# Innsuites Hospitality Trust: Form 10-K for the period ended Jan 31, 2021

- Company: [Innsuites Hospitality Trust](/companies/iht.md) (CIK 82473)
- Form: 10-K
- Filed: 2021-05-17
- Accepted by EDGAR: May 17, 2021, 10:05 ET
- Period: 2021-01-31
- Accession: 0001493152-21-011629
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/82473/000149315221011629/form10-k.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/82473/000149315221011629/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-01-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 12 months, 2020-02-01 to 2021-01-31 | $4.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 12 months, 2020-02-01 to 2021-01-31 | −$2.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 12 months, 2020-02-01 to 2021-01-31 | $360.7k | us-gaap:InterestExpense |
| Income tax | 12 months, 2020-02-01 to 2021-01-31 | $68.7k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 12 months, 2020-02-01 to 2021-01-31 | −$1.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 12 months, 2020-02-01 to 2021-01-31 | −$0.31 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 12 months, 2020-02-01 to 2021-01-31 | −$807.4k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 12 months, 2020-02-01 to 2021-01-31 | $191.8k | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2021-01-31 | $1.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Long-term debt | at 2021-01-31 | $7.0m | us-gaap:LongTermDebt |

## Business

As filed, 14,405 characters.

INTRODUCTION TO OUR BUSINESS

InnSuites Hospitality Trust (the “***Trust”***) is headquartered in Phoenix, Arizona and is an unincorporated Ohio real estate investment trust formed on June 21, 1971. The Trust is not a real estate investment trust for federal taxation purposes but is taxed as a C-corporation. The Trust, with its affiliates RRF Limited Partnership, a Delaware limited partnership (the “***Partnership”***), and InnSuites® Hotels, Inc., a Nevada corporation (“***InnSuites Hotels”***), owns interests in two hotels, operates and provides management services for two hotels, and provides trademark license services. At January 31, 2021, and currently, the Trust owns a 75.89% sole general partner interest in the Partnership, which controls a 51.01% interest in the InnSuites hotel located in Tucson, Arizona, and a direct 20.67% interest in the InnSuites hotel located in Albuquerque, New Mexico. The Tucson and Albuquerque hotels are sometimes referred to as the “***Hotels”***. We anticipate selling one or both Hotels in the next twenty-four to thirty-six (24-36) months.

InnSuites Hotels Inc., a wholly-owned subsidiary of the Trust, provides management services for the two Trust Hotels and prior to its sale on December 18, 2020, for one hotel located in Tempe, Arizona (the “***Tempe Hotel”***) that is owned by affiliates of James F. Wirth, the Trust’s Chairman and Chief Executive Officer. The Trust has approximately 120 full-time employees and approximately 20 part-time employees.

The two Hotels have an aggregate of 270 hotel suites and operate as moderate -service hotels that apply a value studio and two-room suite operating philosophy formulated in 1980 by Mr. Wirth. The Trust hotels offer services such as free hot breakfast buffets and complimentary afternoon social hours plus amenities, such as microwave ovens, refrigerators, and free high-speed Internet access.

For the Fiscal Year 2022 ahead, February 1, 2021 through January 31, 2022, the Trust’s operations are focused on the continued recovery from the impact of the Corona Virus (COVID-19) pandemic, and the severe impact on the travel and hospitality industries which took place after February 1, 2020. The Trust’s primary business objective is to maximize returns to its shareholders through increases in asset value and long-term total returns to shareholders, including profitable sale of assets and growth of investments. The Trust seeks to achieve this objective through intensive management and marketing of the InnSuites© hotels, by selling hotel real estate at market prices well above book values and benefitting from diversified investments, including UniGen Power, Inc. (UPI). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Future Positioning” for a more detailed discussion of the Trust’s strategic objectives.

The Trust has a single class of Shares of Beneficial Interest, without par value, that are traded on the NYSE AMERICAN under the symbol “IHT.” The Partnership has two outstanding classes of limited partnership interests, Class A and Class B, which are identical in all respects, except that each Class A Partnership unit is convertible, at the option of the Class A holder, into one newly issued Share of Beneficial Interest of the Trust and each Class B Partnership unit is convertible, upon approval of the Board of Trustees of the Trust, into one newly-issued Share of Beneficial Interest of the Trust. The Partnership Agreement of the Partnership subjects both general and limited partner units to certain restrictions on transfer.

