InnSuites Hospitality Trust(IHT) - 2026 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for InnSuites Hospitality Trust ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements for InnSuites Hospitality Trust, including balance sheets, statements of operations, shareholders' equity, and cash flows, along with detailed notes explaining the company's operations, accounting policies, debt, equity, and significant events for the periods ended July 31, 2025, and January 31, 2025 Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :------------ | :--------------- | | Assets | | | | Cash | $206,941 | $92,752 | | Total Current Assets | $1,690,994 | $1,720,455 | | Total Assets | $14,197,704 | $14,193,580 | | Liabilities & Equity | | | | Total Current Liabilities | $1,441,278 | $1,391,145 | | Total Liabilities | $13,999,091 | $13,548,102 | | Total Equity | $198,613 | $645,478 | - Cash increased significantly from $92,752 at January 31, 2025, to $206,941 at July 31, 2025[10] - Total Equity decreased from $645,478 at January 31, 2025, to $198,613 at July 31, 2025[10] Condensed Consolidated Statements of Operations (Six Months) This section outlines the company's financial performance over a six-month period, detailing revenues, expenses, and net loss | Metric | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Total Revenue | $4,004,635 | $4,134,362 | | Total Operating Expenses | $4,020,939 | $4,249,872 | | Operating Loss | $(16,304) | $(115,510) | | Consolidated Net Loss | $(361,989) | $(331,387) | | Net Loss Attributable to Controlling Interests | $(512,212) | $(527,416) | | Net Loss Per Share – Basic & Diluted | $(0.06) | $(0.06) | - Total revenue decreased by 3.1% from $4,134,362 in 2024 to $4,004,635 in 2025 for the six-month period[12] - Operating loss significantly improved from $(115,510) in 2024 to $(16,304) in 2025, an 85.9% reduction[12] - Consolidated Net Loss increased by 9.2% from $(331,387) in 2024 to $(361,989) in 2025[12] Condensed Consolidated Statements of Operations (Three Months) This section details the company's financial performance over a three-month period, presenting revenues, expenses, and net loss | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Total Revenue | $1,798,872 | $1,840,392 | | Total Operating Expenses | $2,037,572 | $2,126,348 | | Operating Loss | $(238,700) | $(285,956) | | Consolidated Net Loss | $(401,019) | $(410,002) | | Net Loss Attributable to Controlling Interests | $(391,180) | $(370,883) | | Net Loss Per Share – Basic & Diluted | $(0.04) | $(0.04) | - Total revenue decreased by 2.3% from $1,840,392 in 2024 to $1,798,872 in 2025 for the three-month period[14] - Operating loss improved by 16.5% from $(285,956) in 2024 to $(238,700) in 2025[14] - Consolidated Net Loss improved by 2.2% from $(410,002) in 2024 to $(401,019) in 2025[14] Condensed Consolidated Statements of Shareholders' Equity This section presents changes in the company's equity over time, including trust shareholders' equity and non-controlling interests | Metric | July 31, 2025 | July 31, 2024 | | :------------------------------------ | :------------ | :------------ | | Trust Shareholders' Equity | $3,965,460 | $5,503,977 | | Non-Controlling Interest | $(3,766,847) | $(3,545,148) | | Total Equity | $198,613 | $1,958,829 | | Shares of Beneficial Interest (Shares) | 8,791,300 | 8,763,485 | | Shares of Beneficial Interest (Amount) | $4,882,885 | $6,421,402 | - Total Equity decreased significantly from $1,958,829 at July 31, 2024, to $198,613 at July 31, 2025[15][18] - Shares of Beneficial Interest increased slightly from 8,763,485 to 8,791,300[15][18] Condensed Consolidated Statements of Cash Flows This section details the sources and uses of cash across operating, investing, and financing activities over a six-month period | Metric | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net Cash Provided By (Used In) Operating Activities | $126,863 | $(504,012) | | Net Cash Used In Investing Activities | $(415,091) | $(286,939) | | Net Cash Provided By (Used In) Financing Activities | $402,417 | $(116,384) | | Net Increase (Decrease) In Cash | $114,189 | $(907,335) | | Cash and Cash Equivalents at End of Period | $206,941 | $418,033 | - Operating activities generated cash of $126,863 in 2025, a significant improvement from cash used of $(504,012) in 2024[20] - Investing activities used more cash in 2025 ($(415,091)) compared to 2024 ($(286,939)), primarily due to hotel property improvements[20] - Financing activities provided cash of $402,417 in 2025, a reversal from cash used of $(116,384) in 2024, mainly due to related party borrowings[20] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering operations, policies, and significant events 1. Nature of Operations and Basis of Presentation This note describes InnSuites Hospitality Trust's business, its ownership structure, and the accounting principles used in preparing the financial statements - InnSuites Hospitality