentage is 50%.

WATERTOWN HOTEL PROPERTIES II, L.P.: This limited partnership holds a $1.1
million mortgage receivable from Essex Microtel Leray L.P. which is
collateralized by a 100 room Microtel Inn located in Watertown, New York.
Monthly payments consist of interest only at 9% per annum. The entire principal
amount is due April 30, 2000. The borrower has the option to extend this
mortgage for another year upon written notice received by April 20, 2000.
The Company's general partnership interest totals 2.08%.
<PAGE>

COMPANY OWNED HOTELS

The Company, through its indirect wholly owned subsidiary HH Properties-I, Inc.,
owns the following properties. The properties are secured by a first mortgage
from Nomura Asset Capital Corporation, with an aggregate balance of $54.2
million at December 31, 1999. As part of the first mortgage agreement, the
Company is required to reserve 5% of operating revenues, which is used for
capital improvements to the properties. All properties are in fair to very good
condition.

<TABLE>
<CAPTION>
      PROPERTY NAME                            LOCATION                         NUMBER OF ROOMS
      -------------                            --------                         ---------------
<S>                             <C>                                                 <C>
Seagate Hotel and Beach Club    Delray Beach, Florida                                   70
Brookwood Inn                   Pittsford, New York                                    107
Comfort Inn West                Greece, New York                                        83
Comfort Inn                     Jamestown, New York                                    101
Econo Lodge                     Canandaigua, New York                                   65
Fairfield Inn                   Albany, Georgia                                        120
Fairfield Inn                   Cary, North Carolina                                   125
Fairfield Inn                   North Charleston, South Carolina                       120
Fairfield Inn                   Columbia, South Carolina                               128
Fairfield Inn                   Durham-Research Triangle Park, North Carolina           96
Fairfield Inn                   Richmond, Virginia                                     124
Fairfield Inn                   Statesville, North Carolina                            116
Fairfield Inn                   Wilmington, North Carolina                             120
Brookwood Inn                   Durham, North Carolina                                 149
Red Roof Inn                    Raleigh, North Carolina                                147
Brookwood Inn                   Charlotte, North Carolina                              132
                                                                                     -----
                                                                                     1,803
</TABLE>

The Company, through its indirect wholly owned subsidiary HH Properties-II,
Inc., owns the following properties. The properties are secured by a first
mortgage from Nomura Asset Capital Corporation, with an aggregate balance of
$29.3 million at December 31, 1999. As part of the first mortgage agreement, the
Company is required to reserve 5% of operating revenues, which is used for
capital improvements to the properties. All properties are in good to very good
condition.

<TABLE>
<CAPTION>
      PROPERTY NAME                LOCATION                   NUMBER OF ROOMS
      -------------                --------                   ---------------
<S>                       <C>                                        <C>
Hampton Inn               Greenville, South Carolina                 123
Hampton Inn               Spartanburg, South Carolina                110
Hampton Inn               Albuquerque, New Mexico                    124
Hampton Inn               Greensboro, North Carolina                 121
Hampton Inn               Eden Prairie, Minnesota                    123
Hampton Inn               San Antonio, Texas                         123
Hampton Inn               Amarillo, Texas                            116
Hampton Inn               Roswell, Georgia                           129
Hampton Inn               Syracuse, New York                         116
                                                                   -----
                                                                   1,085
</TABLE>
<PAGE>

LEASED PROPERTY

The Company leases about 19,000 square feet of office space in Rochester, New
York, which serves as the Company's headquarters. The lease has an initial term
of five years, expiring July 2003. The Company has an option to extend this
lease to July 2008.

HOTEL LODGING INDUSTRY

Although the hospitality lodging industry experienced strong profits in 1998,
the increases in occupancy, ADR (average daily rate) and RevPAR (revenue per
available room), which the industry had often experienced since 1992 were
moderated with declining occupancy in 1998 and 1999. According to Smith Travel
Research, hotel room demand had outpaced supply from 1992 through 1996.
Beginning in 1997, room supply increases exceeded demand increases. Room supply
has increased as a result of favorable financing until the summer of 1998, when
financing hotel properties became more difficult.

Currently, the majority of properties owned or managed by the Company fall under
the limited service economy/mid-price category. This category is defined as a
hotel which provides some, but not all of the amenities of a full-service hotel.
It is appropriate to compare the Company's portfolio to this industry segment
since the majority of the Company's properties fall within this segment (Hampton
Inn, Comfort Inn, Econo Lodge, Fairfield Inn and Red Roof Inn.) The
limited-service economy/mid-priced segment had seen increases in occupancy, room
revenue and RevPAR from 1992 to 1995. In 1996 through 1999, the segment of the
hotel industry that the Company primarily competes in experienced a decline in
occupancy, but room rate and RevPAR continued to increase. ADR percentage growth
has decreased compared to prior years. These results are due to added supply
exceeding added demand, moderated by guests willing to pay a premium for
clean/fresh hotel rooms with certain amenities offered by nationally branded
limited-service hotels.

The tables below compare the Company's performance to the limited service
economy/midscale segment as a whole (in the United States) in the categories of
occupancy, ADR (average daily rate) and RevPAR (revenue per available room). The
industry statistics represent results obtained from Smith Travel Research
("STR") and are based on the data STR has compiled for hotels STR classifies as
limited service mid-price and economy hotels with 75-125 rooms.

<TABLE>
<CAPTION>
                                    OCCUPANCY
                                    ---------
                                                         U.S. LIMITED SERVICE
     YEAR               COMPANY OWNED HOTELS               ECONOMY/MIDPRICED
     ----               --------------------               -----------------
<S>                            <C>                                <C>
     1995                       N/A                               64.3%
     1996                      62.6%                              63.0%
     1997                      65.2%                              62.0%
     1998                      68.7%                              61.6%
     1999                      65.6%                              61.4%

================================================================================

<CAPTION>
                                       ADR
                                       ---

                                                         U.S. LIMITED SERVICE
     YEAR               COMPANY OWNED HOTELS               ECONOMY/MIDPRICED
     ----               --------------------               -----------------
<S>                            <C>                                <C>
     1995                        N/A                              $46.75
     1996                      $62.96                             $49.18
     1997                      $56.51                             $51.48
     1998                      $58.74                             $53.63
     1999                      $60.35                             $55.31

================================================================================
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                     REVPAR
                                     ------
                                                         U.S. LIMITED SERVICE
     YEAR               COMPANY OWNED HOTELS               ECONOMY/MIDPRICED
     ----               --------------------               -----------------
<S>                            <C>                                <C>
1995                             N/A                              $30.04
1996                           $39.39                             $31.00
1997                           $36.82                             $31.91
1998                           $40.35                             $33.05
1999                           $39.61                             $34.30

================================================================================
</TABLE>

BUSINESS STRATEGY

The Company plans to continue to improve its position in the lodging industry by
implementing the following strategies:

ENHANCE OPERATING PERFORMANCE OF ITS EXISTING HOTELS OWNED OR UNDER MANAGEMENT.
The Company operated forty-seven (47) hotels at the end of 1999. The Company
intends to utilize its operating, marketing and financial systems resources to
improve operating performance by maximizing revenues and reducing operating
expenses. Steps have been taken to enhance the operating performance of the
hotels by improving revenue and customer service and to provide administrative
support for hotel operations.

ACQUIRE ADDITIONAL HOTEL MANAGEMENT CONTRACTS. In addition to the twenty-five
(25) hotels that the Company owns, it also managed twenty-two (22) hotels at
December 31, 1999, for other owners. The Company has a minority ownership
position in twelve (12) of these twenty-two (22) hotels. The Company is active
in trying to obtain additional management contracts in order to utilize its
information systems and personnel to enhance the operating performance of
additional managed hotels. The Company believes that due to its size,
experience, information systems, purchasing power and support systems it is
often a more effective hotel manager than individuals or smaller firms, which
lack these resources. The Company had a net increase of four (4) new management
contracts in 1999. Additionally, the Company is better able to utilize its
operating structure and spread its administrative costs as it grows the number
of hotels it operates. However, as described above, the Company often must
compete with larger and better-capitalized hotel management companies that have
competitive advantages when compared to the Company.

ACQUISITION OF HOTELS. Since 1996, the Company acquired twenty-one (21) hotels
for approximately $40,750 per room, totaling $106.7 million. The acquisitions
included eight (8) Fairfield Inns, nine (9) Hampton Inns, four (4) Cricket Inns
(of which two (2) were converted to Brookwood Inns and one (1) was converted to
a Red Roof Inn and one (1) was sold during the fiscal year ended December 31,
1998). These hotels are geographically dispersed throughout the country. Given
the Company's highly leveraged financial condition, it is at a substantial
disadvantage in acquiring additional hotel properties since it does not have
significant ability to obtain capital. Such acquisitions, if any are to occur,
will probably require the Company to raise new capital.

SERVICE MARKS

As a result of the USFS Agreement, the Company transferred all proprietary marks
relating to the "Microtel" name to US Franchise Systems, Inc. The Company
retains service marks for certain independent properties which it owns including
"Brookwood Inn" and "Seagate".

The Company uses various national trade names pursuant to licensing arrangements
with national franchisors which include: Microtel Inn-Registered Trademark-, a
registered trademark of USFS; Comfort Inn-Registered Trademark- and Econo
Lodge-Registered Trademark-, registered trademarks of Choice Hotels
International, Inc.; Fairfield Inn by Marriott-Registered Trademark-, a
registered trademark of Marriott International, Inc.; Hampton Inn-Registered
Trademark-, a registered trademark of Promus Corp.; and Red Roof Inn-Registered
Trademark-, a registered trademark of Red Roof Inns, Inc.
<PAGE>

COMPETITION

The hospitality industry is highly competitive. There is no single competitor or
small number of competitors of the Company that are dominant in the industry.
The Company's hotel properties operate in areas that contain numerous
competitors, many of which have substantially greater resources than the
Company. Competition in the lodging industry is based on location, room rates,
quality of services and guest amenities offered. The Company's properties
compete against all hotel products in any given market for market share. In
practice, the hotel industry is highly segmented, ranging from luxury
destination resorts to small "mom and pop" properties. The Company's properties
compete directly against other national and regional chains of hotels in each
geographical market in which the Company hotels are located. New or existing
competitors could significantly lower rates, offer greater conveniences,
services or amenities or significantly expand, improve or introduce new
facilities in markets in which the hotels compete, thereby adversely affecting
the Company's operations.

The Company competes with other regional and national hotel companies for
development and management contracts. There are hundreds of hotel management
companies in the United States, including several which manage over 100
properties and many which manage numbers of hotels comparable to the Company.
Most of the firms are private companies, several are public companies and many
have greater financial strength than the Company; few are as highly financially
leveraged as is the Company.

Although most of the Company's hotels operate under national brands, the Company
has several properties that do not have the benefit of a national brand.
Currently, more than seventy (70%) percent of all U.S. hotel rooms operate under
a national brand which provides certain competitive advantages over hotels which
do not have national brands.

SEASONALITY

The lodging industry is seasonal in nature. Generally, the Company's hotel
revenues are greater in the second and third quarters than in the first and
fourth quarters. This seasonality can be expected to cause quarterly
fluctuations in revenues and profitability of the Company. Quarterly earnings
may be adversely affected by events beyond the Company's control, such as
extreme weather conditions, economic factors and other considerations affecting
travel.

GOVERNMENT REGULATION

A number of states regulate the licensing of hotels and restaurants, including
liquor licenses, by requiring registration, disclosure statements and compliance
with specific standards of conduct. The Company believes it is substantially in
compliance with these requirements. The Company is also subject to laws
governing its relationship with hotel employees, including minimum wage
requirements, overtime, working conditions and work permit requirements.
Compliance with, or changes in, these laws could reduce the revenue and
profitability of the Company owned hotels or otherwise adversely affect the
Company's operations.

Under the Americans with Disabilities Act (ADA), all public accommodations are
required to meet certain requirements related to access and use by disabled
persons. These requirements became effective in 1992. Although significant
dollars have been and continue to be invested in ADA required upgrades to the
Company owned hotels, a determination that the Company is not in compliance with
the ADA could result in a judicial order requiring compliance, imposition of
fines or an award of damages to private litigants. The Company is likely to
incur additional costs of complying with the ADA; however, such costs are not
expected to have a material adverse effect on the Company's results of
operations or financial condition.

ENVIRONMENTAL COMPLIANCE

The Company has not been materially affected by, nor has it incurred any
significant costs related to compliance with federal, state or local
environmental laws.

YEAR 2000 COMPLIANCE

The Year 2000 ("Y2K") problem concerned the inability of information systems to
properly recognize and process date-sensitive information beyond January 1,
2000. As a result, the Y2K problem could have affected any system that uses date
data, including mainframes, PCs, and embedded microprocessors that control
security systems, call-processing systems, building climate systems, elevators,
office equipment and even fire alarms.
<PAGE>

Since January 1, 2000, the Company has not experienced any disruption to its
business operations as a result of Y2K compliance problems. The Company's
response to the Year 2000 problem consisted of three phases that addressed the
state of readiness, Year 2000 costs, risks and contingency plans.

Phase I included a plan to respond to the Year 2000 problem, including the
following areas (the "Focus Areas"): (i) telephone and call accounting systems;
(ii) credit card readers; (iii) sprinkler systems and fire suppression systems;
(iv) security systems; (v) card entry systems; (vi) elevator systems; (vii)
computer systems and vendor contracts (hardware); (viii) fax machines and
laundry equipment; (ix) HVAC (heating and air conditioning systems) and utility
companies; (x) food, beverage, equipment, supplies and other ordering systems;
and (xi) computer software systems, including franchisor and non-franchisor
reservation systems. The Company created a task force and procedures to survey,
test and report results for management's review.

The Company completed Phase II of its assessment of the Year 2000 problem. Phase
II involved initiating a survey and checklist to each hotel manager for
completion and return to management. The survey was developed by the Company
after a review of franchisor and other Year 2000 compliance information to
include (i) the current vendor list with a column for a listing of current
product usage and (ii) a vendor address log and telephone number listing. Each
hotel checklist included the front desk, business center, housekeeping/back
office, beverage and guest rooms. Phase II involved the testing of the Company's
computer systems. The Company has conducted tests on the systems identified in
Phase I and did not encounter any Year 2000 compliance issue which were not
corrected before January 1, 2000.

Phase III of the Company's assessment of the Year 2000 problem included the
results of testing, action plans, reporting of results and contingency plans
to remediate any Year 2000 problems. The risks and contingency plans include
a "reasonably likely worst case Year 2000 scenario." The Company believes
that the consequences of a worst case scenario rest almost exclusively with
outside vendors. The contingency plan, was to replace non-compliant vendors
with new compliant vendors. A thorough review of all vendors will continue to
be an ongoing Year 2000 strategy for the Company. However, the Company's
contingency plan has back-up support to address each of the focus areas.

The franchisors of the hotels have provided compliance guides to assist in the
Company's response to the Year 2000 problem. Promus Hotel Corporation, Holiday
Hospitality/Bass Hotels & Resorts, Marriott International, Inc., and Choice
Hotels International, Inc. have completed third party vendor checks, reviewed
computer systems and provided for reference a preferred compliant vendor list. A
checklist for Year 2000 issues, a work plan and a sample vendor letter was
provided to help the Company complete its assessment of the Year 2000 problem.

The Company mailed a questionnaire to third party vendors to assess third party
risks. The Company sought assurances from the Lessee and other service providers
that they are taking all necessary steps to ensure that their computer systems
will accurately reflect the year 2000.

Throughout 2000, the Company plans to review its systems inventory against
hardware and software component manufacturer upgrade releases to assure that its
systems have the most current Y2K upgrades. The cost of the Company's Y2K
activities, which was budgeted at $500,000, totaled approximately $300,000.