MANAGEMENT AND LICENSING CONTRACTS

The Trust directly manages the Hotels through the Trust’s wholly-owned subsidiary, InnSuites Hotels, Inc. Under the management agreements, InnSuites Hotels manages the daily operations of both Trust Hotels. All Trust managed Hotel expenses, revenues and reimbursements among the Trust, InnSuites Hotels and the Partnership have been eliminated in consolidation. The management fees for the Hotels are 5% of room revenue and a monthly accounting fee of $2,000 per hotel. These agreements have no expiration dates but may be cancelled by either party with 30-days written notice, or potentially sooner in the event the property changes ownership.

The Trust also provides the use of the “InnSuites” trademark to the Hotels and stands ready to offer trademark services through the Trust’s wholly-owned subsidiary, InnSuites Hotels, Inc., which is included in the management fee. The InnSuites trademark expires in January 2027.

These revenues are included in the management and trademark fees revenues in the consolidated statement of operations of our financial statements.

MEMBERSHIP AGREEMENTS

InnSuites Hotels has entered into membership agreements with Best Western International, Inc. (“***Best Western”***) with respect to each of the two Hotels. In exchange for use of the Best Western name, trademark and reservation system, each Hotel pays marketing and reservation fees to Best Western based on reservations received through the use of the Best Western reservation system, a marketing fee based upon the monthly room revenues, and the number of available suites at the Hotels. The agreements with Best Western are year-to-year. Best Western requires that the Hotels meet certain requirements for room quality, and the two Hotels are subject to removal from the Best Western reservation system if these requirements are not met. During the past year, the two Hotels received significant reservations through the Best Western reservation system. Under these arrangements, fees paid for membership fees and reservations were approximately $171,000 and $277,000, recorded in on the Consolidated Statement of Operations, for Fiscal Years ended January 31, 2021, and 2020, respectively.

COMPETITION IN THE HOTEL INDUSTRY

The hotel industry is highly competitive. There are clear signs and trends of economic recovery in this early part of fiscal year 2022, virtually all our fiscal year 2021 from February 1, 2020 until January 31, 2021 was negative due to the impact of COVID-19. The Tucson hotel especially has experienced strong recovery of revenue and even stronger rebounds of gross operating profit to continue due to the ongoing stringent cost control measures. The Albuquerque hotel is doing better than its competitors but nonetheless is very adversely affected by travel restrictions. Despite this revenues are growing and gross operating profit is growing even more again due to stringent cost control measures. The drastic impact of COVID-19 to the world economy and hospitality industry resulted in severely reduced occupancy and significant reduction in room rates. Continued competition for reduced demand in corporate, leisure, group, and government business in the markets in which we operate, will affect our ability to maintain room rates and maintain market share. Each of the Hotels faces competition primarily from other mid-market hotels located in its immediate vicinity, but also competes with hotel properties located in other geographic markets, and increasingly from alternative lodging facilities, such as Airbnb. While none of the Hotels’ competitors dominate any of their geographic markets, some of those competitors may have greater marketing and financial resources than the Trust.

Certain additional hotel property refurbishments have been completed by competitors in both Hotels’ markets, and additional hotel property developments may be built in the future. Such hotel developments could have an adverse effect on the revenue of our Hotels in their respective markets.

The Trust’s hotel investments are located in Arizona and New Mexico. With the completed renovations at our Tucson, Arizona and Albuquerque, New Mexico hotel properties, those hotels are expected to see incremental demand during the next 18 months, as supply had been steady in those respective markets, and is expected to increase as COVID-19 restrictions phase out. Either an increase in supply or a decline in demand could result in increased competition, which could have an adverse effect on occupancy, room rates and revenues of our Hotels in their respective markets. The hotels experienced a decrease in demand due to impact of the COVID-19 virus and the related restrictions and reduction of travel after February 1, 2020.