Trust (IHT) is an Ohio REIT, publicly traded and taxed as a C corporation, owning interests in two hotels (Arizona and New Mexico) and holding investments in UniGen Power Inc. and managing IBC Hotels, LLC[22][23] - The Trust owns a 75.89% interest in RRF Limited Liability Limited Partnership, which manages the hotels and IBC Hotels, LLC[25][26] - Both hotels are classified as operating assets but are available for sale, though not currently listed[27] - The Trust's liquidity relies on hotel revenues, RRF management fees, asset sales, and returns on diversification investments, with current cash and credit lines deemed sufficient for the next 12 months[31][35] - Hotel operations are seasonal, with Tucson's highest occupancy in Q1/Q4 and Albuquerque's in Q2/Q3, providing some balance[43] 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods applied in the preparation of the financial statements, including revenue recognition and asset valuation - The financial statements are prepared using GAAP, requiring management estimates for items like useful lives of assets and fair values[45][46] - Revenue from hotel operations is recognized as services are rendered, bundling room nights with amenities like Wi-Fi and breakfast[53][56] - The Trust holds a $1 million 6% convertible debenture in UniGen Power Inc., approximately $668,750 in UniGen common stock, and warrants, potentially leading to 15-20% fully diluted equity ownership[70][72][81] - UniGen's engineering is 61% complete, and the company is focused on raising additional capital, with IHT potentially participating[82] - The UniGen investment is valued as a Level 3 fair value measurement due to the absence of active or similar observable markets[85] 3. Ownership Interests in Albuquerque and Tucson Subsidiaries This note details the Trust's ownership stakes in its Albuquerque and Tucson hotel subsidiaries and their financial obligations - The Trust has sold non-controlling interests in Albuquerque Suite Hospitality, LLC and Tucson Hospitality Properties, LLLP, maintaining at least 50.1% ownership in one entity[87] - As of July 31, 2025, the Trust held a 21.90% ownership in the Albuquerque entity and the Partnership held a 51.75% ownership in the Tucson entity[91][92] - Neither the Albuquerque nor Tucson entities made quarterly Priority Return payments for the six months ended July 31, 2025[91][92] 4. Variable Interest Entities This note explains the Trust's involvement with Variable Interest Entities, specifically the Albuquerque entity, and its role as the primary beneficiary - The Albuquerque entity is identified as a Variable Interest Entity (VIE) with the Trust as the primary beneficiary, exercising control through financial guarantees, majority ownership, and operational decision-making[94][95][96] - The Trust and Partnership provided mortgage loan guarantees to secure financing on favorable terms for their properties[97] 5. Property and Equipment This note provides a breakdown of the Trust's property and equipment, including hotel properties and corporate assets, net of accumulated depreciation Hotel Segment | Hotel Segment | July 31, 2025 | January 31, 2025 | | :-------------------------- | :------------ | :--------------- | | Total hotel properties | $18,933,321 | $18,518,230 | | Less accumulated depreciation | $(12,099,254) | $(11,729,945) | | Hotel properties, net | $6,834,067 | $6,788,285 | Corporate PP&E | Corporate PP&E | July 31, 2025 | January 31, 2025 | | :-------------------------- | :------------ | :--------------- | | Total property, plant and equipment | $468,540 | $468,540 | | Less accumulated depreciation | $(446,472) | $(445,211) | | Property, Plant and Equipment, net | $22,068 | $23,329 | - Net hotel properties increased slightly from $6,788,285 to $6,834,067, reflecting ongoing investments[98] 6. Mortgage Notes Payable This note details the mortgage loans secured by the Trust's hotel properties, including their balances, interest rates, and guarantees - The Tucson Hospitality Properties LLLP has an $8.4 million loan at 4.99% interest, with a balance of approximately $7,764,000 as of July 31, 2025[100] - Albuquerque Suites Hospitality, LLC has a $1.4 million business loan at an initial 4.90% interest, with a balance of approximately $1,136,000 as of July 31, 2025[101] - Both mortgage loans are guaranteed by InnSuites Hospitality Trust and related parties[100][101] 7. Notes Payable and Notes Receivable – Related Party This note describes the Trust's financial arrangements with related parties, including a demand/revolving line of credit - The Trust has a Demand/Revolving Line of Credit/Promissory Note with Rare Earth Financial, LLC (a related party) with an amount payable of approximately $1,718,000 as of July 31, 2025, up from $1,151,000 at January 31, 2025[103] - The line of credit bears interest at 7.0% per annum, with interest-only payments paused, and has a maximum borrowing capacity of $2,000,000[103] 8. Other