ITEM 3. LEGAL PROCEEDINGS

On October 26, 1990, a complaint was filed in Palm Beach County Circuit Court,
Florida, by Seagate Beach Quarters, Inc., a Florida corporation (Bearing Case
#90-12358-AB), seeking an unspecified amount of damages plus interest and costs,
against Rochester Community Savings Bank, ("RCSB"), a New York based bank, Shore
Holdings, Inc. ("SHORE"), a subsidiary of RCSB and naming Hudson as a
co-defendant. On December 6, 1990, Delray Beach Hotel Properties Limited, a
Florida limited partnership controlled by Hudson Hotels, purchased the Seagate
Hotel and Beach Club from RCSB's subsidiary, SHORE. The purchase contract
included an indemnification of Hudson Hotels against any action resulting from
previously negotiated contracts between RCSB's subsidiaries and third-parties;
however, this indemnity specifically excludes indemnity for punitive damages
which may be assessed against the Company. Case #90-12358-AB contained
allegations that RCSB's subsidiary, SHORE, defaulted in its obligations under a
Contract for Purchase and Sale, dated August 16, 1990, and failed to go forward
with the transaction due to alleged tortious negotiations between RCSB and
Hudson. On March 17, 1994, the Court granted Summary Judgment in favor of RCSB
and Hudson Hotels which judgment was appealed by Seagate. The Fourth District
Court of Appeal in Florida affirmed the summary judgment on RCSB and reversed
the summary judgment granted in favor of Hudson, remanding the action to Circuit
Court for further consideration. On August 15, 1994, Seagate proceeded to trial
against SHORE in case #90-12358-AB. During the course of the trial, Seagate took
a voluntary dismissal of their action against SHORE. On September 8,1994,
Seagate refiled its lawsuit against SHORE and joined Delray Beach Hotel
Properties Limited, through its general partner, Delray Beach Hotel Corp.
(bearing Case #94-6961-AF). The new case against SHORE was brought essentially
on the same facts as stated above. The claim against Delray Beach Hotel
Properties Limited was identical to the conspiracy and tortious interference
with a business relationship claim currently existing against Hudson Hotels. On
January 27, 1995, the Court issued an Order dismissing the Amended Complaint as
to Delray Beach Hotel Properties Limited. The Circuit Court has consolidated the
case against Hudson Hotels (Case #90-12358-AB) and the case against SHORE (Case
#94-6961-AF). The case came to trial in late February 2000; the judge declared a
mistrial before the trial had
<PAGE>

commenced. The case had been put back on the trial calendar with no firm date
for future proceedings.

On December 4, 1998 and February 5, 1999 the Company was served with claims
before the State of South Carolina Human Affairs Division arising out of an
incident that occurred at the Greenville, SC Hampton Inn on November 7, 1997.
A security guard employed by Security Masters, Inc. (the contract provider of
security services at the Hampton Inn) allegedly confronted a group of black
students with a starter pistol, and directed racially biased comments to the
students during that confrontation. Subsequently, on June 18, 1999, the
plaintiffs, Nathaniel Davis III, Jennifer Curry, Shiona Drummer, Renoalda
Bray and Corey-Khalil Horden commenced a civil suit against the Company and
Security Masters, Inc., in the United States District Court, District of
South Carolina, Greenville Division, alleging violations of Titles II and
III of the Civil Rights Act of 1964 and seeking unspecified actual and
compensatory damages, attorneys fees and costs and punitive damages.  The
Company has appeared in this action, and plaintiffs have sought leave to
amend their complaint. The Company's insurance company has assumed the
defense of this action, but has reserved as to coverage.

On April 13, 1999, the Company and its subsidiary, Canandaigua Hotel Corp., were
each served with a summons and complaint by Cheryl K. Lee, as administratrix of
the Estate of Eugene R. Guthrie, deceased, alleging negligence relating to the
design and maintenance of the handicapped access ramp at the Inn on the Lake,
which negligence allegedly caused injuries resulting in the death of the
decedent. L,R,R&M, LLC, the owner of the Inn on the Lake, is also a defendant.
The action has been commenced in New York Supreme Court, Monroe County, and
demands damages in the amount of $2,000,000 plus costs and disbursements. This
action has been turned over to the Company's insurance company for defense; the
Company believes that it has adequate insurance to cover any potential loss.

On June 2, 1999, the Company, and its subsidiary, Hudson Hotels Properties
Corporation, as well as Hudson Hotels Trust; E. Anthony Wilson, the Company's
Chairman and President; and a significant shareholder were each served with a
summons and complaint by B. Thomas Golisano, the holder of a $2,000,000 note
from Hudson Hotels Trust, which is secured by 666,666 shares of common stock of
the Company. The action has been commenced in New York Supreme Court and demands
damages of $2,000,000, plus costs and disbursements. The complaint alleges that
such note is in default and that the Company assumed the obligation of Hudson
Hotels Trust to pay such note. In addition, the complaint alleges that Mr.
Wilson and the significant shareholder of the Company conspired to cause the
Company to breach certain negative covenants that the Company entered into in
connection with the pledge of the 666,666 shares of the Company's common stock.
Hudson Hotels Trust has admitted the default on the $2,000,000 note, while the
Company and the other defendants have denied liability except for the pledge of
the 666,666 shares of the Company's common stock. The parties argued plaintiff's
motion for summary judgement on August 13, 1999. The judge granted summary
judgment in favor of the plaintiff against Hudson Hotels Trust, but denied
summary judgment against Hudson Hotels Corporation. The plaintiff has filed
notice of appeal but has not perfected the appeal.

Advocates for the Disabled, Inc. sued Pamela Skinner, the manager of the Seagate
Hotel and Beach Club, in the United States District Court, Southern District of
Florida, seeking injunctive and declaratory relief relating to alleged
violations of the Americans with Disabilities Act at the Seagate Hotel. The
Company engaged counsel to defend its employee, Ms. Skinner, and engaged an
independent architect to evaluate the alleged deficiencies. This suit has been
settled with the Company being required to make certain improvements. These
costs are estimated to be $25,000.

R. R. Donnelly & Sons, a financial printer, sued the Company and Hudson Hotels
Trust in New York Supreme Court, Monroe County, by complaint filed October 14,
1999, for services rendered in preparation and printing of the registration
statement and prospectus for the aborted initial public offering of Hudson
Hotels Trust. Donnelly had claimed damages of $279,682.34, plus 18% interest,
from May 10, 1999. The Company answered the Complaint on November 22, 1999, and
intends to vigorously defend the action.

After taking into consideration legal counsel's evaluation of all such actions,
management is of the opinion that the outcome of each such proceeding or claim
which is pending, or known to be threatened (as described above), will not have
a material adverse effect on the Company's financial statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted during the fourth quarter of the year ended December 31,
1999, to a vote of the Company's security holders, through the solicitation of
proxies or otherwise.
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Common Stock of the Company has been traded in the over-the-counter market
since its initial public offering on April 13, 1989, and is listed in the Nasdaq
Stock Market under the symbol "HUDS". The following table sets forth, for the
calendar quarters indicated, the range of high and low quotations on the Nasdaq
Stock Market.

<TABLE>
<CAPTION>
                                                                                  HIGH         LOW
                                                                                  ----         ---
                  FISCAL YEAR ENDED DECEMBER 31, 1998
<S>               <C>                                                         <C>           <C>
                  First Quarter (January - March, 1998)                        4 7/8         3 13/16
                  Second Quarter (April - June, 1998)                          4 15/16       3 7/8
                  Third Quarter (July - September, 1998)                       4 5/16        2
                  Fourth Quarter (October - December, 1998)                    2 3/8         1 1/8

                  FISCAL YEAR ENDED DECEMBER 31, 1999

                  First Quarter (January - March, 1999)                        2             1 1/4
                  Second Quarter (April - June, 1999)                          2               9/16
                  Third Quarter (July - September, 1999)                       1 5/8         1
                  Fourth Quarter (October - December, 1999)                    1 3/8           1/2
</TABLE>

The quotations listed above reflect inter-dealer prices, without retail mark-up,
markdown, or commissions and may not necessarily represent actual transactions.

To date, the Company has not paid a dividend on its Common Stock. The payment of
future dividends is subject to the Company's earnings and financial position and
such other factors, including contractual restrictions, as the Board of
Directors may deem relevant. It is unlikely that dividends will be paid on
common stock in the foreseeable future.

As of March 15, 2000, there were approximately 265 holders of record of the
Common Shares of the Company with approximately 2,500 beneficial shareholders.

ITEM 6. SELECTED HISTORICAL FINANCIAL DATA

The following table presents summary selected historical financial data for the
Company derived from its financial statements as of and for the five periods
ended December 31, 1999. The historical information set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and notes thereto, each contained herein.

<TABLE>
<CAPTION>
                                              1999           1998           1997          1996           1995 (1)
                                            ---------      ---------      ---------      --------        -------
<S>                                         <C>            <C>            <C>            <C>             <C>
INCOME STATEMENT DATA:
Operating Revenue                           $  51,271      $  57,640      $  38,731      $ 14,148        $ 6,896
Income from Operations                          8,914          5,215          5,983         1,867            653
Income/(Loss) before extraordinary item        (3,763)       (15,165)        (1,892)          636          1,311
Net Income / (Loss)                               265        (15,165)        (1,892)          636          1,311
PER SHARE DATA:
Income/(Loss) before
   extraordinary item                            (.62)         (2.86)         (0.40)         0.12           0.31
Net Income/(Loss)                                0.02          (2.86)         (0.40)         0.12           0.31
BALANCE SHEET DATA (AT END OF PERIOD):
Total Assets                                  138,211        142,676        152,118       102,893         15,781
Long-Term and Convertible
Subordinated Debt                             123,609        128,040        128,559        80,064          8,506
Shareholders' Investment                        2,065           (166)        13,139        13,317          3,911
</TABLE>

(1)    In 1995, the Company changed its fiscal year-end from March 31 to
       December 31. As a result, the Company had a "short year" of only nine (9)
       months for the period April 1, 1995 to December 31, 1995.
<PAGE>

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

The following Management's Discussion and Analysis should be read in conjunction
with this entire Form10-K 1999 Annual Report. Particular attention should be
directed to the Consolidated Financial Statements found at Item 8.

As a result of the acquisitions of (i) five partnerships owning hotels in which
the Company had a minority interest, (ii) twelve (12) hotels from SB Motel
Corp., and (iii) nine (9) Hampton Inns during the past three years, a
significant portion of the current results are not directly comparable to prior
year results (years 1995-1997), specifically hotel operations, direct costs,
expenses and interest expense.

                              RESULTS OF OPERATIONS

TWELVE MONTHS ENDED DECEMBER 31, 1999, COMPARED TO THE TWELVE MONTHS ENDED
DECEMBER 31, 1998:

Total operating revenues decreased $6,368,269, or 11%, to $51,271,369 for 1999
from $57,639,638 in 1998. This was due primarily to the elimination of
properties that were transferred at the end of 1998, including the Canandaigua
Inn on the Lake and three (3) hotels (HH Bridge, L.P.) that were included for
four months in 1998.

HOTEL OPERATIONS were $47,649,564 for the twelve months ended December 31, 1999,
a decrease of $7,733,653, or 14%, from $55,383,217 for the twelve months ended
December 31, 1998. Hotel operations consisted of the following:

<TABLE>
<CAPTION>
                                                   TWELVE MONTHS ENDED

                                       DECEMBER 31, 1999       DECEMBER 31, 1998
                                       -----------------       -----------------
<S>                                       <C>                     <C>
          Hotel room revenue              $41,746,441             $47,231,157
          Beach Club revenue                1,529,569               1,396,984
          Food and beverage revenue         2,554,853               4,901,800
          Other                             1,818,701               1,853,276
                                          -----------             -----------

               Total                      $47,649,564             $55,383,217
                                          ===========             ===========
</TABLE>

Hotel room revenues were $41,746,441 for the twelve month period ended December
31, 1999, a decrease of $5,484,746, or 12%, from the $47,231,157 for the twelve
month period ended December 31, 1998. The decrease was the result of the
elimination of the Canandaigua Inn on the Lake and three (3) hotels (HH Bridge,
L.P.) included for four months in 1998.

Occupancy and average daily room rates for Company-owned hotels were 65.6% and
$60.35, respectively, for the twelve month period ended December 31, 1999
compared to 68.7% and $58.74, respectively, for the twelve months ended December
31, 1998.

The Beach Club revenue relates to the operation of the Beach Club at the Seagate
Hotel and Beach Club, which was $1,529,569 for the twelve month period ended
December 31, 1999 an increase of $132,585, or 9%, from $1,396,984 for the twelve
month period ended December 31, 1998.

Food and beverage revenue was $2,554,853 for the twelve month period ended
December 31, 1999, a decrease of $2,346,947, or 48%; compared to $4,901,800 for
the twelve month period ended December 31, 1998. The decrease was due to the
elimination of the Canandaigua Inn on the Lake and Holiday Inn Cleveland (HH
Bridge, L.P.).
<PAGE>

Other revenues were $1,818,701 for the twelve month period ended December 31,
1999, a decrease of $34,575, or 2%, from the $1,853,276 for the twelve month
period ended December 31, 1998.

ROYALTIES for the twelve month period ended December 31, 1999 increased
$450,655, or 36% to $1,700,224 from $1,249,569 for the twelve month period
ended December 31, 1998. The increase is attributable to a total of one
hundred seventy-nine (179) franchised Microtel Inns in operation at December
31, 1999, compared to one hundred twenty-four (124) franchised Microtel Inns
in operation at December 31, 1998. The Company receives all royalties on
twenty-seven (27) Microtel Inns and on the remaining one hundred fifty-two
(152) franchises established by US Franchise Systems, Inc., the Company
receives royalty payments from USFS of 1% of gross room revenues from hotels
1-100; .75% of gross room revenues from hotels 101-250; and .5% of gross room
revenues above 250 units. These royalties are pursuant to an Agreement by US
Franchise Systems, Inc, and the Company.

In addition, the Company has retained the right to franchise, construct and
collect franchise placement fees on an additional twenty-two (22) Microtel Inn
properties and ten (10) "suite" properties and will receive the royalties when
the facilities are opened and operating. However, the Company does not currently
have the necessary working capital to undertake the development of these
properties.

MANAGEMENT FEES for the twelve month period ended December 31, 1999 increased
$911,751, or 104%, to $1,786,756, compared to management fees of $875,005 for
the twelve month period ended December 31, 1998. The increase in management fees
is due to an increase of managed hotels. The management fees are generally based
on a percentage of gross revenues. The schedule of owned and managed hotels at
December 31, 1999 and December 31, 1998 is summarized below:

<TABLE>
<CAPTION>
                                                   DECEMBER 31, 1999   DECEMBER 31, 1998
                                                   -----------------   -----------------
<S>                                                        <C>                 <C>
                 Owned                                     25                  25
                 Managed with financial interest           12                  12
                 Other managed                             10                   6
                                                           --                 ---
                                                           47                  43
                                                           ==                 ===
</TABLE>

Management fees of approximately $2,422,000 were generated by the owned hotels
for the twelve month period ended December 31, 1999, and eliminated for
consolidation purposes.

OTHER REVENUE for the twelve month period ended December 31, 1999 increased
$2,978, or 2%, to $134,825 from $131,847 for the year ended December 31, 1998.

GROSS OPERATING MARGIN for hotel operations (consisting of total hotel revenues,
less direct expenses; departmental expenses, undistributed expenses, property
occupancy costs and insurance costs) for the twelve months ended December 31,
1999 was 36.7%, compared to 33.7% for the twelve months ended December 31, 1998.
The increase is the result of undertaking operational steps to more effectively
and efficiently manage the hotel properties.