The Trust may not invest further in hotels, but rather diversify into investments such as the investment made by the Trust in December 2019 in the innovative UniGen Power, Inc. (UPI), efficient clean energy power generation company. The Trust may continue to seek further diversification through a reverse merger with a larger non-public entity.

REGULATION

The Trust is subject to numerous federal, state, and local government laws and regulations affecting the hospitality industry, including usage, building and zoning requirements and the laws and regulations related to the preparation and sale of food and beverage such as health and liquor license laws. A violation of any of those laws and regulations or increased government regulation could require the Trust to make unplanned expenditures which may result in higher operating costs. Compliance with these laws is time intensive and costly and may reduce the Trust’s revenues and operating income.

Under the Americans with Disabilities Act of 1990 (the “***ADA”***), all public accommodations are required to meet certain readily achievable federal requirements related to access and use by disabled persons. In addition to ADA work completed to date, the Trust may be required to remove additional access barriers or make unplanned, substantial modifications to its Hotels to comply with the ADA or to comply with other changes in governmental rules and regulations, or become subject to claims, fines, and damage awards, any of which could reduce the number of total available rooms, increase operating costs, and have a negative impact on the Trust’s results of operations.

Our hotel properties are subject to various federal, state, and local environmental laws that impose liability for contamination. Under these laws, governmental entities have the authority to require us, as the current or former owner of the property, to perform or pay for the clean-up of contamination (including swimming pool chemicals or hazardous substances or biological waste) at or arising from the property and to pay for natural resource damage arising from contamination. These laws often impose liability without regard to whether the owner or operator knew of or caused the contamination. Such liability can be joint and several, so that each covered person can be responsible for all the costs involved, even if more than one person may have been responsible for the contamination. We can also be liable to private parties for costs of remediation, personal injury, death and/or property damage resulting from contamination at or originating from our hotel properties. Moreover, environmental contamination can affect the value of a property and, therefore, an owner’s ability to borrow funds using the property as collateral or to sell the property on favorable terms or at all. Furthermore, persons who sent waste to a waste disposal facility, such as a landfill or an incinerator, may be liable for costs associated with cleanup of that facility.

The Trust is also subject to laws governing our relationship with employees, including minimum wage requirements, overtime, working conditions and work permit requirements. There are frequent proposals under consideration, at the federal and state levels, to increase the minimum wage. Additional increases to the state or federal minimum wage rate, and employee benefit costs including health care or other costs associated with employees could increase expenses and result in lower operating margins.

The Trust collects and maintains information relating to its guests for various business purposes, including maintaining guest preferences to enhance the Trust’s customer service and for marketing and promotional purposes. The collection and use of personal data are governed by privacy laws and regulations. Compliance with applicable privacy regulations may further increase the Trust’s operating costs and/or adversely impact its ability to service its guests and market its products, properties, and services to its guests. In addition, non-compliance with applicable privacy regulations by the Trust (or in some circumstances non-compliance by third parties engaged by the Trust) could result in fines or restrictions on its use or transfer of data.

SEASONALITY OF THE HOTEL BUSINESS

The Hotels’ operations historically have been somewhat seasonal. The Tucson Hotel typically experiences its highest occupancy in the first fiscal quarter and, to a lesser extent, the fourth fiscal quarter (the winter high season). The second fiscal quarter tends to be the lowest occupancy period at the Tucson Hotel. This seasonality pattern can be expected to cause fluctuations in the Trust’s quarterly revenues. The hotel located in New Mexico historically experiences their most profitable periods during the second and third fiscal quarters (the summer high season), providing balance to the general seasonality of the Trust’s hotel business.

The seasonal nature of the Trust’s business increases its vulnerability to risks such as labor force shortages and cash flow issues. Further, if an adverse event such as an actual or threatened terrorist attack, viral outbreak or pandemic, international conflict, data breach, regional economic downturn or poor weather conditions should occur during the high season, the adverse impact to the Trust’s revenues could likely be greater as a result of its seasonal business.

OTHER AVAILABLE INFORMATION

We also make available, free of charge, on our Internet website at www.innsuitestrust.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we file such material with, or furnish it to, the Securities and Exchange Commission (the “***SEC”***). Information on our Internet website shall not be deemed incorporated into, or be part of, this report.