Notes Payable This note outlines other unsecured notes payable held by the Trust, including their interest rates and maturity dates - The Trust has a $200,000 unsecured note payable at 5% interest, due in August 2025 or 90 days notice, which may be extended[104] - Another unsecured loan of $270,000 at 5% interest, entered into with the Partnership, has been extended to May 2026[105] 9. Notes Payable to Banks This note details the Trust's revolving lines of credit with Pima Federal Credit Union, including balances and maturity dates - The Trust has three revolving lines of credit with Pima Federal Credit Union totaling $250,000, with balances of $25,000 (Trust), $21,000 (Albuquerque Hotel), and $33,000 (Tucson Hotel) as of July 31, 2025[108][109][110] - These lines of credit have variable interest rates and maturity dates ranging from November 2025 to January 2027[108][109][110] 10. Minimum Debt Payments This note presents a schedule of the Trust's minimum debt payments for mortgages, other notes, bank notes, and related party notes across future fiscal years | Fiscal Year | Mortgages | Other Notes Payable | Notes Payable to Banks | Notes Payable - Related Party | Total | | :---------- | :-------- | :------------------ | :--------------------- | :---------------------------- | :---------- | | 2026 | $123,673 | $470,000 | $79,878 | $- | $673,551 | | 2027 | $260,999 | $- | $- | $1,715,750 | $1,976,749 | | 2028 | $263,125 | $- | $- | $- | $263,125 | | 2029 | $274,685 | $- | $- | $- | $274,685 | | 2030 | $1,164,262 | $- | $- | $- | $1,164,262 | | Thereafter | $6,813,552 | $- | $- | $- | $6,813,552 | | Total | $8,900,296 | $470,000 | $79,878 | $1,715,750 | $11,165,924 | - Total minimum debt payments are approximately $673,551 for Fiscal Year 2026 and $1,976,749 for Fiscal Year 2027[111] 11. Description of Beneficial Interests This note describes the rights and characteristics of the Trust's Shares of Beneficial Interest, including dividend entitlements and voting rights - Holders of Shares of Beneficial Interest are entitled to dividends, share ratably in assets upon liquidation, and possess ordinary voting rights (one vote per share)[112] - The Trust repurchased 0 shares for the six months ended July 31, 2025, compared to 18,456 shares at an average price of $1.38 in the prior year[113] 12. Related Party Transactions This note discloses transactions and relationships between the Trust and its related parties, including ownership stakes and management agreements - Mr. Wirth and his affiliates held 22.51% of Partnership units and 73.03% of the Trust's Shares of Beneficial Interest as of July 31, 2025[114] - The Trust's subsidiary, RRF LLLP, manages the two hotels and IBC Hotels, LLC, under agreements with 5% of room revenue and a $2,000 monthly accounting fee per hotel[116] - An immediate family member of Mr. Wirth provides part-time IT support, earning up to approximately $24,000 annually plus bonuses[117] 13. Statements of Cash Flows, Supplemental Disclosures This note provides additional information on cash flow activities, specifically detailing cash paid for interest and taxes - Cash paid for interest was approximately $245,000 for the six months ended July 31, 2025, compared to $250,000 in the prior year[118] - No cash was paid for taxes during the six months ended July 31, 2025 and 2024[118] 14. Commitments and Contingencies This note outlines the Trust's contractual obligations and potential liabilities, including escrow requirements, membership fees, and legal matters - The Trust is obligated to deposit 4% of Tucson hotel room revenue into an escrow account for capital expenditures, but no cash balance existed as of July 31, 2025[119] - Fees paid to Best Western for membership and reservation systems were approximately $112,000 for the six months ended July 31, 2025, an increase from $92,000 in the prior year[120] - Management believes that current legal actions will not materially adversely affect the Trust's financial position, results of operations, or liquidity[121] 15. Leases This note details the Trust's operating leases, including its corporate offices and a non-cancelable ground lease for the Albuquerque Hotel - The Trust has operating leases for its corporate offices (month-to-month) and a non-cancelable ground lease for the Albuquerque Hotel, expiring in 2058[124][125] | Metric | July 31, 2025 | | :------------------------------------ | :------------ | | Weighted average remaining lease term | 31 years | | Weighted average discount rate | 4.85% | | Total minimum lease payments | $4,463,211 | | Total present value of minimum payments | $2,216,563 | | Long term portion of operating lease liability | $2,196,084 | 16. Share-Based Payments This note describes the Trust's share-based compensation program for non-employee Trustees, including restricted share grants and vesting terms - The Trust compensates its three non-employee Trustees with grants of 6,000 restricted shares each