CORPORATE EXPENSE represents general and administrative costs and expenses
associated with the corporate office. Corporate costs and expenses increased
$1,462,233 , or 39%, to $5,204,184 for year end December 31, 1999 from
$3,741,951 for the year ended December 31, 1998. The increase is primarily a
result of the following: (1) professional fees increased as a result of Company
growth, (2) payroll increased as a result of additional employees, and (3) rent
expense.
<PAGE>

INDIRECT OPERATING COSTS represents costs incurred by the Company which do not
represent direct hotel or corporate expenses. In 1999, the Company incurred
$443,896 due to employee severance and related costs, including investment
banking fees. During 1998 the Company had $577,074 of indirect operating costs.
The 1998 indirect operating costs represent a one time non-cash charge of
$529,764 associated with warrants issued by the Company as a result of two $2.0
million notes issued by Hudson Hotels Trust. The remaining indirect operating
costs are associated with corporate moving expenses associated with relocation
to new office space.

LOSS ON ASSET VALUATION totaling $5,259,701 was recorded in 1998 as a result of
the subsequent sale and disposition of assets in 1999. No corresponding loss was
recognized in 1999.

DEPRECIATION AND AMORTIZATION for the twelve month period ended December 31,
1999 increased $404,520, or 7%, to $6,534,906 from $6,130,386 for the twelve
month period ended December 31, 1998.

OTHER INCOME (EXPENSE) for the year ended December 31, 1999 decreased
$6,449,822, or 34%, to $12,641,922 from $19,091,744 for the year ended December
31, 1998. The current year's expense includes $12,537,384 of interest expense,
compared to $14,180,437 for the year ended December 31, 1998. The year ended
December 31, 1999 expense also includes $610,523 for a loss on the
disposition/writedown of assets (furniture and equipment) at three (3) owned
properties. The furniture and equipment at these properties was replaced, and
the undepreciated balances were eliminated. The year ended December 31, 1998
included losses incurred on a failed REIT of $4.8 million and a litigation
settlement of $475,000 that were non-recurring charges.

EQUITY IN OPERATIONS OF AFFILIATES represents the net income earned from the
Company's equity investment in various hotels. The income for the year ended
December 31, 1999 decreased by $142,739 to $56,171, or 72%, from $198,910 for
the year ended December 31, 1998.

INCOME TAXES - The provision for income taxes for December 31, 1999, was $-0-
due to the Company's loss carryforward position. The provision for income tax
for the twelve month period ended December 31, 1998 was $1,421,057, representing
the elimination of deferred taxes provided prior to 1998.

EXTRAORDINARY GAIN - In 1999, the Company restructured a debt with one of its
lenders, reducing the debt from $7.5 million to $3.2 million, incurring a gain
on extinguishment of indebtedness of $4.3 million, less related costs for a net
gain of $4,027,655.

NET INCOME/(LOSS) - As a result of the above factors, net income for the twelve
month period ended December 31, 1999 was $264,543, compared to a net loss of
$15,165,194 for the twelve month period ended December 31, 1998. The net income
per common share - basic of $.02 for the twelve month period ended December 31,
1999, compared with a net loss per common share - basic of $2.86 for the twelve
month period ended December 31, 1998.

TWELVE MONTHS ENDED DECEMBER 31, 1998, COMPARED TO THE TWELVE MONTH PERIOD ENDED
DECEMBER 31, 1997:

Total operating revenues increased $18,908,541, or 49% to $57,639,638 for 1998
from $38,731,097 in 1997, reflecting changes in revenue categories and the
inclusion of added properties for a longer period of time in 1998 than in 1997,
as discussed below.

HOTEL OPERATIONS were $55,383,217 for the twelve months ended December 31, 1998,
an increase of $18,460,321, or 50%, from $36,922,896 for the twelve months ended
December 31, 1997. Hotel operations consisted of the following:
<PAGE>

<TABLE>
<CAPTION>
                                                   TWELVE MONTHS ENDED

                                       DECEMBER 31, 1998      DECEMBER 31, 1997
                                       -----------------      -----------------
<S>                                       <C>                    <C>
        Hotel room revenue                $47,231,157            $30,617,628
        Beach club revenue                  1,396,984              1,346,522
        Food and beverage revenue           4,901,800              3,565,646
        Other                               1,853,276              1,393,100
                                          -----------            -----------

            Total                         $55,383,217            $36,922,896
                                          ===========            ===========
</TABLE>

Hotel room revenues were $47,231,157 for the twelve month period ended December
31, 1998, an increase of $16,613,529, or 54%, from the $30,617,628 for the
twelve month period ended December 31, 1997. The increase is a result of (i) the
acquisition of nine (9) hotels on October 31, 1997 and, therefore, the Company
only recognized revenues from these hotels for a portion of 1997 while the
Company recognized revenues from these hotels for all of 1998, and (ii) the
Company consolidating the operations of three (3) hotels acquired by a
partnership (HH Bridge, L.P.) in which the Company had a 42% interest. The HH
Bridge, L.P. Partnership Agreement states that in an event of default of certain
obligations, the third parties have the right to acquire the Company's 41%
limited partnership interest for $1. As a result of the Company's default as of
December 31, 1998, of certain of these obligations, these third parties
exercised their rights to acquire the Company's 41% limited partnership interest
in HH Bridge, L.P. for $1 and as a result, the balance sheet has been
deconsolidated at December 31, 1998.

Occupancy and average daily room rates for Company-owned hotels were 68.7% and
$58.74, respectively, for the twelve month period ended December 31, 1998,
compared to 65.2% and $56.51, respectively, for the twelve months ended December
31, 1997.

The Beach Club revenue relates to the operation of the Beach Club at the Seagate
Hotel and Beach Club, which was $1,396,984 for the twelve month period ended
December 31, 1998, an increase of $50,462, or 4%, from $1,346,522 for the twelve
month period ended December 31, 1997, as a result of an increase in new member
dues (initiation fees).

Food and beverage revenue was $4,901,800 for the twelve month period ended
December 31, 1998, an increase of $1,336,154, or 37%; compared to $3,565,646 for
the twelve month period ended December 31, 1997. The increase is primarily the
result of the acquisition of HH Bridge, L.P. on August 14, 1998, which has a
full-service restaurant and additional food and beverage volume at the
Canandaigua Inn on the Lake.

Other revenues were $1,853,276 for the twelve month period ended December 31,
1998, an increase of $460,176, or 33%, from the $1,393,100 for the twelve month
period ended December 31, 1997, as a result of the acquisition of nine (9)
hotels on October 31, 1997; therefore, the Company only recognized revenues from
these hotels for a portion of 1997. Additionally, the Company consolidated the
three (3) hotels (HH Bridge, L.P.) on August 14, 1998, which added to the
revenues for 1998.

ROYALTIES for the twelve month period ended December 31, 1998 increased
$492,522, or 65% to $1,249,569 from $757,047 for the twelve month period
ended December 31, 1997. The increase is attributable to a total of one
hundred twenty-four (124) franchised Microtel Inns in operation at December
31, 1998, as opposed to sixty-two (62) franchised Microtel Inns in operation
at December 31, 1997. The Company receives all royalties on twenty-eight (28)
Microtel Inns and on the remaining ninety-six (96) franchises established by
US Franchise Systems, Inc., the Company receives royalty payments from USFS
of 1% of gross room revenues from hotels 1-100; .75% of gross room revenues
from hotels 101-250; and .5% of gross room revenues above 250 units.

Pursuant to the USFS Agreement, the Company has retained the right to franchise,
construct and collect franchise placement fees on an additional twenty-two (22)
Microtel Inn properties and ten (10) "suite" properties. The USFS Agreement
allows the Company to retain all royalties on fifty (50) Microtel Inns
(twenty-eight (28) existing and twenty-two (22) new ones to be developed by the
Company) and ten (10) Microtel Suites to be developed by the Company. Hudson
also receives royalty payments from USFS for franchises it opens based on the
schedule discussed in the preceding paragraph.
<PAGE>

MANAGEMENT FEES for the twelve month period ended December 31, 1998 increased
$73,948, or 9%, to $875,005, compared to management fees of $801,057 for the
twelve month period ended December 31, 1997. The increase in management fees is
primarily due to increased gross revenues at hotels managed by the Company, as
management fees are generally based on a percentage of gross revenues. The
schedule of owned and managed hotels at December 31, 1998, is summarized below:

<TABLE>
<CAPTION>
                                                   DECEMBER 31, 1998   DECEMBER 31, 1997
                                                   -----------------   -----------------
<S>                                                         <C>                <C>
                 Owned                                      25                 26
                 Managed with financial interest            12                 10
                 Other managed                               6                  5
                                                            --                ---
                                                            43                 41
                                                            ==                ===
</TABLE>

Management fees of approximately $2,735,524 were generated by the owned hotels
for the twelve month period ended December 31, 1998, which were eliminated for
consolidation purposes.

OTHER REVENUE for the twelve month period ended December 31, 1998 decreased
$118,250, or 47% to $131,847 from $250,097 for the year ended December 31, 1997.
This is primarily the result of non-recurring fees received in 1997 for the
construction of one (1) hotel, the gain from the sale of real estate and
franchise placement fees.

The Company plans to continue its revenue growth by maintaining the following
strategies: (i) enhance operating performance of its existing hotels owned or
under management, (ii) acquire additional hotel management contracts, and (iii)
pursue opportunistic acquisition or management of existing hotels. However,
given the Company's highly leveraged financial condition, it is at a substantial
disadvantage in acquiring additional hotel properties.

GROSS OPERATING MARGIN for hotel operations (consisting of total hotel revenues,
less direct expenses; departmental expenses, undistributed expenses, property
occupancy costs and insurance costs) for the twelve months ended December 31,
1998 was 33.7%, compared to 32.8% for the twelve months ended December 31, 1997.
The increase is the result of undertaking operational steps to more effectively
and efficiently manage the hotel properties.

CORPORATE EXPENSE represents general and administrative costs and expenses
associated with the corporate office. Corporate costs and expenses increased
$1,124,793, or 43% to $3,741,951 from $2,617,158 for the year ended December 31,
1998. The increase is primarily a result of the following: (1) professional fees
increased as a result of Company growth, (2) payroll expense increased as a
result of pay increases, and the addition of employees, and (3) rent expense
associated with leasing new office space.

INDIRECT OPERATING COSTS represents costs incurred by the Company which do not
represent direct hotel or corporate expenses. During 1998, the Company had
$577,074 of indirect operating costs, a decrease of $648,714, or 53%, from the
prior year. The 1998 indirect operating costs represent a one time non-cash
charge of $529,764 associated with warrants issued by the Company and valued as
a result of two $2.0 million notes issued by Hudson Hotels Trust. The remaining
indirect operating costs are associated with corporate moving expenses
associated with relocation to new office space. The 1997 indirect operating
costs consisted primarily of a non-cash charge of $835,118 for consulting
expenses related to investor relations services. This amount was written off in
1997, as its expected future value appeared minimal. The remaining indirect
operating costs in 1997 are comprised of costs relating to the acquisition of
nine (9) Hampton Inns and write-offs of several development expenditures which
the Company will no longer pursue.

LOSS ON ASSET VALUATION totaling $5,259,701 was recorded in 1998 as a result of
the subsequent sale and disposition of assets in 1999.

DEPRECIATION AND AMORTIZATION for the twelve month period ended December 31,
1998 increased $2,033,625, or 50%, to $6,130,386 from $4,096,761 for the twelve
month period ended December 31, 1997. The increase is a result of depreciation
charges for a full year in 1998 related to the acquisition of nine (9) hotels on
October 31, 1997 and depreciation charges for three (3) hotels consolidated from
August 14, 1998 to December 31, 1998.
<PAGE>

OTHER INCOME (EXPENSE) for the year ended December 31, 1998 increased
$10,258,133, or 116%, to $19,091,744 from $8,833,611 for the year ended December
31, 1997. The increase is primarily the result of incurring additional debt for
the acquisition of nine (9) hotels on October 31, 1997 and three (3) HH Bridge,
L.P. hotels consolidated by the Company since August 14, 1998. Of the
$14,180,437 in total interest expense, 61% relates to the mortgages on the
hotels acquired or consolidated by the Company in 1996, 1997 and 1998. The
remaining amount represents interest on the Company's outstanding convertible
debentures, mezzanine financing, notes payable relating to purchase of hotels,
Tonawanda bond issue and line of credit. In addition, the Company had a
litigation settlement totaling $475,000 and non-recurring charges totaling
$4,838,872.

EQUITY IN OPERATIONS OF AFFILIATES represents the net income earned from the
Company's equity investment in various hotels. The income for the year ended
December 31, 1998 increased by $133,075 to $198,910, or 202%, from $65,835 for
the year ended December 31, 1997. The increase is a result of various hotel
properties in a partnership still undergoing a start-up period during 1997 and
other hotel properties increasing profitability.

INCOME TAXES - The provision for income tax of $1,421,057 includes recording a
valuation allowance for the Company's deferred tax asset as realization of the
future tax benefits related to the deferred tax assets is dependent on many
factors, including the Company's ability to generate taxable income within the
net operating loss carryforward period. The benefit for income tax of $1,000,849
for the twelve month period ended December 31, 1997 represents federal and state
tax income tax benefit from the recognition of deferred tax assets and
liabilities on loss before tax of $2,892,603.

NET INCOME/LOSS - As a result of the above factors, net loss increased
$13,273,440, or 702%, from the twelve month period ended December 31, 1997 to a
net loss of $15,165,194 for the twelve month period ended December 31, 1998. The
net loss per common share - basic of $2.86, compared with a net loss per common
share - basic of $.40 for the twelve month period ended December 31, 1997.

CAPITAL RESOURCES AND LIQUIDITY

In December 1998 and the first quarter of 1999, the Company took certain
actions which resulted in default under its $35mm Mezzanine Loan. In April,
1999, the Company entered into an Agreement with the holder of its Mezzanine
Loan pursuant to which the holder agreed to forbear from exercising its
rights and remedies as a result of those defaults until April 11, 2000. A
condition of the forbearance is that the Company repay a total of $5,508,567
on April 11, 2000. The Company did not have the capital reserves to make this
payment. On April 14, 2000, RHD Capital Ventures, LLC, an affiliate of a
large shareholder of the Company, purchased the Mezzanine Loan. The Company
and RHD have extended the forbearance agreement through April 11, 2001.

Equity Inns, LP is the holder of a Promissory Note from Hudson Hotels Properties
Corp., guaranteed by the Company, with a current principal balance of
$2,634,052. During 1999, the Company defaulted in payments of principal under
that Note. Equity Inns served notice of default upon the Company, but declined
to take any other actions to collect upon the Note. Equity Inns is entitled to
take 2,000,000 shares of common stock of Hudson Hotels Corporation, which was
pledged as security for the Note. On April 12, 2000, Equity Inns and the
Company executed a Note Modification Agreement which modified the terms of
repayment and reinstated the Note in good standing.

Oppenheimer Convertible Securities Fund is the holder of the Company's
$3,000,000 Convertible Debenture, due April 12, 2000. The Company did not
have the capital resources to pay this obligation at maturity. On
April 13, 2000, Oppenheimer executed an agreement pursuant to which it agreed
to convert the principal of the Debenture into 1,666,667 shares of common
stock of the Company, in accordance with the terms of the Debenture, in
partial consideration of the Company's agreement to register with the SEC all
of the shares issued upon conversion. The Agreement was contingent upon the
Company paying outstanding interest upon the Debenture through April 15,
2000. On April 14, 2000 the Company paid the interest. Oppenheimer delivered
notice of conversion to the Company on April 20, 2000.


In 1998, Hudson Hotels Trust executed a Promissory Note in the amount of
$2,000,000, which is currently in default. The Company pledged 666,667 shares of
common stock as security for repayment of the Note. The holder has sued both
Hudson Hotels Trust and the Company for repayment of the principal; the Company
has denied liability for repayment, and summary judgment against the Company was
denied by the court. The Noteholder has filed notice of appeal. There can be no
assurance as to the outcome of this lawsuit.

<PAGE>

At December 31, 1999, the Company had a $400,000 working capital demand note
with a commercial bank, which bears interest at a rate of prime plus 1 1/2%.
Amounts borrowed are collateralized by land. At December 31, 1999, $400,000 was
borrowed under the terms of this agreement.