## Properties

As filed, 1,668 characters.

The Trust maintains its administrative offices at the InnSuites Hotels Centre, at 1730 E. Northern Avenue, Suite 122, Phoenix, Arizona 85020 in a space leased by the Trust from a third party. The two Hotels are operated as InnSuites Hotels, and both Hotels are also marketed as Best Western® Hotels. The Hotels operate in the following locations:

- Best Western InnSuites Tucson Foothills Hotel & Suites. 6201 N Oracle Rd., Tucson, AZ 85704
- Best Western InnSuites Albuquerque Airport Hotel & Suites. 2400 Yale Boulevard SE, Albuquerque, NM 87106

In the fiscal years ended January 31, 2019, and January 31, 2020, we remodeled 100% of each property’s available suites and public areas. The Albuquerque Hotel added six additional suites during the fiscal quarter ending April 30, 2018 by splitting several two-room suites into individual suites. The Trust owns a direct 20.67% interest in the InnSuites Hotel and Suites Airport Albuquerque Best Western Hotel. The Partnership owns a 51.01% interest in the InnSuites Hotel and Suites Tucson Oracle Best Western Hotel. The Trust owns a 75.89% general partner interest in the Partnership.

See “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – General” below for a discussion of occupancy rates at the Hotels.

See Note 11 to the Trust’s Consolidated Financial Statements – “Mortgage Notes Payable” below for a discussion of mortgages encumbering the Hotels.

See Note 16 to the Trust’s Consolidated Financial Statements – “Leases” for a discussion of the lease for our corporate headquarters and the non-cancellable ground lease to which our Albuquerque Hotel is subject.

## Legal proceedings

As filed, 227 characters.

The Trust is not a party to, nor are any of its properties subject to, any material litigation or environmental regulatory proceedings. See Note 20 to Trust’s Consolidated Financial Statements – “Commitments and Contingencies”.

## Market risk

As filed, 52,690 characters.

GENERAL

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this Form 10-K.

We are engaged in the ownership and operation of hotel properties. At January 31, 2021, the Trust had two moderate -service hotels in Tucson, Arizona and Albuquerque, New Mexico with 270 hotel suites. Both of our Trust Hotels are branded through membership agreements with Best Western, and both are also trademarked as InnSuites Hotels. We are also involved in various operations incidental to the operation of hotels, such as the operation of a limited service restaurant, and bar, as well as meeting/banquet room rentals.

At January 31, 2021, we owned a direct 20.67% interest in the Albuquerque, New Mexico Hotel, and, together with the Partnership, owned a 51.01% interest in the Tucson, Arizona. Hotel.

Our operations consist of one reportable segment – Hotel Operations & Hotel Management Services. Hotel Operations derives its revenue from the operation of the Trust’s two hotel properties with an aggregate of 270 suites in Arizona and New Mexico. Hotel management services, provides management services for the Trust’s two Hotels and a non-owned hotel in Tempe, Arizona. As part of our management services, we also provide trademark and licensing services. The Tempe hotel was sold on December 16, 2020.

Our results are significantly affected by the overall economy and travel, occupancy and room rates at the Hotels, our ability to manage costs, changes in room rates, and changes in the number of available suites caused by the Trust’s disposition activities. Results are also significantly impacted by overall economic conditions and conditions in the travel industry. Unfavorable changes in these factors, such as the virus-related travel slowdown in the fiscal year starting February 1, 2020, can and have negatively impacted hotel room demand and pricing, which reduces our profit margins. Additionally, our ability to manage costs could be adversely impacted by significant increases in operating expenses, resulting in lower operating margins and higher hourly labor costs. Either a further increase in supply or a further decline in demand could result in increased competition, which could have an adverse effect on the rates and revenue of the Hotels in their respective markets.