per year, vesting over one year[129] - On February 15, 2025, 18,000 restricted shares with an aggregate fair value of $7,200 per grant were issued to the independent Trustees[129] 17. Notes Receivable (IBC) This note details the secured promissory note held by the Trust from the sale of its technology subsidiary, IBC Hotels LLC, including its terms and security - The Trust holds a secured promissory note of $1,925,000 from the sale of its technology subsidiary, IBC Hotels LLC, with interest accrued at 3.75% per annum[131] - The note's maturity was extended to June 30, 2030, and the interest rate adjusted to 3.25% payable at maturity, as RRF (IHT's management subsidiary) took over IBC management[135] - The note is secured by a pledge of the buyer's interest in IBC and a security interest in all IBC assets[136] 18. Income Taxes This note provides information on the Trust's income tax status as a C-Corporation, including deferred tax assets and valuation allowances - The Trust is taxed as a C-Corporation and has deferred tax assets of $6.1 million, including $3.1 million in net operating loss carryforwards and $2.9 million in syndications[137] - A valuation allowance of approximately $4.3 million has been determined against the net deferred tax asset[137] 19. COVID-19 Disclosure This note discusses the impact of the COVID-19 pandemic on the Trust's business and the subsequent recovery and current financial outlook - COVID-19 had a material detrimental impact on the business in Fiscal Year 2021, but lodging demand and revenue levels have since recovered[138] - Fiscal Year 2025 showed a strong rebound, and Fiscal Year 2026 has stable revenue but reduced profits due to inflation and increased costs[139] 20. Employee Retention Tax Credit This note details the anticipated and received Employee Retention Tax Credits under the CARES Act and Consolidated Appropriations Act - The Trust is anticipated to receive approximately $2.7 million in Employment Tax Refunds and Credits under the CARES Act and Consolidated Appropriations Act[141] - As of July 31, 2025, IHT has received approximately $1.5 million of these funds[141] 21. Going Concern This note addresses the Trust's ability to continue as a going concern, outlining management's strategies to improve profitability and cash flow - Fiscal Year 2025 was the Trust's first loss in four years, prompting a focus on cost-cutting, including a $350,000 annual reduction in Tucson Hotel insurance costs for Fiscal Year 2026[143] - Management believes that improved operating profits, diversification opportunities, and NYSE-American listing provide positive equitable assets for continued success and positive cash flow[143] 22. Best Western Rewards Guest Voucher Expense This note discloses the expense incurred by the Trust for Best Western Rewards Guest Vouchers, primarily for guest free night redemptions - The Trust recorded approximately $66,000 in Best Western Rewards Guest Voucher Expense for the six months ended July 31, 2025, primarily for guest free night vouchers[144] 23. IBC Receivable This note provides background on IBC Hotels, LLC, its sale to a related party, and the Trust's ongoing involvement through a management subsidiary - IHT founded IBC Hotels, LLC in 2014 to address the unfulfilled need for independent hotel reservation services, selling it in 2018[145] - On March 5, 2025, a related party purchased IBC Hotels, LLC, and RRF LLLP (IHT's subsidiary) was hired to manage its revitalization, obtaining a five-year option to purchase IBC at cost[147][149] - This opportunity allows IHT to benefit from the significant global market for independent hotel reservations and branding[149] 24. Subsequent Events This note discloses significant events that occurred after the balance sheet date, including dividend policy, note extensions, and hotel operational performance - The Trust maintains a conservative dividend policy, paying two semi-annual dividends totaling $0.02 per share per fiscal year since 1971[150] - The note payable to IHT from the sale of IBC Hotels, LLC was extended to June 30, 2030, with interest at 3.25% payable at maturity, as RRF took over IBC management[152] - Hotel operations achieved record revenue and Gross Operating Profit in Fiscal Year 2025, with solid revenue expected for Fiscal Year 2026[153] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Trust's financial condition, results of operations, and future outlook, including discussions on hotel performance, diversification investments, liquidity, and key accounting policies General This section provides context for the management discussion and analysis, advising it be read with the financial statements and prior annual report - This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes for the first two Fiscal Quarters of Fiscal 2026 and the audited consolidated Form 10-K for the fiscal year ended January 31, 2025[158] Forward-Looking Statements This section highlights forward-looking