InnSuites Hospitality Trust(IHT) - 2020 Q3 - Quarterly Report

Part I Part I - Financial Information This section presents the company's financial information, including statements and related disclosures Item 1. Financial Statements The financial statements detail the company's financial position and performance, reflecting a decrease in total equity to $7.3 million and a $0.9 million net loss for the nine-month period, influenced by new lease accounting and prior year's discontinued operations gains Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | Oct 31, 2019 ($) | Jan 31, 2019 ($) | | :--- | :--- | :--- | | Total Current Assets | $3,313,033 | $5,146,128 | | Cash and Cash Equivalents | $739,298 | $749,075 | | Short-Term Investments | $790,373 | $1,896,556 | | Total Assets | $17,671,019 | $17,199,754 | | Total Current Liabilities | $2,967,874 | $3,310,016 | | Total Liabilities | $10,399,399 | $8,451,239 | | Total Equity | $7,271,620 | $8,748,515 | - The adoption of a new lease accounting standard resulted in the recognition of Operating Lease Right-of-Use assets of $2.72 million and corresponding Operating Lease Liabilities of $2.81 million as of October 31, 2019[4] Condensed Consolidated Statements of Operations Nine Months Ended October 31, 2019 vs 2018 (Unaudited) | Metric | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | | Total Revenue | $5,123,661 | $4,803,273 | | Operating Loss | ($605,601) | ($424,549) | | Net Loss from Continuing Operations | ($912,293) | ($1,028,540) | | Consolidated Net (Loss) Income | ($912,293) | $11,124,289 | | Net (Loss) Income Attributable to Controlling Interests | ($1,005,927) | $1,529,669 | | Net (Loss) Income Per Share | ($0.10) | $1.16 | Three Months Ended October 31, 2019 vs 2018 (Unaudited) | Metric | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | | Total Revenue | $1,497,246 | $1,486,183 | | Operating Loss | ($30,595) | ($215,214) | | Net Loss from Continuing Operations | ($151,903) | ($480,275) | | Net (Loss) Income Attributable to Controlling Interests | ($201,105) | $2,899,711 | - The significant consolidated net income in the 2018 periods was primarily due to a $13.3 million gain on the disposal of discontinued operations, which was absent in 2019[6][8] Condensed Consolidated Statement of Shareholders' Equity - Total equity decreased from $8.75 million on January 31, 2019, to $7.27 million on October 31, 2019, primarily driven by a net loss and the repurchase of treasury stock[10] - During the nine months ended October 31, 2019, the Trust repurchased a total of 73,385 shares of its treasury stock for approximately $124,000[10][99] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for the Nine Months Ended October 31 (Unaudited) | Cash Flow Activity | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | | Net Cash Provided By (Used In) Operating Activities | $113,603 | ($1,700,524) | | Net Cash Provided By Investing Activities | $762,126 | $10,305,310 | | Net Cash Used In Financing Activities | ($885,506) | ($1,631,481) | | Net (Decrease) Increase in Cash | ($9,777) | $6,973,305 | | Cash at End of Period | $739,298 | $11,749,758 | - The significant decrease in cash from investing activities in 2019 compared to 2018 is due to the prior year's cash proceeds of over $10 million from the sale of a hotel property and IBC[13] Notes to Financial Statements The notes detail the company's operations, accounting policies, and specific financial items, highlighting two hotels marketed for sale, the impact of new lease accounting, and subsequent events including a $1.4 million loan and a $1.5 million investment agreement - As of October 31, 2019, the Trust owns interests in two hotels with 267 suites in Arizona and New Mexico, which are being marketed for sale[14][18] - On October 24, 2018, the Yuma hotel was sold for $16.05 million, and on August 1, 2018, the IBC technology subsidiary was sold for $3.0 million, both treated as discontinued operations[19][121][127] - Subsequent to the quarter, a subsidiary entered into a $1.4 million loan agreement, and the Trust agreed to invest up to $1.5 million in UniGen Power Inc. as part of a diversification strategy[133][134] - The company has accrued approximately $200,000 for potential interest and penalties related to various IRS and state tax jurisdiction notices[131] Item 2. Management's Discussion and Analysis (MD&A) Management's discussion highlights the Trust's strategy to sell hotel properties and pursue a reverse merger, noting a 7% revenue growth to $5.1 million for the nine months ended October 31, 2019, despite a widened operating loss, while maintaining sufficient liquidity Overview and Hotel Performance - The Trust's strategic plan is to sell its hotel properties to realize real estate equity and seek a public or large private reverse merger partner to leverage its NYSE AMERICAN listing[146] Hotel Performance for the Nine Months Ended October 31 | Hotel / Metric | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Albuquerque | | | | | Occupancy (%) | 92.30% | 90.60% | 1.88% | | ADR ($) | $88.35 | $83.55 | 5.75% | | REVPAR ($) | $81.56 | $75.71 | 7.73% | | Tucson | | | | | Occupancy (%) | 67.60% | 74.71% | -9.52% | | ADR ($) | $66.25 | $64.28 | 3.06% | | REVPAR ($) | $44.76 | $47.63 | -6.03% | Results of Operations For the nine months ended October 31, 2019, revenue from continuing operations increased by 7% to $5.1 million, but a 10% rise in operating expenses widened the operating loss to $606k, while the three-month period saw a narrowed operating loss due to decreased expenses - Nine-Month Comparison: Revenue from continuing operations increased by approximately $0.3 million (7%) YoY, while operating expenses increased by $0.5 million (10%), widening the operating loss by 43%[151][154][156] - Three-Month Comparison: Revenue was flat YoY at $1.5 million, while operating expenses decreased by $156,000 (9.2%), primarily due to lower G&A and repairs & maintenance costs[173][175] Liquidity and Capital Resources The Trust maintains sufficient liquidity for the next 12 months with $1.53 million in cash and investments, supported by improved operating cash flow of $113k and a subsequent $1.4 million intercompany loan repayment - As of October 31, 2019, the Trust had approximately $1.53 million in cash and short-term investments and access to multiple credit facilities, which management believes is sufficient to meet obligations for at least the next twelve months[188] - Net cash provided by operating activities was approximately $113,000 for the nine months ended Oct 31, 2019, a significant improvement from a net cash use of $1.7 million in the prior-year period[194] - Subsequent to the quarter, the Albuquerque hotel secured a $1.4 million loan, which was used to fully repay an intercompany loan to IHT, thereby improving the Trust's cash position[191] Future Positioning and Strategy The Trust's long-term strategy involves selling its remaining two hotel properties to realize real estate equity and pursuing a merger with a larger private entity seeking a NYSE AMERICAN listing Hotel Properties for Sale | Hotel Property | Book Value ($) | Mortgage Balance ($) | Listed Asking Price ($) | | :--- | :--- | :--- | :--- | | Albuquerque | $1,752,371 | $- | $7,995,000 | | Tucson Oracle | $7,449,506 | $4,756,000 | $16,600,000 | | Total | $9,201,877 | $4,756,000 | $24,595,000 | - The company plans to sell its remaining two hotel properties within two years and has engaged real estate brokers for this purpose[233] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of October 31, 2019, due to material weaknesses in internal control over financial reporting, including personnel and IT deficiencies, with remediation efforts impacted by CFO departure - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were not effective as of October 31, 2019[242] - Material weaknesses identified include: lack of comprehensive entity-level controls, insufficient segregation of duties, lack of personnel with appropriate GAAP expertise, and inadequate IT controls for certain financial spreadsheets[249] - Remediation efforts, which include hiring more technically proficient staff, were negatively impacted by the departure of the new Chief Financial Officer in December 2018, who was not replaced[248] Part II Part II - Other Information This section provides other relevant information not covered in the financial statements Item 2. Issuer Purchases of Equity Securities The Trust maintains an ongoing share repurchase program, having repurchased 73,385 Shares of Beneficial Interest during the nine months ended October 31, 2019, with authorization to repurchase an additional 976,557 shares or units Issuer Purchases of Equity Securities (Q3 FY2020) | Period (2019) | Total Shares Purchased (Shares) | | :--- | :--- | | August | 4,587 | | September | 2,288 | | October | 1,426 | | Total for 9 Months | 73,385 | - As of October 31, 2019, the Trust may yet purchase up to 976,557 shares or units under its publicly announced repurchase plans[258]