At December 31, 1999, the Company had $1,489,438 of cash and cash equivalents
compared with $1,751,580 at December 31, 1998.

The Company is restricted in accessing cash flow from operations because it
is required to maintain certain levels of escrowed cash in order to comply
with the terms of its debt agreements. All cash flow is trapped in its
property-owning subsidiaries for application against required escrows for
debt, taxes, insurance and capital asset reserves.  A substantial portion of
the escrowed funds are released several times monthly for payment of
operating expenses. The excess cash, plus other corporate cash flow, is
trapped at the mezzanine loan level for payment of required debt service.
Excess cash is released monthly. The balances held in escrow on December 31,
1999 and 1998 were $3,847,208 and $3,013,617, respectively.

Net cash flows from operating activities increased $3,382,421 to $4,014,447 for
the year ended December 31, 1999 from $632,026 for the year ended December 31,
1998. The net increase is primarily the result of losses generated as a result
of non-recurring charges in 1998.

Net cash flows used in investing activities increased $421,529 for the year
ended December 31, 1999, to $2,467,536, compared to $2,046,008 for the year
ended December 31, 1998. The increase in cash used is primarily a result of an
increase in restricted cash and increased purchases of property and equipment.

Net cash flows used in financing activities for the year ended December 31, 1999
was $1,809,052, compared to net cash provided by financing activities of
$2,494,826 for the year ended December 31, 1998. The net decrease of $4,303,878
is a result of $4,000,000 of proceeds received from debt borrowings in 1998.
There were no additional borrowings in 1999.

EBITDA decreased by $1,155,707, or 7%, to $15,449,158 during the twelve months
ended December 31, 1999; compared to $16,604,865 for the twelve months ended
December 31, 1998. EBITDA is defined as total operating revenues less direct,
corporate and indirect operating costs. The decrease was primarily due to the
increase in corporate overhead costs for 1999. The Company believes this
definition of EBITDA provides a meaningful measure of its ability to service
debt.

There can be no assurances that in 2001 the Company's restructuring efforts will
be successful, or that its lenders will agree to a course of action consistent
with the Company's requirements in restructuring the obligations. Even if such
agreement is reached it may require agreements of other creditors and
shareholders of the Company, none of which is assured. Furthermore, there can be
no assurance that restructuring of the Company's debt can be successfully
accomplished on terms acceptable to the Company. Under current circumstances,
the Company's ultimate ability to remain viable depends upon the successful
restructuring of its debt obligations. If the Company is unsuccessful in these
efforts, it may be unable to make its future obligations associated with its
principal payments, as well as other obligations, making it necessary to
undertake such other actions including seeking court protection as may be
appropriate to preserve asset value.

RECENT ACCOUNTING PRONOUNCEMENTS

The Company is not aware of any pronouncements which would have a material
adverse effect on the Company's liquidity, financial position or results of
operations.
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following tables summarize the financial instruments held by the Company at
December 31, 1999, which are sensitive to changes in interest rates. At December
31, 1999, approximately 28% of the Company's debt and capital lease obligations
are subject to changes in market interest rates and are sensitive to those
changes. The Company currently has no derivative instruments to offset the risk
of interest rate changes. In the future, the Company may choose to use
derivative instruments, such as interest rate swaps to manage the risk
associated with interest rate changes.

For fixed rate debt obligations, the table presents principal cash flows and
related weighted-average interest rates by expected maturity date and
contracted interest rates at December 31, 1999. For variable rate debt
obligations, the table presents principal cash flows by expected maturity
date and contracted interest rates at December 31, 1999.

The following table presents principal cash flows for debt outstanding at
December 31, 1999, by maturity date and the related average interest rate.

<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT PERCENTAGES
                                                   2000        2001        2002         2003       2004      THEREAFTER     TOTAL
                                                   ----        ----        ----         ----       ----      ----------     -----
<S>                                               <C>         <C>         <C>          <C>        <C>        <C>           <C>
Long-term debt:
     Fixed rate                                   3,178       1,410       1,567        1,712      1,849      78,907        88,623
         Weighted-average interest rate            9.51%       8.79%       8.88%        8.89%      8.91%       8.93%         8.95%
     Variable rate                                  --       35,000         --                                 --          35,000
         Weighted-average interest rate             --        11.90%        --                                 --           11.90%
</TABLE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<PAGE>



                   HUDSON HOTELS CORPORATION AND SUBSIDIARIES



                        CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                         TOGETHER WITH AUDITORS' REPORTS
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
Hudson Hotels Corporation and Subsidiaries

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in shareholders' equity
(deficiency) and cash flows present fairly, in all material respects, the
financial position of Hudson Hotels Corporation and its subsidiaries at
December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the years in the three year period ended December 31,
1999 in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements
in accordance with auditing standards generally accepted in the United
States, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/s/PricewaterhouseCoopers LLP
Rochester, New York

March 24, 2000, except as to the information in Note 2 and the last three
paragraphs of Note 7 for which the date is April 14, 2000.

<PAGE>

HUDSON HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ASSETS                                                               1999               1998
------                                                               ----               ----
<S>                                                         <C>                <C>
CURRENT ASSETS:
     Cash and cash equivalents                              $   1,489,438      $   1,751,580
     Cash - restricted                                          3,847,208          3,013,617
     Accounts receivable - trade                                  992,505            931,212
     Prepaid expenses and other                                 1,441,892          1,356,730
                                                            -------------      -------------

TOTAL CURRENT ASSETS                                            7,771,043          7,053,139

INVESTMENTS IN PARTNERSHIP INTERESTS                            1,591,283          1,781,218

LAND AND REAL ESTATE DEVELOPMENT                                  780,822          2,430,880

PROPERTY AND EQUIPMENT, NET                                   121,728,780        124,434,369

OTHER ASSETS                                                    6,339,628          6,976,612
                                                            -------------      -------------

TOTAL ASSETS                                                $ 138,211,556      $ 142,676,218
                                                            =============      =============

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
     Lines of credit                                        $     400,000      $     400,000
     Current portion of long-term debt                          3,178,401          6,017,698
     Accounts payable - trade                                   1,376,111          1,112,851
     Other accrued expenses                                     6,337,369          6,026,744
                                                            -------------      -------------

TOTAL CURRENT LIABILITIES                                      11,291,881         13,557,293

LONG-TERM DEBT                                                123,609,313        128,039,543

DEFERRED REVENUE - LAND SALE                                      185,055            185,055

LIMITED PARTNERS' INTEREST IN
   CONSOLIDATED PARTNERSHIP                                     1,060,613          1,060,581

SHAREHOLDERS' EQUITY (DEFICIENCY):
     Preferred stock                                                  295                295
     Common stock                                                   6,507              5,743
     Additional paid-in capital                                21,966,221         19,873,260
     Accumulated deficit                                      (19,867,078)       (20,004,301)
                                                            -------------      -------------

                                                                2,105,945           (125,003)
     Less:  10,000 shares of common stock
               in treasury, at cost                               (41,251)           (41,251)
                                                            -------------      -------------

TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY)                         2,064,694           (166,254)
                                                            -------------      -------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)     $ 138,211,556      $ 142,676,218
                                                            =============      =============
</TABLE>

  The accompanying notes are an integral part of these consolidated statements.
<PAGE>

HUDSON HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
OPERATING REVENUES:                                                        1999              1998              1997
                                                                           ----              ----              ----
<S>                                                                <C>               <C>               <C>
     Hotel operations                                              $ 47,649,564      $ 55,383,217      $ 36,922,896
     Management fees                                                  1,786,756           875,005           801,057
     Royalties                                                        1,700,224         1,249,569           757,047
     Other                                                              134,825           131,847           250,097
                                                                   ------------      ------------      ------------

TOTAL OPERATING REVENUES                                             51,271,369        57,639,638        38,731,097

OPERATING COSTS AND EXPENSES:
     Direct                                                          30,174,131        36,715,748        24,808,798
     Corporate                                                        5,204,184         3,741,951         2,617,158
     Indirect operating costs                                           443,896           577,074         1,225,788
     Loss on asset valuation                                               --           5,259,701              --
     Depreciation and amortization                                    6,534,906         6,130,386         4,096,761
                                                                   ------------      ------------      ------------
     Total operating costs and expenses                              42,357,117        52,424,860        32,748,505
                                                                                     ------------      ------------

     Income from operations                                           8,914,252         5,214,778         5,982,592
                                                                   ------------      ------------      ------------

OTHER INCOME (EXPENSE):
     Interest income                                                    293,632           328,042           194,755
     Interest expense                                               (12,537,384)      (14,180,437)       (9,028,366)
     Settlement of litigation                                              --            (475,000)             --
     Non-recurring costs                                                212,353        (4,838,872)             --
     Gain/(Loss) on sale/disposition of property and equipment         (610,523)           74,523              --
                                                                   ------------      ------------      ------------

TOTAL OTHER (EXPENSE)                                               (12,641,922)      (19,091,744)       (8,833,611)
                                                                   ------------      ------------      ------------

     (Loss) before income taxes, minority interest,
        equity in operations of affiliates and
        extraordinary gain                                           (3,727,670)      (13,876,966)       (2,851,019)

(PROVISION)/BENEFIT FOR INCOME TAXES                                       --          (1,421,057)        1,000,849
                                                                   ------------      ------------      ------------

     (Loss) before minority interest, equity in operations
         of affiliates and extraordinary gain                        (3,727,670)      (15,298,023)       (1,850,170)

MINORITY INTEREST                                                       (91,613)          (66,081)         (107,419)
EQUITY IN OPERATIONS OF AFFILIATES                                       56,171           198,910            65,835
                                                                   ------------      ------------      ------------

(LOSS) BEFORE EXTRAORDINARY GAIN                                     (3,763,112)      (15,165,194)     $ (1,891,754)

EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT                          4,027,655              --                --
                                                                   ------------      ------------      ------------

NET INCOME/(LOSS)                                                  $    264,543      $(15,165,194)     $ (1,891,754)
                                                                   ============      ============      ============


NET INCOME/(LOSS) PER COMMON SHARE
     BASIC AND DILUTED

LOSS BEFORE EXTRAORDINARY GAIN                                     $       (.62)     $      (2.86)     $       (.40)
EXTRAORDINARY GAIN                                                          .64            ____--              --
                                                                   ------------      ------------      ------------
NET INCOME/(LOSS)                                                  $        .02      $      (2.86)     $       (.40)
                                                                   ============      ============      ============
</TABLE>

  The accompanying notes are an integral part of these consolidated statements.
<PAGE>

HUDSON HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
FOR THE THREE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                              SERIES A   ADDITIONAL                 ADDITIONAL
                                             PREFERRED  PAID-IN CAPITAL COMMON    PAID-IN CAPITAL  WARRANTS       ACCUMULATED
                                               STOCK     PREFERRED      STOCK        COMMON       OUTSTANDING       DEFICIT
                                                ----     ----------     ------     -----------     --------      ------------
<S>                                             <C>      <C>            <C>        <C>             <C>           <C>
BALANCE, DECEMBER 31, 1996                      $295     $1,560,705     $4,788     $14,394,040     $ 50,000      $ (2,692,713)
     Net Loss 1997                               --            --         --              --           --          (1,891,754)
     Purchase of treasury stock                  --            --         --              --           --                --
     Exercise of stock options                   --            --          233       1,046,855         --                --
     Issuance of common stock and options
       for investor relation services            --            --          145         834,973         --                --
     Cash dividends paid on preferred stock      --            --         --              --           --            (127,320)
                                                ----     ----------     ------     -----------     --------      ------------

BALANCE, DECEMBER 31, 1997                       295      1,560,705      5,166      16,275,868       50,000        (4,711,787)
     Net Loss 1998                               --            --         --              --           --         (15,165,194)
     Sale of common stock                        --            --          333         999,667         --                --
     Issuance of common stock to                 --            --           40          67,460         --                --
       employees and consultants
     Settlement of lawsuit                       --            --          200         424,800      (50,000)             --
     Exercise of options                         --            --            4          14,996         --                --
     Cash dividends paid on preferred stock      --            --         --              --           --            (127,320)
     Other                                       --            --         --           529,764         --             529,764
                                                         ----------     ------     -----------     --------      ------------

BALANCE, DECEMBER 31, 1998                       295      1,560,705      5,743      18,312,555            0       (20,004,301)

     Net Income 1999                             --            --         --              --           --             264,543
     Issuance of common stock                    --            --          699       2,041,838         --                --
     Issuance of stock as compensation           --            --           65          51,123         --                --
     Cash dividends paid on preferred stock      --            --         --              --           --            (127,320)
                                                ----     ----------     ------     -----------     --------      ------------

BALANCE, DECEMBER 31, 1999                      $295     $1,560,705     $6,507     $20,405,516     $      0      $(19,867,078)
                                                ====     ==========     ======     ===========     ========      ============

<CAPTION>
                                              TREASURY
                                               STOCK            TOTAL
                                              --------      ------------
<S>                                           <C>           <C>
BALANCE, DECEMBER 31, 1996                    $   --        $ 13,317,115
     Net Loss 1997                                --          (1,891,754)
     Purchase of treasury stock                (41,251)          (41,251)
     Exercise of stock options                    --           1,047,088
     Issuance of common stock and options
       for investor relation services             --             835,118
     Cash dividends paid on preferred stock       --            (127,320)
                                              --------      ------------

BALANCE, DECEMBER 31, 1997                     (41,251)       13,138,996
     Net Loss 1998                                --         (15,165,194)
     Sale of common stock                         --           1,000,000
     Issuance of common stock to                  --              67,500
       employees and consultants
     Settlement of lawsuit                        --             375,000
     Exercise of options                          --              15,000
     Cash dividends paid on preferred stock       --            (127,320)
     Other
                                              --------      ------------

BALANCE, DECEMBER 31, 1998                     (41,251)         (166,254)
     Net Income 1999                              --             264,543
     Issuance of common stock                     --           2,042,537
     Issuance of stock as compensation            --              51,188
     Cash dividends paid on preferred stock       --            (127,320)
                                              --------      ------------
BALANCE, DECEMBER 31, 1999                    $(41,251)     $  2,064,694
                                              ========      ============
</TABLE>

  The accompanying notes are an integral part of these consolidated statements.
<PAGE>

HUDSON HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:                         1999              1998             1997
                                                              ----              ----             ----
<S>                                                        <C>              <C>               <C>
NET INCOME (LOSS)                                          $   264,543      $(15,165,194)     $(1,891,754)
Adjustments to reconcile net income (loss) to net cash
 provided by operating activities:
  Deferred tax provision                                          --           1,387,926       (1,010,478)
  Depreciation and amortization                              6,534,906         6,130,386        4,096,761
  Loss on asset valuation                                         --           5,259,701             --
  Non-cash expenses                                               --             972,264          835,118
  Loss (Gain) on sale of assets                                610,523           (74,523)         (28,812)
  Non-cash extraordinary gain on debt extinguishment        (4,027,655)             --               --
  Bad debt expense                                              49,196              --            167,163
  Minority interest                                             91,613            66,081          107,419
  Equity in operations of affiliates                           (56,171)         (198,910)         (65,835)
  Cash collected on installment sale                              --             454,546          288,112
(Increase) decrease in assets:
    Accounts receivable - trade                               (110,489)          (33,334)        (454,886)
    Prepaid expenses and other                                  84,096          (316,764)         (35,126)
Increase (decrease) in liabilities:
      Accounts payable                                         263,260          (281,609)        (465,136)
      Other accrued expenses                                   310,625         2,431,456          756,173
                                                           -----------      ------------      -----------

         Net cash provided by operating activities         $ 4,014,447           632,026        2,298,719
                                                           -----------      ------------      -----------
</TABLE>

  The accompanying notes are an integral part of these consolidated statements.
<PAGE>

HUDSON HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                           1999              1998              1997
                                                                           ----              ----              ----
<S>                                                                      <C>               <C>               <C>
CASH FLOWS FROM INVESTING ACTIVITIES:

   Purchase of hotels                                                          --                --         (47,148,504)
   Acquisition of land/real estate development                                 --            (101,940)          (85,054)
   Cash collected on sale of assets                                       1,650,058         2,188,625           399,659
   Change in restricted cash                                               (833,591)          450,311        (1,948,049)
   Capital contribution to unconsolidated partnership interests              (8,750)             --                --
   Collection on non-affiliate mortgage                                        --              38,000              --
   Change in non-affiliates accounts and notes receivable                   (66,830)           78,180            29,049
   Purchase of equipment                                                 (3,209,421)       (2,056,524)       (2,595,035)
   Purchase of partnership interest                                            --          (3,556,837)             --
   Change in other assets                                                   (90,625)          384,477           (11,937)
   Deposits                                                                 (60,806)          450,000          (343,034)
   Change in affiliate accounts receivable                                 (102,428)         (202,039)          125,188
   Capital distributions from unconsolidated partnership interests          254,856           281,739           163,577
                                                                       ------------      ------------      ------------

         Net cash (used in) investing activities                         (2,467,537)       (2,046,008)      (51,414,140)
                                                                       ------------      ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:

    Financing costs                                                            --                --          (1,154,545)
         Proceeds of borrowings                                                --           4,000,000        51,884,052
         Repayment of mortgages                                          (1,590,150)       (1,935,267)       (3,483,680)
         Distributions to limited partners                                  (91,582)         (145,050)         (108,092)
         Proceeds from stock options exercised                                 --              15,000         1,047,088
         Dividends paid                                                    (127,320)         (127,320)         (127,320)
         Proceeds from sale of common stock                                    --           1,000,000              --
         Borrowings on line of credit, net                                     --            (312,537)          712,537
    Purchase of treasury stock                                                 --                --             (41,251)
                                                                       ------------      ------------      ------------

         Net cash provided by / (used in) financing activities           (1,809,052)        2,494,826        48,728,789
                                                                       ------------      ------------      ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                       (262,142)        1,080,844          (386,632)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                           1,751,580           670,736         1,057,368
                                                                       ------------      ------------      ------------

CASH AND CASH EQUIVALENTS - END OF PERIOD                              $  1,489,438      $  1,751,580      $    670,736
                                                                       ============      ============      ============

OTHER INFORMATION:
Cash paid during the period for:
   Interest                                                            $ 12,427,419      $ 14,152,439      $  8,747,412
   Income taxes                                                                --        $     40,690      $     31,693
Non-cash financing and investing activities
   Issuance of 666,666 shares of common stock upon
   conversion of convertible subordinated debentures                      2,000,000              --                --
Capital lease obligation                                                    348,276              --                --
</TABLE>

  The accompanying notes are an integral part of these consolidated statements.
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1999

1.       THE COMPANY:

Hudson Hotels Corporation (the "Company") was organized as Microtel Franchise
and Development Corporation to develop and franchise a national chain of economy
limited service lodging facilities ("Microtels"), using the service mark
"MICROTEL". The Company was incorporated in New York State on June 5, 1987.

The principal activity of the Company is as owner/manager of hotels. The Company
also manages hotels with financial interest (through various partnerships) and
manages hotels through third party management contracts. The owned and managed
hotels are located in thirteen (13) states, and are operated under various
franchise agreements. The Company operates in the industry segment of hotel
operations and management.

In 1995, the Company entered into an agreement with US Franchise Systems, Inc.
("USFS") pursuant to which USFS purchased worldwide franchising and
administration for the Microtel hotel chain (the "USFS Agreement"). Following
this transaction, the Company ceased its franchising activities. Although the
agreement was entitled Joint Venture Agreement, the transaction was structured
as an outright sale of the Company's franchising rights. The Company is entitled
to receive royalty payments from properties franchised by USFS at the rate of 1%
of gross room revenues from hotels 1-100; .75% of gross room revenues from
hotels 101-250 and .5% of gross room revenues for all hotels in excess of 250.

As a result of the sale of its franchising system pursuant to the USFS
Agreement, the Company has focused its efforts on development, acquisition and
management of various hotel products, including Microtel Inns. During 1996, 1997
and 1998, the Company embarked upon a significant expansion and development
program, including several acquisitions and development of five (5) Microtel
Inns through a joint venture partnership.

2.       SUBSEQUENT EVENTS:

In December 1998 and the first quarter of 1999, the Company took certain actions
which resulted in default under its $35mm Mezzanine Loan. In April, 1999, the
Company entered into an Agreement with the holder of its Mezzanine Loan pursuant
to which the holder agreed to forbear from exercising its rights and remedies as
a result of those defaults until April 11, 2000. A condition of the forbearance
is that the Company repay a total of $5,508,567 on April 11, 2000. The Company
did not have the capital reserves to make this payment. On April 14, 2000, RHD
Capital Ventures, LLC, an affiliate of a large shareholder of the Company,
purchased the Mezzanine Loan. The Company and RHD have extended the forbearance
agreement through April 11, 2001.

Equity Inns, LP is the holder of a Promissory Note from Hudson Hotels Properties
Corp., guaranteed by the Company, with a current principal balance of
$2,634,052. During 1999, the Company defaulted in payments of principal under
that Note. Equity Inns served notice of default upon the Company, but declined
to take any other actions to collect upon the Note. Equity Inns is entitled to
take 2,000,000 shares of common stock of Hudson Hotels Corporation, which was
pledged as security for the Note. On April 12, 2000, Equity Inns and the
Company executed a Note Modification Agreement which modified the terms of
repayment and reinstated the Note in good standing. The Note Modification
Agreement became effective upon the Purchase of the Mezzanine Loan by RHD
Capital Ventures.


Oppenheimer Convertible Securities Fund was the holder of the Company's
$3,000,000 Convertible Debenture, due April 15, 2000. The Company did not
have the capital resources to pay this obligation at maturity. On April 13,
2000, Oppenheimer and the Company executed an agreement pursuant to which it
agreed to convert the principal of the Debenture into 1,666,667 shares of
common stock of the Company, in accordance with the terms of the Debenture,
in partial consideration of the Company's agreement to register with the SEC
all of the shares issued upon conversion. The Agreement was contingent upon
the Company paying outstanding interest upon the Debenture through April 15,
2000. On April 14, 2000, the Company paid the interest.

<PAGE>

There can be no assurances that in 2001 the Company's restructuring efforts will
be successful, or that its lenders will agree to a course of action consistent
with the Company's requirements in restructuring the obligations. Even if such
agreement is reached it may require agreements of other creditors and
shareholders of the Company, none of which is assured. Furthermore, there can be
no assurance that restructuring of the Company's debt can be successfully
accomplished on terms acceptable to the Company. Under current circumstances,
the Company's ultimate ability to remain viable depends upon the successful
restructuring of its debt obligations. If the Company is unsuccessful in these
efforts, it may be unable to make its future obligations associated with its
principal payments, as well as other obligations, making it necessary to
undertake such other actions including seeking court protection as may be
appropriate to preserve asset value.

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries collectively referred to as the Company. The
consolidated financial statements also include the accounts of a partnership
that is controlled by the Company. Other investments in partnerships that the
Company does not control are accounted for under the equity method (see below
and Note 4). Income and expenses are recorded on the accrual basis of accounting
and all significant inter-company accounts and transactions have been
eliminated.

INVESTMENTS IN PARTNERSHIP INTERESTS

The Company owns or owns equity interests, either as a general or limited
partner, in entities that own hotel properties or real estate.

Income and losses of controlled partnerships are allocated to the Company
according to the terms of each partnership agreement.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include cash on
hand and amounts due from banks with original maturities of less than three (3)
months. The Company maintains its cash in bank deposit accounts, which at times,
may exceed federally insured limits. The Company has not experienced any losses
in such accounts. The Company believes it is not exposed to any significant
credit risk on cash and cash equivalents.

RESTRICTED CASH

The Company is required to maintain certain levels of escrowed cash in order to
comply with the terms of its debt agreements. All cash is trapped for
application against required escrows for debt, tax, insurance and capital asset
reserve. A substantial portion of the escrowed cash funds is released several
times monthly for application against current liabilities.

ACCOUNTS RECEIVABLE - TRADE

Accounts Receivable - Trade represents billed receivables to hotel entities
for management services and royalties due from hotel room revenues. At
December 31, 1999 and 1998, $121,687 and $72,952, respectively, represents
amounts due from entities in which the Company has a minority interest.

INVENTORIES

Inventories are stated at the lower of cost, on a first-in, first-out method, or
market and consist primarily of hotel supplies.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. When property or equipment is
retired or otherwise disposed of, the related cost and accumulated depreciation
are reversed and the net difference, less any amount realized from the
disposition, is reflected as income or loss. Betterments, renewals and
extraordinary repairs that extend the life of an asset are capitalized; other
repairs and maintenance are expensed.
<PAGE>

Property and equipment consists of the following at December 31,

<TABLE>
<CAPTION>
                                                   1999                1998
                                                   ----                ----
<S>                                           <C>                 <C>
Land and land improvements                    $  18,098,693       $  16,283,653
Building and building improvements               99,380,352          98,656,047
Furniture and equipment                          18,774,351          18,813,802
                                              -------------       -------------

                                                136,253,396         133,753,502
Less - accumulated depreciation                 (14,524,616)         (9,319,133)
                                              -------------       -------------

Net                                           $ 121,728,780       $ 124,434,369
                                              =============       =============
</TABLE>

For financial reporting purposes, depreciation is computed using the
straight-line method for building and accelerated methods for furniture and
equipment over the following estimated useful lives:

Building and building improvements                             7-40 years
Furniture and equipment                                        3-7 years

The Company reviews quarterly its properties in accordance with the Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of Long
Lived Assets" to determine if its carrying costs will be recovered from future
operating cash flows. In cases where the Company does not expect to recover its
carrying costs, the Company recognizes an impairment loss. In the fourth quarter
of 1998 the Company recognized an impairment loss of $1,818,211 in relation to
five (5) parcels of undeveloped land that were sold in the first quarter of
1999. Additionally, a charge of $3,441,490 was recognized from the loss of the
Company's limited partnership interest in HH Bridge, L.P.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Given the Company's current financial position, it is not practical to determine
the fair value of its financial instruments.

DEFERRED FINANCING COSTS

Costs incurred to acquire financing are being amortized over the estimated term
of the related financing. Accumulated amortization was $1,154,206 and $562,465
as of December 31, 1999 and 1998, respectively.

REVENUE RECOGNITION

Hotel operations revenue, principally from room rentals, is recognized as
earned. Ongoing credit evaluations are performed and an allowance for potential
credit losses is provided against the portion of accounts receivable which is
estimated to be uncollectible.

Membership dues for the Beach Club of the Seagate Hotel and Beach Club are
recognized ratably over the membership period. Membership dues received in
advance are reflected as deferred membership dues.

Royalty fee revenue is based on gross room revenues and franchises open under
the USFS Agreement and recognized as earned.
<PAGE>

Management fee revenue is recognized monthly as the services are performed in
accordance with the terms of the management contracts and is generally based on
a percentage of the managed property's revenue plus monthly charges for
accounting, marketing, and payroll fees.

BEACH CLUB

As a result of the acquisition of the Seagate Hotel and Beach Club, the Beach
Club operation was valued at $3,206,531, based on an independent appraisal.
Amortization is provided using the straight-line method over the twenty (20)
year estimated useful life of the asset. Accumulated amortization is $547,782
and $387,456 as of December 31, 1999 and 1998, respectively.

EARNINGS PER SHARE

The Company calculates earning per share ("EPS") in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, which requires dual presentation
of basic EPS and diluted EPS. Basic EPS is computed as net earnings, less
preferred stock dividends, divided by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects dilution that could
occur from common shares issuable through stock options, convertible
subordinated debentures and convertible preferred stock.

<TABLE>
<CAPTION>
                     BASIC AND DILUTED                              1999              1998             1997
                                                                    ----              ----             ----
<S>                                                              <C>              <C>               <C>
Loss before extraordinary gain applicable to common stock:

     Net (loss) before extraordinary gain                        $(3,763,112)     $(15,165,194)     $(1,891,754)
     Deduct preferred stock dividends paid                          (127,320)         (127,320)        (127,320)
                                                                 -----------      ------------      -----------

Net (loss) applicable to common stock before extraordinary gain  $(3,890,432)     $(15,292,514)     $(2,019,074)
                                                                 ===========      ============      ===========

Weighted average number of common shares outstanding               6,273,268         5,353,078        4,996,694
                                                                 ===========      ============      ===========

LOSS PER SHARE BEFORE EXTRAORDINARY GAIN                         $      (.62)     $      (2.86)     $      (.40)
                                                                 ===========      ============      ===========

Extraordinary gain:

     Extraordinary gain                                          $ 4,027,655              --               --
                                                                 ===========      ============      ===========

     Weighted average number of common shares outstanding          6,273,268         5,353,078        4,996,694
                                                                 ===========      ============      ===========

EXTRAORDINARY GAIN                                               $       .64              --               --
                                                                 ===========      ============      ===========

NET INCOME/(LOSS)                                                $   264,543      $(15,165,194)     $(1,891,754)

     Deduct preferred stock dividends paid                          (127,320)         (127,320)        (127,320)
                                                                 -----------      ------------      -----------

     Net income (loss) applicable to common shareholders         $   137,223      $(15,292,514)     $(2,019,074)
                                                                 ===========      ============      ===========

     Weighted average number of common shares outstanding          6,273,268         5,353,078        4,996,694
                                                                 ===========      ============      ===========

EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED                    $       .02      $      (2.86)     $      (.40)
                                                                 ===========      ============      ===========
</TABLE>

The exercise of outstanding stock options, convertible subordinated debenture
and convertible preferred stock were not included in some of the calculations of
diluted EPS, as their effect would be anti-dilutive. Unexercised stock
options/warrants to purchase 1,893,467; 1,959,092; and 1,751,667 shares of the
Company's common stock during the years ended December 31, 1999, 1998 and 1997,
respectively, were not included in the computations of diluted EPS because the
prices were greater than the average market price of the Company's stock or the
addition of the options and warrants are considered antidilutive.

The Company did not include the conversion of convertible preferred stock and
convertible subordinated debentures totaling 1,961,390; 1,961,390; and 1,294,723
shares of the Company's common stock in the calculation of EPS because the
addition is considered antidilutive for the years ended December 31, 1999, 1998
and 1997, respectively.

RECLASSIFICATIONS

Certain account balances at December 31, 1998 and 1997, were reclassified to
conform to account classifications used by the Company at December 31, 1999.
These changes had no effect on reported results of operations or financial
position.
<PAGE>

ESTIMATES

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenue and expenses during the reporting period. Actual results could differ
from those estimates.

4.     SUMMARIZED FINANCIAL INFORMATION - INVESTMENTS IN PARTNERSHIP INTERESTS:

The following is a summary of condensed financial information for the
unconsolidated partnerships that the Company does not control for the
partnerships years ended December 31, 1999, 1998 and 1997.