statements within the report, outlining the inherent uncertainties and risk factors that could cause actual results to differ - The report contains forward-looking statements regarding dividends, hotel operations, financing, investments, UniGen expansion, hotel sales, and financial trends, subject to safe harbor provisions[159] - Uncertainties and factors that may cause actual results to differ materially include tariffs, investment risks (UniGen, IBC), inflation, economic recession, pandemics, political instability, labor costs, and competition[160][161] Overview This section provides a general description of the Trust's business, including its hotel operations, diversification investments, and strategic objectives - The Trust owns and operates two moderate-service hotels in Tucson, Arizona, and Albuquerque, New Mexico, with 270 suites, branded as InnSuites and Best Western[163] - The Trust manages IBC Hotels, LLC, offering independent hotel reservation and branding services, with an option to purchase IBC at cost[165] - Diversification includes an investment in UniGen Power Inc., developing efficient clean energy generation[165] - Results are significantly affected by the economy, travel, occupancy, room rates, cost management, and inflationary increases in operating expenses[167] - The strategic plan includes selling the two hotels at market value within 36 months, expanding IBC, and benefiting from the UniGen investment[171] Hotel Operations (Performance Metrics) This section analyzes the performance metrics of the Trust's hotel operations, including occupancy, average daily rate, and revenue per available room - Hotel expenses primarily include property taxes, insurance, corporate overhead, interest on mortgage debt, professional fees, depreciation, payroll, supplies, marketing, and utilities[174] | Metric | July 31, 2025 | July 31, 2024 | Change | %-Incr/Decr | | :-------------------------- | :------------ | :------------ | :----- | :---------- | | Albuquerque | | | | | | Occupancy | 91.97% | 89.86% | 2.11% | 2.35% | | Average Daily Rate (ADR) | $99.55 | $101.88 | $(2.33) | -2.29% | | Revenue Per Available Room (REVPAR) | $91.55 | $91.55 | $- | 0.00% | | Tucson | | | | | | Occupancy | 73.11% | 77.42% | -4.31% | -5.57% | | Average Daily Rate (ADR) | $94.62 | $96.23 | $(1.61) | -1.67% | | Revenue Per Available Room (REVPAR) | $69.17 | $74.50 | $(5.33) | -7.15% | | Combined | | | | | | Occupancy | 80.96% | 82.58% | -1.62% | -1.96% | | Average Daily Rate (ADR) | $96.95 | $98.78 | $(1.83) | -1.85% | | Revenue Per Available Room (REVPAR) | $78.48 | $81.57 | $(3.09) | -3.79% | - Albuquerque saw increased occupancy but decreased ADR, while Tucson experienced declines in all three metrics (Occupancy, ADR, REVPAR)[175] Results of Operations (Twelve Months Trailing) This section compares the Trust's financial performance for the twelve months trailing July 31, 2025, against the prior year, focusing on revenues, expenses, and net loss | Metric | FY 2025/2026 | FY 2024/2025 | Change | % Change | | :-------------------------- | :----------- | :----------- | :------- | :------- | | Total Revenues | $7,463,789 | $7,691,676 | $(227,887) | (3%) | | Operating Expenses | $8,107,325 | $8,558,603 | $(451,278) | (5%) | | Operating Loss | $(643,536) | $(866,927) | $223,391 | 26% | | Consolidated Net Loss | $(1,422,234) | $(586,036) | $(836,198) | (143%) | - Total revenues decreased by 3%, while operating expenses decreased by 5%, leading to a 26% improvement in operating loss[177] - Consolidated Net Loss significantly worsened by 143% to $(1,422,234), partly due to BW Rewards Guest Voucher Expense and the absence of Employee Retention Benefit[179] Results of Operations (Six Months) This section analyzes the Trust's financial performance for the six months ended July 31, 2025, compared to the prior year, detailing revenue, expenses, and net loss | Metric | July 31, 2025 | July 31, 2024 | Change | % Change | | :------------------------------------------ | :------------ | :------------ | :------- | :------- | | Total Revenues | $4,004,635 | $4,134,362 | $(129,727) | (3%) | | Operating Expenses | $4,020,939 | $4,249,872 | $(228,933) | (5%) | | Operating Income (Loss) | $(16,304) | $(115,510) | $99,206 | 86% | | Consolidated Net Loss | $(361,989) | $(331,387) | $(30,602) | 9% | | Net Loss Attributable to Controlling Interests | $(512,212) | $(527,416) | $15,204 | 3% | | Net Loss Per Share – Basic & Diluted | $(0.06) | $(0.06) | $0.00 | 0% | - Total revenues decreased by 3% due to a 4% decrease in room revenues, despite prior refurbishments[183][186] - Operating expenses decreased by 5%, primarily due to cost cuts in corporate staffing and sales/marketing, leading to an 86% improvement in operating loss[187][190][191] - Consolidated Net Loss increased by 9%, while Net Loss Attributable to Controlling Interests improved by 3%[180][184] Results of Operations (Three Months) This section examines the Trust's