We experienced extremely weak economic conditions during Fiscal Year 2021, ended January 31, 2021, primarily a result of the Covid-19 virus pandemic. We anticipate slow recovery from weak travel and hospitality industry for much of the current Fiscal Year 2022, ending January 31, 2022 due to the Covid-19 travel related restrictions and decline in travel. We expect the major challenge for fiscal year 2022 to be the continued recovery of the travel industry, and our Hotel’s occupancy levels, followed by room rates. We believe that we have positioned the Hotels to remain competitive through our now completed refurbishment(s), by offering a relatively large number of fully refurbished two-room suites at each location, and by maintaining robust complementary guest items, including complimentary breakfast and free Internet access.

Our strategic plan is to continue to obtain the full benefit of our real estate equity, by marketing the remaining two Hotels over the next 12-36 months. In addition, the Trust is seeking a larger private reverse merger partner that may benefit from a merger that would afford that partner access to our listing on the NYSE AMERICAN. In the process of reviewing merger opportunities, the Trust identified and invested $1 million in Unigen Power, Inc. (“Unigen”, or “UPI), an innovative efficient clean energy power generation company. The Trust has invested $1 million debentures convertible into 1 million shares of UniGen Power Inc., and in addition has acquired warrants to purchase approximately an additional 2 million UniGen shares over the next approximately two to three years, which could result up to 25% ownership in UPI. For more information on our strategic plan, including information on our progress in disposing of our hotel properties and expanding energy diversification, see “Future Positioning” in this Management Discussion and Analysis of Financial Condition and Results of Operations.

Our expenses consist primarily of property taxes, insurance, corporate overhead, interest on mortgage debt, professional fees, depreciation of the Hotels and hotel operating expenses. Hotel operating expenses consist primarily of payroll, guest and maintenance supplies, marketing, and utilities expenses. Management believes that a review of the historical performance of the operations of the Hotels, particularly with respect to occupancy, which is calculated as rooms sold divided by total rooms available, average daily rate (“***ADR”***), calculated as total room revenue divided by number of rooms sold, and revenue per available room (“***REVPAR”***), calculated as total room revenue divided by number of rooms available, is appropriate for understanding revenue from the Hotels. In fiscal year 2021, as compared with fiscal 2020, occupancy decreased approximately 24.21% to 56.24% from 80.45% in the prior fiscal year. ADR decreased by $7.64, or 9.41%, to $73.54 in fiscal year 2021 from $81.18 in fiscal year 2020. The decreased occupancy and decreased ADR resulted in a decrease in REVPAR of $23.96, or 36.69%, to $41.35 in fiscal year 2021 from $65.31 in fiscal year 2020. The decrease in Occupancy, ADR and REVPAR reflect the Covid-19 travel lockdown and resulting depressed economy.

For the fiscal year ending January 31, 2022, we anticipate continued Covid-19 pressure, moderately increased occupancy, and flat rates (ADR), resulting in relatively flat REVPAR all due to the COVID-19 virus-related travel/hospitality slowdown. Additionally, we expect some offsetting benefit from the expected forgiveness of debt related to the Small Business Administration (SBA) Payroll Protection Program (PPP) loans. We had a total of three PPP loans, one of which had been granted forgiveness in the amount of approximately $86,700 in January 2021, subsequently another loan was forgiven in March 2021 for $228,602 and a loan was granted forgiveness in the amount of approximately $187,685 also in March 2021.

The following table shows certain historical financial and other information for the periods indicated:

| Albuquerque | For the Twelve Months Ended January 31, 2021 | 2020 | Point Change | %-Incr/decr |
| --- | ---: | ---: | ---: | ---: |
| Occupancy | 56.50% | 89.60% | (33.10) | -36.94% |
| Average Daily Rate (ADR) | $66.37 | $80.35 | $(13.98) | -17.40% |
| Revenue Per Available Room (REVPAR) | $37.51 | $72.02 | $(34.51) | -47.92% |