<TABLE>
<CAPTION>
                                               1999              1998              1997
                                               ----              ----              ----
<S>                                        <C>               <C>               <C>
Property and equipment, net of
  accumulated depreciation                 $ 56,406,107      $ 57,248,847      $ 29,943,215
Current assets                                4,629,600         3,495,286         2,925,293
Other assets                                  1,000,538         1,088,155           938,340
                                           ------------      ------------      ------------

  TOTAL ASSETS                             $ 62,036,245        61,832,288        33,806,848
                                           ------------      ------------      ------------

Mortgage and notes payable - current         18,834,325           550,524           302,732
Other current liabilities                     2,090,728         2,429,449           712,866
Mortgage and note payable - noncurrent       25,844,367        43,614,917        25,056,584
                                           ------------      ------------      ------------

  TOTAL LIABILITIES                          46,769,420        46,594,890        26,072,182
                                           ------------      ------------      ------------

NET ASSETS                                 $ 15,266,825      $ 15,237,398      $  7,734,666
                                           ============      ============      ============

  COMPANY'S SHARE                          $  1,164,932      $  1,781,218      $  1,781,621
                                           ============      ============      ============

Net revenues                                 24,047,799        17,794,838        12,387,125
Operating expenses                          (14,682,991)      (10,984,777)       (7,192,947)
                                           ------------      ------------      ------------

Income from operations                        9,364,808         6,810,061         5,194,178
Other income (expense), net                  (6,891,582)       (5,546,368)       (4,228,999)
                                           ------------      ------------      ------------

NET INCOME                                 $  2,473,226      $  1,263,693      $    965,179
                                           ============      ============      ============

  COMPANY'S SHARE                          $     56,171      $    198,910      $     65,835
                                           ============      ============      ============
</TABLE>

5.      LAND AND REAL ESTATE DEVELOPMENT:

Real estate held for development or sale is summarized as follows at December
31:

<TABLE>
<CAPTION>
                                                    1999                 1998
                                                    ----                 ----
<S>                                               <C>               <C>
Cost of land                                      $780,822          $ 3,610,592
Capitalized costs                                     --                638,499
                                                  --------          -----------
Total real estate                                  780,822            4,249,091
Less: Valuation allowance                             --             (1,818,211)
                                                  --------          -----------
Total                                             $780,822          $ 2,430,880
                                                  ========          ===========
</TABLE>

The Company reviews quarterly its land and real estate development in accordance
with the Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long Lived Assets" to determine if its carrying costs will be
recovered from future operating cash flow. As a result of the sale of five (5)
parcels of land in February 1999, the Company recognized a loss in 1998 on asset
valuation.

6.      LINE OF CREDIT:

The Company has a working capital demand note with a commercial bank, with an
interest rate of prime plus 1 1/2%, for a total of $400,000. The amount borrowed
is collateralized by land in Tonawanda, New York.
<PAGE>

7.      DEBT:

Long-term debt consists of the following at December 31:

<TABLE>
<CAPTION>
                                                                                             1999              1998
                                                                                             ----              ----
<S>                                                                                      <C>              <C>
Mortgage payable to Nomura Asset Capital Corporation, by HH Properties-I, Inc.,
a wholly owned subsidiary dated November 27, 1996, due in monthly installments
of $477,257, including principal and interest at 9.19% over a 25-year period. In
2008, the interest rate recasts at no less than 14.19%. The mortgage is
collateralized by all of the assets of HH Properties-I, Inc., one of the
Company's indirect wholly-owned hotel subsidiaries.                                      $54,244,191      $54,884,544

Mortgage payable to Nomura Asset Capital Corporation, by HH Properties-II, Inc.,
a wholly owned subsidiary, dated October 31, 1997, due in monthly installments
of $239,147, including principal and interest at 8.38% over a 25 year period. In
2007, the interest rate recasts at no less than 13.38%. The mortgage is
collateralized by all of the assets of HH Properties-II, Inc., one of the
Company's indirect wholly-owned hotel subsidiaries.                                       29,267,808       29,640,847

Mezzanine note payable to Nomura Asset Capital Corporation, dated November 27,
1996, payable in monthly installments of interest only at LIBOR plus 6%. On
October 31, 1997, the Company borrowed an additional $18.0 million at LIBOR plus
6% interest only. As part of the additional borrowing, the Company and the
lender agreed to pay monthly installments of interest only in year one and two,
at an interest rate of LIBOR plus 6% and additionally $583,333 monthly of
minimum principal in years three through five. This note is collateralized by
substantially all assets of the Company. The note was due April 11, 2000.                 35,000,000       35,000,000

18.75% convertible subordinated debenture due April 11, 2000.                              3,164,063        7,500,000

$2.0 million note due April 30, 1999.                                                      2,000,000        4,000,000

10% subordinated note payable to Equity Inns Partnership, L.P. by the Company,
payable in monthly installments of interest only. Principal payments of $250,000
are due January 31, April 30, July 31, October 31 of each year with the unpaid
balance due October 31, 2000. The note is collateralized by 2,000,000 shares of
the Company's common stock issued in the name of Hudson Hotels Properties Corp.,
a wholly owned subsidiary.                                                                  2,634,052        2,884,052

Capitalized lease obligations with varying maturities and varying interest rates             348,276                0

4.4% Town of Tonawanda bonds with yearly principal payments of $22,169 through
1997 and yearly principal payments of $18,745 thereafter until 2006.                         129,324          147,798
                                                                                        ---  -------     ------------

Total long-term debt                                                                     126,787,714      134,057,241
Less - current portion                                                                    (3,178,401)       (6,017,698)
                                                                                        ------------     ------------
                                                                                        $123,609,313     $128,039,543
                                                                                        ============     ============
</TABLE>

The conversion price of the 18.75% convertible subordinated debenture due April
15, 2000, is $1.80 per common share.

As a result of postponing the initial public offering of Hudson Hotels Trust
and its relationship with Hudson Hotels Trust, the Company is required to
consolidate the financial statements of Hudson Hotels Trust that includes a
$2.0 million promissory note bearing interest at 12% to a third party payable
in monthly installments of interest only, with the principal balance due on
April 30, 1999. The note may be converted into a term loan, bearing interest
at 12% and 60 equal monthly principal payments of $33,333. The note can be
prepaid at any time prior to maturity. The note is secured by the pledge of
666,666 shares of common stock of the Company as security of the payment of
the note. In addition, the Company issued warrants to acquire 250,000 shares
of the Company's common stock at $4.00 a share, which expire April 30, 2003,
to the note holder as an additional inducement for amounts loaned other than
the pledge of the stock. The Company is not obligated to repay the principal
or interest on these notes.

On April 14, 2000, RHD Capital Ventures, LLC, an affiliate of a large
shareholder of the Company, purchased the mezzanine loan from Nomura Asset
Capital Corporation. RHD Capital Ventures and the Company have executed a
Forbearance Extension Agreement, which extends the forbearance on the
existing defaults under the mezzanine loan through April 11, 2001.

Effective April 13, 2000, Oppenheimer Convertible Securities Fund executed an
agreement to convert the Company's 18.75% Debenture, in accordance with the
terms of the Debenture, to 1,666,667 shares of common stock of the Company.
The Company has agreed to effect the registration of these shares.


On April 12, 2000, Equity Inns and the Company executed a Note Modification
Agreement, which modified the payment terms and reinstated the Equity Inns
debt. The Company will pay interest only at 10% for one year, and thereafter
will amortize the loan, with a balloon payment in April 2006.

The Note Modification Agreement became effective upon the purchase of the
Mezzanine Loan by RHD Capital Ventures.

<PAGE>

The repayments reflecting the revised debt agreements for the next five years
are as follows:

                                    2000                     $ 3,178,401
                                    2001                      36,409,994
                                    2002                       1,567,114
                                    2003                       1,712,281
                                    2004                       1,849,023

8.       SHAREHOLDERS' EQUITY:

(A)      PREFERRED STOCK

At December 31, 1999, the Company's authorized preferred shares were 10,000,000
at $.001 par value, of which 294,723 were issued and outstanding at December 31,
1999 and 1998, respectively.

Series A Preferred Stock - 294,723 shares are issued and outstanding and
includes a liquidation preference of $5.40 per share. Dividends are paid at
$.432 per share annually and are cumulative, subject to Board declaration.
Voting rights are co-equal with Common Shares; 1 share, 1 vote. Each Preferred
Share is convertible at the option of the holder into one share of the Company's
Common Stock, with antidilution protection. The Preferred Shares are redeemable
at the option of the Company for debentures.

(B)      COMMON STOCK

At December 31, 1999, the Company's authorized common shares were 20,000,000 at
$.001 par value per share, of which 6,496,902 and 5,732,495 were issued and
outstanding at December 31, 1999 and 1998, respectively.

The Company has established the following stock option plans, authorized by the
Board of Directors and approved by shareholders:

         --1988 Employee Stock Option Plan, whereby 100,000 shares of the
         Company's common stock are reserved for issuance under plan provisions
         to Directors, Officers and key employees pursuant to the exercise of
         qualified stock options, non-qualified stock options and direct
         purchase of stock. The granted options vest over a two year period,
         with 1/3 vesting immediately, 1/3 vesting at each of the first and
         second anniversary.

         --1993 Employee Stock Option Plan, whereby 550,000 shares of the
         Company's common stock are reserved for issuance under plan provisions
         to Officers and key employees pursuant to the exercise of qualified
         stock options, non-qualified stock options and direct purchase of
         stock. The granted options vest over a two year period, with 1/3
         vesting immediately, 1/3 vesting at each of the first and second
         anniversary. In 1996, the Board of Directors authorized the issuance of
         an additional 300,000 shares, which was approved by shareholders at the
         annual meeting. At December 31, 1999, 186,500 shares were available for
         grant under this plan.

         --1993 Directors Stock Option Plan, whereby 135,000 shares of the
         Company's common stock are reserved for issuance under plan provisions
         to outside Directors. The granted options vest over a two year period
         with 1/3 vesting immediately, with an additional 1/3 vesting at the
         first and second anniversaries. In 1998, the Board of Directors
         authorized the issuance of an additional 81,000 shares, which was
         approved by shareholders at the annual meeting. At December 31, 1999,
         189,000 shares were available for grant under this plan.

         --1998 Long-Term Incentive Compensation Plan, whereby 1,500,000 shares
         of the Company's common stock are reserved for issuance under plan
         provisions to officers and key employees pursuant to the issuance of
         non-qualified stock options, stock appreciation rights, restricted
         stock awards, phantom stock and direct purchase of stock. The purpose
         of the plan is to attract, retain and motivate key employees of the
         Company by offering incentive compensation tied to the performance of
         the Company and its share price and, therefore, more closely align with
         the interests of shareholders. At December 31, 1999, 300,000 shares had
         been granted, of which 100,000 shares have been forfeited.

In addition, the Company, from time to time, grants warrants to non-employees,
at a price equal to or greater than the fair market value at the date of grant.
The Chairman of the Board and Chief Executive Officer of the Company has
purchased 211,875 warrants from non-affiliate third parties.

<PAGE>

A summary of changes in common stock options and warrants during the year ended
December 31, 1999, 1998 and 1997 is:

<TABLE>
<CAPTION>

                                               NUMBER OF SHARES       PRICE PER SHARE
                                               ----------------       ---------------
<S>                                               <C>                 <C>
Outstanding at December 31, 1996                   1,407,667           $1.50 - $8.375

Granted                                              627,000           $5.50 - $10.00
Exercised/Expired                                   (283,000)          $2.00 - $6.00
                                                   ---------

Outstanding at December 31, 1997                   1,751,667           $1.50 - $10.00

Granted                                              520,000           $4.00 - $4.50
Exercised/Expired/Forfeited                         (312,575)          $4.125 - $7.00
                                                   ---------

Outstanding at December 31, 1998                   1,959,092           $1.50 - $10.00

Granted                                              300,000                $4.00
Exercised/Expired/Forfeited                         (365,625)          $2.00 - $10.00
                                                   ---------

Outstanding at December 31, 1999                   1,893,467           $1.50 - $8.375
                                                   =========

Options and warrants exercisable at:
   December 31, 1999                               1,886,800
                                                   =========
   December 31, 1998                               1,952,133
                                                   =========
   December 31, 1997                               1,648,134
                                                   =========

</TABLE>

The FASB has issued SFAS No. 123, Accounting for Stock-Based Compensation
effective for the fiscal years beginning after December 15, 1995. The Company
has adopted the disclosure provisions of the Statement.

The Company accounts for its stock-based compensation plans under APB No. 25,
under which no compensation expense has been recognized because all employee
stock options have been granted with the exercise prices equal to the fair value
of the Company's Class A common stock on the date of grant. The Company adopted
SFAS No. 123 for disclosure purposes only in 1996. During the phase-in period of
SFAS No. 123, pro forma disclosures may not be indicative of future amounts
until the new rules are applied to all awards. For SFAS No. 123 purposes, the
fair value of each employee options grant has been estimated as of the date of
grant using the Black-Scholes option pricing model and the following weighted
average assumptions: risk-free interest rate of 6.50%, expected life of five (5)
years, no dividends and expected volatility of 33.1%. Using these assumptions,
the fair value of the employee stock options granted in 1999, 1998, and 1997, is
$15,000, $32,000, and $168,000 respectively, which would be amortized as
compensation expense over the vesting period of the options. Had compensation
cost been determined in accordance with SFAS No. 123, utilizing the assumptions
detailed above, the Company's net income (loss) and net income (loss) per share
would have been reduced to the following pro forma amounts for the period ended
December 31:

<TABLE>
<CAPTION>

                                                          1999             1998             1997
                                                          ----             ----             ----
<S>                                                    <C>             <C>               <C>
       Net income (loss):
          As reported                                   $   264,543     $(15,165,194)     $(1,891,754)
          Pro forma                                         188,205      (15,317,487)      (2,069,452)

       Net income (loss) per share - basic:
          As reported                                    $.02            $(2.86)           $(0.40)
          Pro forma                                      $.01            $(2.89)           $(0.44)

</TABLE>

9.       COMMITMENTS:

Certain office space and automobiles are rented under non-cancelable operating
leases that expire at various dates through 2003. The following is a schedule of
future minimum annual rentals on non-cancelable operating leases:

                      2000                                472,800
                      2001                                450,500
                      2002                                426,100
                      2003                                420,000
                      Thereafter                          420,000

Total rent expense for the year ended December 31, 1999, 1998 and 1997, was
$492,900, $307,800 and $159,600, respectively.

As a partner in the partnerships disclosed in Note 4, the Company has guaranteed
portions of mortgages payable relating to the partnerships. Amounts guaranteed
by the Company related to the partnerships' mortgages payable were approximately
$2.5 million and $3.6 million at December 31, 1999 and 1998, respectively.

The Company is required to remit monthly royalty fees from 2% to 4% of gross
room revenue, plus additional monies for marketing assessments and reservation
fees to its franchisors, based on franchise agreements which extend from ten to
seventeen years. Some of these agreements specify restrictions on
transferability of franchise and liquidated damages upon termination of
franchise agreement due to the franchisee's default. Total fees were
approximately

<PAGE>

$2,687,200, $2,731,600 and $1,567,600 for the years ended December 31, 1999,
1998 and 1997, respectively.

10.      INCOME TAXES:

Income taxes are provided in accordance with Statement of Financial
Accounting Standard, No. 109, "Accounting for Income Taxes", which requires
an asset and liability approach to financial accounting and reporting for
income taxes. The Statement requires that deferred income taxes be provided
to reflect the impact of "temporary differences" between the amount of assets
and liabilities for financial reporting purposes and such amounts as measured
by current tax laws and regulations. A valuation allowance is established,
when necessary, to reduce deferred tax assets to the amount expected to be
realized.

The components of the provision/(benefit) for income taxes are as follows:

                                1999              1998            1997
                                ----              ----            ----
      CURRENT:
        State              $         --       $    33,182     $     9,629
      DEFERRED:
        Federal            $         --         1,094,465        (765,864)
        State              $         --           293,410        (244,614)
                                              -----------     -----------

      TOTAL                $         --       $ 1,421,057     $(1,000,849)
                                              ===========     ===========

Deferred tax (liabilities) assets are comprised of the following at December 31:

                                             1999                1998
                                             ----                ----

      Depreciation                        $(1,805,289)        $(1,581,218)
      Minority interest                       (11,888)            (11,888)
                                          -----------         -----------

      Gross deferred tax liability         (1,817,177)         (1,593,106)
                                          -----------         -----------

      Operating Loss carryforwards          4,652,234           3,511,081
      Capital loss carryforward             1,374,531                --
      Accrued expenses                        821,147           1,051,893
      Deferred revenue                         74,094              73,975
      Bad debt reserve                         56,982             236,424
      Tax credit                               85,787              79,751
      Financing costs                         125,025              62,566
      Writedown of assets                        --             2,044,569
      Miscellaneous                            17,178              42,636
                                          -----------         -----------

        Gross deferred tax assets           7,206,978           7,102,895
                                                              -----------
      Valuation allowance                  (5,389,801)         (5,509,789)
                                          -----------         -----------

      Net deferred tax asset              $       -0-         $       -0-
                                          ===========         ===========

The deferred tax consequences of temporary differences in reporting items for
financial statement and income tax purposes are recognized, if appropriate.
Realization of the future tax benefits related to the deferred tax assets is
dependent on many factors, including the Company's ability to generate taxable
income within the net operating loss carryforward period and its history of
taxable earnings. Management has considered these factors in reaching its
conclusion as to the valuation allowance for financial reporting purposes.