financial performance for the three months ended July 31, 2025, compared to the prior year, focusing on revenue, expenses, and net loss | Metric | July 31, 2025 | July 31, 2024 | Change | % Change | | :------------------------------------------ | :------------ | :------------ | :------- | :------- | | Total Revenues | $1,798,872 | $1,840,392 | $(41,520) | (2%) | | Operating Expenses | $2,037,572 | $2,126,348 | $88,776 | 4% | | Operating Loss | $(238,700) | $(285,956) | $47,256 | 17% | | Consolidated Net Loss | $(401,019) | $(410,002) | $8,983 | 2% | | Net Loss Attributable to Controlling Interests | $(391,180) | $(370,883) | $(20,297) | (5%) | | Net Loss Per Share – Basic & Diluted | $(0.04) | $(0.04) | $0.00 | 0% | - Total revenues decreased by 2%, primarily due to a 3% decrease in room revenues[198][201] - Operating expenses decreased by 4%, leading to a 17% improvement in operating loss[197][202] - Consolidated Net Loss improved by 2%, while Net Loss Attributable to Controlling Interests worsened by 5%[197][199] Liquidity and Capital Resources This section discusses the Trust's ability to meet its short-term and long-term financial obligations, detailing cash sources, credit lines, and cash flow activities - Primary cash sources are hotel management fees and distributions from hotel operations, supplemented by intercompany loan repayments, potential asset sales/refinancing, and diversified investment returns[211] - As of July 31, 2025, the Trust had approximately $0.2 million in cash, three bank lines of credit, and a $300,000 related party line of credit, which management believes is sufficient for the next twelve months[213] - Net cash provided by operating activities was $127,000 for the six months ended July 31, 2025, a significant improvement from cash used of $504,000 in the prior year[217] - Net cash used in investing activities increased to $415,000, primarily due to improvements and additions to hotel properties[220] - Net cash provided by financing activities was $402,000, mainly due to borrowing on Notes Payable – Related Party[221][224] Competition in the Hotel Industry This section analyzes the competitive landscape of the hotel industry for the Trust's properties and its strategic response through diversification - The hotel industry is highly competitive, with both Tucson and Albuquerque hotels facing competition from other mid-market hotels and alternative lodging facilities like Airbnb[229] - Despite record Gross Operating Profit in Fiscal Year 2025, Fiscal Year 2026 is slightly down but stable, with stable room revenue expected for the remainder of the year[229][231] - The Trust may diversify away from hotel investments into ventures like UniGen Power, Inc. and IBC Hotels, LLC, or pursue a reverse merger with a larger non-public entity[232] Critical Accounting Policies and Estimates This section identifies the most significant accounting policies and estimates that require management's judgment, particularly regarding asset valuation and revenue recognition - The most critical accounting policies relate to the valuation of hotel properties, including methods for recognizing and measuring asset impairment[234][235] - Management believes the current market value of the hotels is significantly higher than their depreciated book value and plans to sell both hotels within 36 months[236] - Revenue recognition for hotel operations is based on services rendered, bundling room nights with amenities, and is recorded when rooms are occupied and food/beverage sales are delivered[237][238][239][240] Compliance with Continued Listing Standards of NYSE American This section confirms the Trust's compliance with the NYSE American's continued listing standards for equity requirements - The Trust's Management received communication from the NYSE-American on August 29, 2022, confirming full compliance with all Continued Listing Standards Equity Requirements[242] Non-GAAP Financial Measures This section presents non-GAAP financial measures, Adjusted EBITDA and FFO, to provide additional insights into the Trust's operating and investment performance - Adjusted EBITDA and Funds From Operations (FFO) are presented as non-GAAP measures to evaluate operating performance, reflecting ongoing hotel real estate assets and investment performance[243][244][246] Six Months Ended | Metric | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Adjusted EBITDA | $140,000 | $35,000 | | FFO | $9,000 | $15,000 | Three Months Ended | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Adjusted EBITDA | $(73,000) | $(74,000) | | FFO | $(30,000) | $(64,000) | - Adjusted EBITDA significantly increased for the six-month period, while FFO decreased. For the three-month period, both Adjusted EBITDA and FFO showed improvement (less negative)[245][247] Future Positioning This section outlines the Trust's strategic plans, including the sale of hotel properties and diversification into clean energy and independent hotel services - The Trust continues to seek buyers for its two remaining hotel properties (Tucson and Albuquerque) at market value, aiming to sell them within 36 months[248][251] | Hotel Property | Book Value | Mortgage Balance | Estimated Market Asking Price | | :------------- | :--------- | :--------------- | :---------------------------- | | Albuquerque | $907,122 | $1,135,926 | $9,500,000 | | Tucson Oracle | $5,926,945 | $7,764,370 | $18,500,000 | | Total | $6,834,067 | $8,900,296 | $28,000,000 | - The long-term strategic plan includes benefiting from UniGen Power, Inc. and IBC Hotels, and pursuing a reverse merger with a larger private entity to list on the NYSE AMERICAN Exchange[253] Share Repurchase Program This section details the Trust's share repurchase program, driven by management's belief that the company's share price is undervalued - The Trust intends to continue repurchasing Shares of Beneficial Interest, believing the share price does not fully recognize the Trust's value due to depreciated book values, hotel operations, and potential from UniGen and IBC investments[254][288] - No shares were repurchased during the six months ended July 31, 2025, compared to 28,337 shares at an average price of $1.59 in the prior year[288] Off-Balance Sheet Arrangements This section confirms that the Trust does not have any off-balance sheet financing arrangements or unconsolidated subsidiaries - The Trust does not have any off-balance sheet financing arrangements or liabilities, nor any majority-owned or controlled subsidiaries not included in consolidated financial statements[255] Seasonality This section discusses the seasonal nature of the Trust's hotel operations and its implications for business vulnerability - Hotel operations are seasonal, with Tucson's highest occupancy in Q1/Q4 and Albuquerque's in Q2/Q3, which balances the Trust's overall hotel business seasonality[256] - Seasonality increases vulnerability to risks such as travel disruptions, labor shortages, cash flow issues, and adverse events like pandemics or economic downturns[257] Inflation This section addresses the impact of inflation on the Trust's operations and its strategies to manage rising costs through revenue adjustments - The Trust relies on hotel performance and its ability to increase revenue to keep pace with inflation, though competitive pressures may limit rate increases[258] - During Fiscal Year 2025, rates generally increased to offset inflationary increases in labor and other expenses, and rates are stable in Fiscal Year 2026[258] Investment in UniGen Power, Inc. This section details the Trust's diversification investment in UniGen Power Inc., a clean energy company, including its financial terms and development status - IHT made a $1 million diversification investment in UniGen Power Inc. in late Fiscal Year 2020/early Fiscal Year 2021, which is developing a patented efficient clean energy generation innovation[259] - The investment includes $1 million in convertible debentures (6% interest, convertible into 1 million shares), approximately 575,000 shares of UniGen stock, and warrants, potentially leading to 15-20% fully diluted equity ownership[261][262][263][264] - UniGen is delinquent on principal and interest payments, currently seeking additional investors, and its engineering is 61% complete for the prototype[261][266] - The market for UniGen's product is strong, with projected doubling of U.S. electricity demand over the next five years due to data centers, electric vehicles, and AI[260][267] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section states that quantitative and qualitative disclosures about market risk are not required for smaller reporting companies, which InnSuites Hospitality Trust is - Quantitative and Qualitative Disclosures About Market Risk are not required for smaller reporting companies[271] ITEM 4. CONTROLS AND PROCEDURES This section details the evaluation of the Trust's disclosure controls and procedures and internal control over financial reporting, concluding their effectiveness after remediation efforts Evaluation of Disclosure Controls and Procedures This section presents management's conclusion on the effectiveness of the Trust's disclosure controls and procedures as of July 31, 2025 - Management, including the CEO and CFO, concluded that disclosure controls and procedures were fully effective as of July 31, 2025[272] - Control systems provide reasonable, not absolute, assurance against error or fraud due to inherent limitations and resource constraints[273] Management's Report on Internal Control Over Financial Reporting This section outlines management's responsibility for maintaining adequate internal control over financial reporting and acknowledges its inherent limitations - Management is responsible for establishing and maintaining adequate internal control over financial reporting to ensure reliability and GAAP compliance[274] - Internal control