<PAGE>

The provision for income taxes differs from the amount of income tax determined
by applying the applicable US statutory federal income tax rate to pretax income
as a result of the following differences:

<TABLE>
<CAPTION>

                                                     1999             1998             1997
                                                     ----             ----             ----
<S>                                              <C>              <C>              <C>
Statutory US tax rates                                 89,944      $(4,673,006)     $  (938,485)
Increase (decrease) in rates resulting from:
State income taxes, net of federal income tax          17,687         (634,924)        (155,090)
Change in valuation allowance                        (119,988)       5,509,789             --
Permanent differences                                  12,537        1,291,238           72,080
Other                                                    --            (72,040)          20,646
                                                  -----------      -----------      -----------

Provision/(Benefit) for income taxes              $      --        $ 1,421,057      $(1,000,849)
                                                  ===========      ===========      ===========

</TABLE>

At December 31, 1999, the Company has tax net operating loss carryforwards of
approximately $11,700,000 and capital loss carryforwards of approximately
$3,400,000 that may be used to offset future taxable income and capital
gains. These loss carryforwards will begin to expire in 2004.

11.      LITIGATION:

The Company and its subsidiaries are parties to various legal actions and
complaints arising in the ordinary course of business. No such pending matters
are expected to have a material adverse effect on the Company's financial
position, results of operations, or cash flows.

12.      LEASEHOLD INTEREST:

The Company assumed a ground lease for the land on which a hotel was acquired
by the Company in 1996 in Statesville, North Carolina. The initial term of
this lease commenced in February 1984 and expires April 30, 2005. The Company
renewed the lease at its option, for three additional ten-year periods ending
April 30, 2035. The annual rental during the final ten years of the initial
term and each extension is the greater of $22,000 less one-half percent of
gross room rentals from the Statesville hotel during the 1991 lease year of
the lease term or four percent of gross room rentals from the Statesville
hotel during each lease year. The Company has a right to buy the land subject
to the ground lease from the lessor during the lease term subject to the
first refusal rights of Roses Department Stores, Inc., or its successors.
Rent expense on the ground lease was $67,581 for the year ended December 31,
1999, and $59,167 for the year ended December 31, 1998. The future minimum
ground lease rental payments, assuming no gross room rentals during the
initial lease term and no increases in the consumer price index, are as
follows for the years ended December 31:

                     2000                            22,000
                     2001                            22,000
                     2002                            22,000
                     2003                            22,000
                     2004                            22,000
                     Thereafter                     682,000
                                                    -------
                                                    792,000
                                                    =======

13.      ACQUISITION:

In 1998, the Company invested as a 41% limited partner in a partnership, HH
Bridge, L.P., which acquired three (3) properties for approximately $26.6
million. As of December 31, 1998, the partnership was unable to make certain
"guaranteed return" payments to the limited partner owning 58%, who then
exercised its rights to acquire the Company's 41% limited partnership
interest for $1. As a result, the operations of HH Bridge, L.P. were
consolidated by the Company from August 14, 1998, to December 31, 1998,
however, the balance sheet has been deconsolidated at December 31, 1998 and a
loss on asset valuation was taken for the Company's investment in the
partnership of $3.4 million in the fourth quarter of 1998. Presently the
Company owns a non-controlling 1% interest in HH Bridge, L.P., as a general
partner, and manages the three properties.

14.      INDIRECT OPERATING COSTS:

The Company incurred $443,896 due to employee severance and related costs
including investment banking fees in 1999. In 1998, the Company had charges
of $577,074 as a result of indirect costs. This amount is comprised of a
one-time non-cash charge of $529,764 associated with warrants issued as a
result of two $2.0 million notes issued by Hudson Hotels Trust. The remaining
indirect operating costs are associated with corporate moving expenses with
relocation to new office space.

In 1997, the Company had charges of $1,225,788 as a result of indirect costs.
This amount is comprised primarily of $835,118 of non-cash consulting expense
for investor relations services and indirect costs relating to acquisitions
and

<PAGE>

write-offs of deposits, which the Company will no longer pursue.

15.      NON-RECURRING COSTS:

In 1998, the Company recognized charges of $4.8 million. These charges include:
(i) a deposit and direct costs related to the terminated acquisition of
twenty-six Fairfield Inns by Marriott that were under contract to Hudson Hotels
Trust and (ii) costs incurred by the Company as Hudson Hotels Trust was unable
to raise funds through an initial public offering. The failed REIT was due to
current economic conditions and prevented the completion of Hudson Hotels
Trust's initial public offering. In 1999, the Company recognized income of
$212,353 as a result of satisfying certain creditors' claims for less than full
value of the charge.

16.      EXTRAORDINARY ITEM:

In July 1999, the Company replaced its outstanding $7.5 million Convertible
Subordinated Debenture to Oppenheimer Convertible Securities Fund with a new
Convertible Subordinated Debenture bearing the following terms: principal
balance of $3.0 million; interest rate of 18.75%; maturity date of April 15,
2000; and a conversion price of $1.80 per share. As a result, the Company
reported an extraordinary gain from the debt restructuring, net of expenses, of
approximately $4 million or $0.64 per common share - basic.

17.      BUSINESS SEGMENTS:

As described in Note 1, the Company operates in two segments: (1) hotel
owner/operator; and (2) hotel management services and other. Revenues,
identifiable assets and capital expenditures of each segment are those that are
directly identified with those operations.

The Company evaluates the performance of its segments based primarily on
earnings before interest, taxes and depreciation and amortization ("EBITDA")
generated by the operations of its Owned Hotels. Interest expense is
primarily related to debt incurred by the Company through its corporate
obligations and collateralized mortgage obligations on its hotel properties.
The Company's taxes are included in the consolidated Federal income tax
return of the Company and are allocated based upon the relative contribution
to the Company's consolidated taxable income/losses and changes in temporary
differences.

The following table presents revenues and other financial information by
business segment for the years ended December 31, 1999, 1998 and 1997 (in
thousands):

<TABLE>
<CAPTION>

              1999                  Hotel Operations     Management & Other    Elimination (A)    Consolidated
              ----                  ----------------     ------------------    ---------------    ------------
<S>                                     <C>                  <C>                 <C>               <C>
Revenues                                 $ 47,650             $  6,043            $ (2,422)         $ 51,271
EBITDA                                   $ 15,053             $    396                --            $ 15,449
Depreciation and amortization            $  5,920             $    615                --            $  6,535
Interest expense                         $ 11,835             $    702                --            $ 12,537
Capital expenditures                     $  2,918             $    291                --            $  3,209
Total assets                             $124,383             $ 57,196            $(43,367)         $138,212

<CAPTION>

              1998                  Hotel Operations     Management & Other    Elimination (A)    Consolidated
              ----                  ----------------     ------------------    ---------------    ------------
<S>                                     <C>                  <C>                 <C>               <C>
Revenues                                 $ 55,383             $  4,993            $ (2,736)         $ 57,640
EBITDA                                   $ 15,931             $    674                --            $ 16,605
Depreciation and amortization            $  5,890             $    240                --            $  6,130
Interest expense                         $ 13,177             $  1,003                --            $ 14,180
Capital expenditures                     $  1,775             $    282                --            $  2,057
Total assets                             $127,205             $ 66,495            $(51,024)         $142,676

<CAPTION>

              1997                  Hotel Operations     Management & Other    Elimination (A)    Consolidated
              ----                  ----------------     ------------------    ---------------    ------------
<S>                                     <C>                  <C>                 <C>               <C>
Revenues                                 $ 36,923             $  3,615            $ (1,807)         $ 38,731
EBITDA                                   $ 10,307             $   (228)               --            $ 10,079
Depreciation and amortization            $  3,877             $    220                --            $  4,097
Interest expense                         $  8,314             $    714                --            $  9,028
Capital expenditures                     $  2,479             $    116                --            $  2,595
Total assets                             $132,731             $ 74,025            $(54,638)         $152,118

</TABLE>

(A)  Eliminations represent inter-company management fees and inter-company
     receivables/payables and investments in subsidiaries.


<PAGE>

The following presents the segments' performance measure to the Company's
consolidated income (loss) before taxes, minority interest, and equity in
operations of partnerships:

<TABLE>
<CAPTION>

                                                            1999          1998          1997
                                                            ----          ----          ----
<S>                                                      <C>           <C>           <C>
EBITDA
     Hotel operations                                     $ 15,053      $ 15,931      $ 10,307
     Management and other                                      396           674          (228)
Interest                                                   (12,537)      (14,180)       (9,028)
Depreciation and amortization                               (6,535)       (6,130)       (4,097)
Loss on asset valuation                                       --          (5,260)         --
Non-recurring costs                                           --          (4,839)         --
Other                                                         (105)          (72)          195
                                                          --------      --------      --------

Income (loss) before income taxes, minority interest,
     and equity in operations of partnerships             $ (3,728)     $(13,876)     $ (2,851)
                                                          ========      ========      ========

</TABLE>


<PAGE>

18.      SELECTED QUARTERLY FINANCIAL DATA:

Unaudited interim quarterly results for the Company over the past two years
were as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
---------------------------- ----------- ------------- ---------------------- -------------------
FISCAL YEAR                               INCOME FROM   INCOME (LOSS) BEFORE   NET INCOME/(LOSS)
ENDING 12/31/99               NET SALES    OPERATIONS    EXTRAORDINARY ITEMS
---------------------------- ----------- ------------- ---------------------- -------------------
<S>                           <C>          <C>               <C>                   <C>
Fourth quarter                 $11,483      $   209           $ (2,983)             $(3,044)
---------------------------- ----------- ------------- ---------------------- -------------------
Third quarter, as reported      14,011        2,723               (248)               3,841
---------------------------- ----------- ------------- ---------------------- -------------------
Adjustment                        --           --                 (275)                (275)
---------------------------- ----------- ------------- ---------------------- -------------------
Third quarter, as restated      14,011        2,723               (523)               3,566
---------------------------- ----------- ------------- ---------------------- -------------------
Second quarter                  13,861        3,679                577                  577
---------------------------- ----------- ------------- ---------------------- -------------------
First quarter                   11,916        2,303               (834)                (834)
---------------------------- ----------- ------------- ---------------------- -------------------

---------------------------- ----------- ------------- ---------------------- -------------------
FISCAL YEAR
ENDING 12/31/98
---------------------------- ----------- ------------- ---------------------- -------------------
Fourth quarter                  14,167       (4,326)           (11,752)             (11,752)
---------------------------- ----------- ------------- ---------------------- -------------------
Third quarter                   16,678        3,564             (3,220)              (3,220)
---------------------------- ----------- ------------- ---------------------- -------------------
Second quarter                  14,788        3,674                352                  352
---------------------------- ----------- ------------- ---------------------- -------------------
First quarter                   12,007        2,303               (545)                (545)
---------------------------- ----------- ------------- ---------------------- -------------------

<CAPTION>
---------------------------- ----------------------------------- -----------------------------
FISCAL YEAR                   INCOME BEFORE EXTRAORDINARY ITEMS   NET INCOME/(LOSS) PER SHARE
ENDING 12/31/99                  PER SHARE BASIC AND DILUTED           BASIC AND DILUTED
---------------------------- ----------------------------------- -----------------------------
<S>                                       <C>                              <C>
Fourth quarter                             $  (.46)                         $  (.47)
---------------------------- ----------------------------------- -----------------------------
Third quarter, as reported                    (.04)                             .59
---------------------------- ----------------------------------- -----------------------------
Adjustment                                    (.04)                            (.04)
---------------------------- ----------------------------------- -----------------------------
Third quarter, as restated                    (.08)                             .55
---------------------------- ----------------------------------- -----------------------------
Second quarter                                 .09                              .09
---------------------------- ----------------------------------- -----------------------------
First quarter                                 (.15)                            (.15)
---------------------------- ----------------------------------- -----------------------------

---------------------------- ----------------------------------- -----------------------------
FISCAL YEAR
ENDING 12/31/98
---------------------------- ----------------------------------- -----------------------------
Fourth quarter                               (2.05)                           (2.05)
---------------------------- ----------------------------------- -----------------------------
Third quarter                                 (.61)                            (.61)
---------------------------- ----------------------------------- -----------------------------
Second quarter                                 .06                              .06
---------------------------- ----------------------------------- -----------------------------
First quarter                                 (.11)                            (.11)
---------------------------- ----------------------------------- -----------------------------

</TABLE>

       THE THIRD QUARTER OF FISCAL 1999 HAS BEEN RESTATED AS A RESULT OF
        PROPERTY AND EQUIPMENT DISPOSED OF IN THE THIRD QUARTER BUT NOT
               RECORDED BY THE COMPANY UNTIL THE FOURTH QUARTER.

   FULL YEAR PER SHARE DATA DOES NOT EQUAL THE SUM OF THE QUARTERLY DATA DUE
TO THE COMBINATION OF SEASONALITY AND INCREASE IN NUMBER OF SHARES OUTSTANDING.
<PAGE>

                                    PART III

As described below, certain information appearing in the Company's Proxy
Statement to be furnished to shareholders in connection with the 2000 Annual
Meeting, is incorporated by reference in this Form 10-K Annual Report.

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Certain additional information is incorporated by reference to the
"Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
sections of the Company's Proxy Statement to be furnished to shareholders in
connection with the 2000 Annual Meeting. Information regarding the Company's
Executive Officers is included below.

<TABLE>
<CAPTION>

Name and Title                           Age                        Business Experience
<S>                                      <C>   <C>
E. Anthony Wilson, Chairman of the        55    E. Anthony Wilson serves as the Chairman of the Board and
Board and Chief Executive Officer               Chief Executive Officer of the Company. Mr. Wilson was a
                                                co-founder of the Company, has served as its Chairman of the
                                                Board since its inception, and as Chief Executive Officer
                                                since January 1993. In 1984 he co-founded Hudson Hotels Corp.
                                                which was acquired by the Company in June 1992. He has over 25
                                                years experience in the hospitality and real estate industries
                                                as a developer, owner and manager. As general partner of
                                                Wilson Enterprises, L.P., a real estate development firm in
                                                Rochester, New York, he has developed a significant amount of
                                                office, warehouse, apartments and related facilities. Mr.
                                                Wilson is an alumnus of the School of Business at Indiana
                                                University. He has served as the Chairperson of the Strong
                                                Memorial Hospital Children's Fund, and has been a Director of
                                                Erdle Perforating Corp., and the Rochester Family of Mutual
                                                Funds.

Bruce A. Sahs, Senior Vice                55    Mr. Sahs is currently serving as the Company's Senior Vice
President                                       President and has held various other capacities throughout
                                                his tenure, commencing in June 1986.

                                                Prior to his employment with Hudson, Mr. Sahs was a partner in
                                                a Rochester based Certified Public Accounting firm, practicing
                                                public accounting since 1967, specializing in hotel and
                                                restaurant auditing controls and management services.

                                                Mr. Sahs received his degree from the Rochester Institute of
                                                Technology, is a Certified Public Accountant, as well as a
                                                Certified Hotel Administrator. He is also a member of the
                                                New York State Society of Certified Public Accountants.