over financial reporting may not prevent or detect all misstatements due to inherent limitations[275] Assessment of Internal Control over Financial Reporting This section details management's assessment of the effectiveness of internal control over financial reporting, concluding its full effectiveness as of July 31, 2025 - Management assessed the effectiveness of internal control over financial reporting as of January 31, 2025, using COSO criteria, and concluded it was fully effective as of July 31, 2025[276] Management's Remediation Initiatives This section describes the actions taken by management to address past deficiencies and enhance the Trust's internal controls over financial reporting - The Trust increased technical accounting expertise by hiring a seasoned CFO and Senior Staff Accountants to address past deficiencies and enhance internal controls[277] - Remediation efforts included improving the control environment, increasing GAAP knowledge, implementing formal processes for non-standard transactions, and enhancing management oversight[278] - These measures are believed to strengthen internal control over financial reporting and remediate material weaknesses, with ongoing improvements throughout Fiscal Years 2025 and 2026[279] Changes in Internal Control over Financial Reporting This section reports on positive changes in the Trust's internal control over financial reporting, attributing improvements to new staffing and ongoing efforts - Positive changes in internal control over financial reporting occurred during the three months ended July 31, 2025, with new staffing additions expected to assist with stability, technical accounting, and internal control issues[281] PART II. OTHER INFORMATION This section provides additional disclosures not covered in the financial information, including legal proceedings, risk factors, and exhibit listings ITEM 1. LEGAL PROCEEDINGS This section states that there are no legal proceedings to report for the Trust - There are no legal proceedings to report[284] ITEM 1A. RISK FACTORS This section outlines key risk factors affecting the Trust, including the lingering impact of COVID-19 on travel and the economy, and uncertainties related to tariffs - COVID-19 had a material detrimental impact on business, financial results, and liquidity in Fiscal Year 2021, though lodging demand and revenue have significantly recovered[285] - Uncertainty regarding tariffs in the current economy is a risk, though it is anticipated that tariff issues will be resolved, allowing travel to normalize[286] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section details the rights of holders of Shares of Beneficial Interest and the Trust's share repurchase activities, driven by management's belief in undervaluation - Holders of Shares of Beneficial Interest are entitled to dividends, share ratably in assets upon liquidation, and possess ordinary voting rights[287] - The Trust repurchased 0 shares for the six months ended July 31, 2025, compared to 28,337 shares at an average price of $1.59 in the prior year[288] - Management believes the Trust's share price is undervalued due to depreciated book values, strong hotel operations, and the potential of UniGen and IBC investments, and intends to continue repurchasing shares[288] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section confirms that there have been no defaults upon senior securities - There have been no defaults upon senior securities[290] ITEM 4. MINE SAFETY DISCLOSURES This section states that there are no mine safety disclosures to report - There are no mine safety disclosures to report[291] ITEM 5. OTHER INFORMATION This section indicates that there is no other information to report - There is no other information to report[292] ITEM 6. EXHIBITS This section lists the exhibits filed with the Form 10-Q, including certifications by the Chief Executive Officer and Chief Financial Officer, and Inline XBRL exhibits | Exhibit No. | Exhibit | | :------------ | :--------------------------------------------------- | | 31.1 | Section 302 Certification by Chief Executive Officer | | 31.2 | Section 302 Certification by Chief Financial Officer | | 32.1 * | Section 906 Certification of Principal Executive Officer and Principal Financial Officer | | 101 | Inline XBRL Exhibits | | 101.INS | Inline XBRL Instance Document | | 101.SCH | Inline XBRL Schema Document | | 101.CAL | Inline XBRL Calculation Linkbase Document | | 101.LAB | Inline XBRL Labels Linkbase Document | | 101.PRE | Inline XBRL Presentation Linkbase Document | | 101.DEF | Inline XBRL Definition Linkbase Document | | 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | SIGNATURES This section contains the signatures of the registrant's authorized officers, certifying the report on September 12, 2025 - The report was signed by James F. Wirth, Chairman and Chief Executive Officer, and Sylvin R. Lange, Chief Financial Officer, on September 12, 2025[297]