Alan S. Lockwood, Director and            47    Alan S. Lockwood is a partner in the law firm of Boylan,
Secretary                                       Brown, Code, Fowler, Vigdor & Wilson, LLP of Rochester, New
                                                York, which firm is general counsel to the Company. Mr.
                                                Lockwood specializes in corporate finance and has been
                                                affiliated with Boylan, Brown since 1978. He is a graduate of
                                                Cornell University School of Arts and Sciences and Cornell Law
                                                School. Mr. Lockwood has served as Secretary of the Company
                                                since its inception.


Ralph L. Peek, CPA                        51    Ralph L. Peek has been a general partner of Wilson
Vice President and Treasurer                    Enterprises, L.P. since 1978, and he has been involved with
                                                the Company and has served as a Director since its inception
                                                in 1987. As of December 31, 1996, Mr. Peek was named Vice
                                                President and Treasurer of the Company. Mr. Peek is licensed
                                                as a certified public accountant and received his Bachelor of
                                                Science degree from the Rochester Institute of Technology.

</TABLE>

ITEM 11. EXECUTIVE COMPENSATION

This information is incorporated by reference to the "Executive Compensation"
section of the Company's Proxy Statement to be furnished to shareholders in
connection with the 2000 Annual Meeting.

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

This information is incorporated by reference to the "Principal Shareholders"
section of the Company's Proxy Statement to be furnished to shareholders in
connection with the 2000 Annual Meeting.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH E. ANTHONY WILSON

As of December 31, 1999, E. Anthony Wilson was indebted to the Company in the
amount of $90,543. This amount represents the cumulative unpaid advances made
by the Company to Mr. Wilson. These advances have been made over the years
and have been periodically repaid.

TRANSACTIONS WITH M,L,R&R PARTNERSHIP AND AFFILIATES

M,L,R&R is a New York partnership owned by members of the Sands family.
M,L,R&R and its partners are together the owners of greater than 10% of the
Company's outstanding common stock as reflected on Form 13D filed by them. In
addition, Richard Sands is the husband of Jennifer Sands, the beneficiary of
the Q-Tip Trust of Jennifer L. Ansley, which Q-Tip Trust is a greater than 5%
shareholder of the Company. The Company has entered into a number of
transactions with M,L,R&R or its affiliates, as follows:

HUDSON HOTELS TRUST - In May 1998, Hudson Hotels Trust, a newly-formed
Maryland real estate investment trust, borrowed $2.0 million in seed capital
financing from M,L,R&R to finance its startup operations through its
anticipated initial public offering. The Company intended to enter into a
strategic alliance with this real estate investment trust, which was
anticipated to have significant benefits for the future operations of the
Company. In order to induce the partnership to loan the seed capital money to
the trust, the Company issued to the partnership warrants to purchase 250,000
shares of the Company's common stock at a strike price of $4.00. This was the
approximate trading price of the stock at issuance of the warrants. In
addition, the loan was collateralized by the pledge of 666,666 shares of
common stock of the Company. Subsequent to December 31, 1999 this loan was
converted to 666,666 shares of common stock in the Company.

ACQUISITION OF HH BRIDGE, L.P. PROPERTIES - In August 1998, the Company
organized a Virginia limited partnership, HH Bridge, L.P., to acquire three
properties for an aggregate purchase price of $26.6 million. The Company
contributed $3.6 million to the capital of the Partnership for a 1% general
partnership interest and a 41.2% limited partnership interest M, L, R & R
contributed $5.0 million for a 57.8% limited partnership interest. The
partnership agreement provided that: M, L, R & R receive a $250,000
guaranteed payment each quarter; Hudson receive all income of the partnership
in excess of that guaranteed return; M, L, R & R had the right to require the
Company to purchase its partnership interest on August 14, 1999 for $6.0
million; M, L, R & R had the right to acquire Hudson's interest in the
partnership for $1.00 if: (1) the guaranteed return is not paid, or (b) the
Company was unable to purchase M, L, R & R's interest on August 14, 1999 as
required. The Company was unable to make the guaranteed payments, and M, L, R
& R exercised its right to acquire the Company's limited partnership interest.

SALE OF STOCK - On August 17, 1998 the Company sold 333,334 shares of its
common stock to M,L,R&R for an aggregate consideration of $1,000,000, or
$3.00 per share. The per-share price was approximately the market price of
the Company's shares at the date of sale.

TRANSFER AND SALE OF CERTAIN ASSETS - In December 1998 and January 1999
Hudson transferred properties and a lease to companies which are affiliates
of M,L,R&R. The Company undertook these transfers to obtain working capital,
which it required to pay operating expenses and debt service during its
traditionally slow first quarter. The transfers were: (i) the lease of the
Inn on the Lake, owned by L, R, R & M L.L.C. by Canandaigua Hotel Corp., a
subsidiary of Hudson was terminated and the company entered into a management
contract for that property; and (ii) H.H. Properties Southwest, Inc., a
subsidiary of Hudson, sold five (5) parcels of vacant land in Texas and
Arizona to Transport Associates. The Company received approximately $2.3
million in cash from these transactions.

PURCHASE OF MEZZANINE DEBT - On April 14, 2000, RHD Capital Ventures, LLC, a
New York limited liability company, owned and controlled by Richard Sands,
purchased the Company's $35,000,00 mezzanine loan and took assignment of the
collateral therefor. RHD Capital and the Company then executed a Forebearance
Extension Agreement extending the forbearance until April 11, 2001. The
Company anticipates that it will discuss and consider with RHD Capital the
restructuring of the debt service under the mezzanine loan.
<PAGE>

TRANSACTIONS WITH BOYLAN, BROWN, CODE, VIGDOR & WILSON, LLP

Mr. Lockwood, a Director and the Secretary of the Company, is also a partner in
Boylan, Brown, Code, Vigdor & Wilson, LLP, which law firm is general
counsel to the Company. In 1999, the Company paid approximately $130,182 to the
law firm in legal fees.


<PAGE>

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A)      The following exhibits are filed as part of this Form 10-K

(1)      Financial Statements

         The response to this portion of Item 14 is submitted under Item 8 of
         this Report on Form 10-K.

(2)      Financial Statement Schedules

         All schedules for which provision is made in the applicable accounting
         regulations of the Securities and Exchange Commission are not required
         under the related instructions or are inapplicable and therefore have
         been omitted.

(3)      Exhibits

         Any shareholder who desires a copy of the following Exhibits may obtain
         a copy upon request from the Company at a charge that reflects the
         reproduction cost of such Exhibits. Requests should be made to the
         Secretary, Hudson Hotels Corporation, 300 Bausch & Lomb Place,
         Rochester, NY 14604.

Exhibit Number
--------------
         3.1      Restated Certificate of Incorporation of Registrant (a)

         3.2      By-Laws of Registrant (a)

         3.3      Amendment to Certificate of Incorporation to authorize the
                  issuance of 10,000,000 shares of Preferred Stock, with a par
                  value of $.001 (f)

         3.4      Amendment to Certificate of Incorporation stating the number,
                  designation, relative rights, preferences and limitations of
                  Series A Preferred Shares, with a par value of $.001, to be
                  issued (f)

         3.5      Amendment to Certificate of Incorporation changing the
                  Company's name to Hudson Hotels Corporation (i)

         4.1      Form of Stock Purchase and Loan Agreement, dated September 19,
                  1988, between the Registrant, the Stockholders named therein
                  and the Investors identified in the amended Schedule of
                  Investors attached thereto (a)

         4.2      Form of Promissory Note issued on September 19, 1988 to each
                  Investor identified on the amended Schedule of Investors
                  included with Exhibit 4.1 (a)

         4.3      Form of Registration Agreement, dated September 19, 1988,
                  between the registrant and each Investor identified on the
                  amended Schedule of Investors included with Exhibit 4.1 (a)

         4.4      Registrant's form of Non-Statutory Stock Option Agreement,
                  attached to which is an Option Schedule setting forth the
                  material terms of options granted by the Registrant pursuant
                  thereto (a)

         4.5      Line of Credit Note and Subordination Agreement between the
                  Registrant and Hudson Hotels Corp. dated December 28, 1988 (a)

         4.6      Convertible subordinated debenture due February 1, 2004, with
                  the Bond Fund for Growth (f)

         4.7      Stock Exchange Agreement: 30,500 shares of Common Stock for
                  16,495 shares of Series A Preferred Stock (f)

         4.8      Convertible subordinated debenture due February 1, 2005, with
                  the Bond Fund for Growth (g)

         4.9      Convertible Subordinated Debenture due July 1, 2001 with
                  Oppenheimer Bond Fund for Growth (k)

         9        Voting Trust Agreement (not applicable)

         10.1     Franchise Agreement, dated January 10, 1989, between the
                  Registrant and Lehigh Hotel Corp. (a)

<PAGE>

         10.2     Employment Agreement, dated December 1, 1988, between the
                  Registrant and Loren G. Ansley (a)

         10.3     Agreement, dated June 1, 1988, between Hudson Hotels Corp. and
                  the Registrant (a)

         10.4     Agreement, dated April 11, 1988, between the Registrant and
                  Petrus II (a)

         10.5     Master Franchise Agreement, dated February 13, 1991, between
                  the Registrant and Essex Microtel International Lodging,
                  Inc.(b)

         10.6     Exclusive Development Agreement, dated September 30, 1991,
                  between the Registrant and S&E Hospitality Partnership (c)

         10.7     Form of Management Agreement (d)

         10.8     Partnership Agreement of Crestmount Associates (d)

         10.9     Partnership Agreement of Brookwood Hotel Properties (d)

         10.10    Partnership Agreement of Montgomery Group (d)

         10.11    Partnership Agreement of Microtel Leray L.P. (d)

         10.12    Partnership Agreement of Lehigh Hotel Properties (d)

         10.13    Partnership Agreement of Delray Beach Hotel Properties Ltd.
                  (d)

         10.14    Warrant for the Purchase of 125,000 Shares of Common Stock
                  issued to Ladenburg, Thalmann & Co. Inc. (e)

         10.15    Warrant for the Purchase of 25,000 Shares of Common Stock
                  issued to William R. Lerner (e)

         10.16    First Amendment to Master Franchise Agreement between the
                  Company and Essex Microtel International Lodging, Inc. dated
                  March 29, 1993 (e)

         10.17    Agreement between Microtel and Jennifer L. Ansley, as
                  Executrix of the Estate of Loren G. Ansley (f)

         10.18    Termination of Exclusive Development Agreement (f)

         10.19    Second Amendment to Master Franchise Agreement between the
                  Company and Essex Microtel International Lodging, Inc., dated
                  April 29, 1994 (f)

         10.20    1993 Non-Statutory Employee Stock Option Plan (f)

         10.21    Lease agreement between L,R,R&M, L.L.C., and Canandaigua Hotel
                  Corp. (g)

         10.22    Purchase of remaining partnership interest in Crestmount
                  Associates (g)

         10.23    Sale of land to Microtel Partners 1995-I, L.P. (g)

         10.24    Joint Venture Agreement Between Microtel Franchise and
                  Development Corporation and US Franchise Systems, Inc. (h)

         10.25    Termination of Master Franchise Agreement

         10.26    Three Party Agreement Between Microtel Franchise and
                  Development Corporation, Stonehurst Capital, Inc. and Essex
                  Investment Group, Inc.

         10.27    Form of Offer Letter, Transfer Agreement and List of Investors
                  (j)

         10.28    Agreement of Purchase and Sale, as amended for the acquisition
                  of the SB Motel Corp. portfolio (l)

         10.29    Hotel Asset Purchase Agreement between the Company and Equity
                  Inns Partnership, L.P. (m)

         10.30    Promissory Note between the Company and Equity Inns
                  Partnership, L.P. (m)

         10.31    Guaranty between the Company and Equity Inns Partnership, L.P.
                  (m)

<PAGE>

         10.32    Pledge Agreement between the Company and Equity Inns
                  Partnership, L.P. (m)

         10.33    Amended and Restated Mezzanine Loan Agreement (m)

         10.34    Employment Agreement (Wilson) (n)

         10.35    Employment Agreement (George) (n)

         10.36    Employment Agreement (Sabin) (n)

         10.37    Forbearance Extension Agreement between the Company and RHD
                  Capital Ventures LLC (o)

         10.38    Agreement between the Company and Oppenheimer Convertible
                  Securities Fund (o)

         10.39    Note Modification Agreement between the Company and Equity
                  Inns Partnership, L.P. (o)

         11       Statement re: Computation of Per Share Earnings

         18       Letter on Accounting Change for Revenue Recognition of
                  Franchise Fees (e)

         21       Subsidiaries of the Registrant

         23.1     Consent of PricewaterhouseCoopers, LLP

         24       Power of Attorney (a)

         27       Financial Data Schedule

         28.1     Form of Consulting Agreement entered into between the
                  Registrant and the Underwriter (a)

         28.2     Form of Employee Stock Plan adopted by the Registrant (a)

         99       Forward Looking Statements

--------------------
         (a)      Previously filed as part of, and hereby incorporated by
                  reference to, the Exhibits in the Company's Registration
                  Statement on Form S-18 (File Number 33-26780-NY), as amended
                  by Amendment No. 1 (The "Registration Statement")

         (b)      Filed as an Exhibit to the Company's Form 10-K Annual Report
                  for the year ended March 31, 1991, and incorporated hereby by
                  reference

         (c)      Filed as an Exhibit to the Company's Form 10-K Annual Report
                  for the year ended March 31, 1992, and incorporated hereby by
                  reference

         (d)      Filed as an Exhibit to the Company's Form 8-K Current Report
                  dated June 26, 1992, and incorporated hereby by reference

         (e)      Filed as an Exhibit to the Company's Form 10-KSB Annual Report
                  for the year ended March 31, 1993

         (f)      Filed as an Exhibit to the Company's Form 10-KSB Annual Report
                  for the year ended March 31, 1994

         (g)      Filed as an Exhibit to the Company's Form 10-KSB Annual Report
                  for the year ended March 31, 1995

         (h)      Filed as an Exhibit to the Company's Form 10-QSB Quarterly
                  Report for the Quarter Ended September 30, 1995

         (i)      Filed as an Exhibit to the Company's Form 10-QSB Quarterly
                  Report for the quarter ended June 30, 1996

         (j)      Filed as an Exhibit to the Company's Form 8-K Current Report
                  dated August 28, 1996

         (k)      Filed as an Exhibit to the Company's Form 10-QSB Quarterly
                  Report for the quarter ended September 30, 1996

         (l)      Filed as an Exhibit to the Company's Form 8-K Current Report
                  dated November 27, 1996

         (m)      Filed as an Exhibit to the Company's 8-K Current Report dated
                  October 31, 1997

         (n)      Filed as an Exhibit to the Company's Form 10K Annual Report
                  dated April 14, 1999.

         (o)      Filed as an Exhibit to the Company's Form 8-K Current
                  Report dated April 14, 2000.
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

HUDSON HOTELS CORPORATION

Dated:   April 25, 2000                    By:  /s/ E. Anthony Wilson
                                           -------------------------------------
                                                   E. Anthony Wilson
                                                   Chief Executive Officer,
                                                   President and Director

Dated:   April 25, 2000                    By: /s/ Ralph L. Peek
                                           -------------------------------------
                                                   Ralph L. Peek
                                                   Vice President and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:

SIGNATURE                                   TITLE                    DATE
---------                                   -----                    ----
PRINCIPAL EXECUTIVE OFFICER:


/s/ E. Anthony Wilson              Chairman of the Board,        April 25, 2000
------------------------------     Chief Executive Officer,
E. Anthony Wilson                  President and Director


PRINCIPAL FINANCIAL OFFICER:


/s/ Ralph L. Peek                  Vice President, Treasurer     April 25, 2000
------------------------------     and Director
Ralph L. Peek



/s/ Richard C. Fox                 Director                      April 25, 2000
------------------------------
Richard C. Fox



/s/ Alan S. Lockwood               Secretary and Director        April 25, 2000
------------------------------
Alan S. Lockwood