8

| Tucson | For the Twelve Months Ended January 31, 2021 | 2020 | Point Change | %-Incr/decr |
| --- | ---: | ---: | ---: | ---: |
| Occupancy | 57.60% | 74.40% | -16.80 | -22.58% |
| Average Daily Rate (ADR) | $73.94 | $81.00 | $(7.06) | -8.72% |
| Revenue Per Available Room (REVPAR) | $42.58 | $60.30 | $(17.72) | -29.39% |

| Combined | For the Twelve Months Ended January 31, 2021 | 2020 | Point Change | %-Incr/decr |
| --- | ---: | ---: | ---: | ---: |
| Occupancy | 57.05% | 82.00% | -24.95 | -30.43% |
| Average Daily Rate (ADR) | $70.16 | $80.68 | $(10.52) | -13.04% |
| Revenue Per Available Room (REVPAR) | $41.35 | $65.31 | $(23.96) | -36.69% |

No assurance can be given that occupancy, ADR and/or REVPAR will not increase or decrease as a result of changes in national or local economic or hospitality industry conditions.

We enter into transactions with certain related parties from time to time. For information relating to such related party transactions see the following:

- For a discussion of management and licensing agreements with certain related parties, see “Item 1 – Business – Management and Licensing Contracts.”
- For a discussion of guarantees of our mortgage notes payable by certain related parties, see Note 11 to our Consolidated Financial Statements – “Mortgage Notes Payable.”
- For a discussion of our equity sales and restructuring agreements involving certain related parties, see Notes 3, and 4 to our Consolidated Financial Statements – “Sale of Ownership Interests in Albuquerque Subsidiary,” and “Sale of Ownership Interests in Tucson Hospitality Properties Subsidiary,” respectively.
- For a discussion of other related party transactions, see Note 19 to our Consolidated Financial Statements – “Other Related Party Transactions.”

***Results of operations of the Trust for the fiscal year ended January 31, 2021 compared to the fiscal year ended January 31, 2020.***

### Overview

A summary of total Trust operating results for the fiscal years ended January 31, 2021 and 2020 is as follows:

|  | 2021 | 2020 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total Revenues | $4,202,574 | $6,568,171 | $(2,365,597) | (36)% |
| Operating Expenses | 7,014,719 | 8,420,980 | (1,406,261) | (17)% |
| Operating Loss | (2,812,145) | (1,852,809) | (959,336) | (52)% |
| Interest Income | 276,320 | 146,645 | 129,675 | 88% |
| Interest Expense | (360,676) | (566,682) | (206,006) | (36)% |
| Income Tax Benefit | 68,661 | 294,402 | (225,741) | (77)% |
| Consolidated Net Loss | (2,827,840) | (1,978,444) | (849,396) | (43)% |

The Chief Operating Decision Maker (“CODM”), Mr. Wirth, CEO of the Trust, has determined that the Trust operations are comprised of one reportable segment, Hotel Operations & Hotel Management Services (continuing operations) segment that has ownership interest in two hotel properties with an aggregate of 270 suites in Arizona and New Mexico.

The Trust has its hotel investments in the southwest region of the United States. The CODM does not review assets by geographical region; therefore, no income statement or balance sheet information by geographical region is provided.

REVENUE

For the twelve months ended January 31, 2021, we had total revenue of approximately $4,203,000 compared to approximately $6,568,000 for the twelve months ended January 31, 2020, a decrease of approximately $2,366,000, or 36%.

We realized a 38% decrease in room revenues during fiscal year 2021 as room revenues were approximately $3,905,000 for the fiscal year ending January 31, 2021 as compared to approximately $6,278,000 for the fiscal year ending January 31, 2020. With the decrease in room revenue and general occupancy, our food and beverage revenue decreased by 18% to approximately $56,000 for fiscal year 2021 as compared to approximately $68,000 during fiscal year 2020, a decrease of approximately $12,000. We also realized an approximate 32% decrease in management and trademark fee revenues during fiscal year 2021 to approximately $116,000 as compared to approximately $170,000 during fiscal year 2020. Management and trademark fee revenues decreased during fiscal year 2021 as a result of the loss of management fees due to the sale of the Tempe hotel. Management fees remained unchanged year on year at 5%. We realized an approximate 143% increase in other revenues from the hotel properties during fiscal year 2021 to approximately $126,000 as compared to approximately $52,000 during fiscal year 2020.

EXPENSES

Total expenses before interest expense and income tax provision were approximately $7,015,000 for the twelve months ended January 31, 2021 reflecting a decrease of approximately $1,406,000 compared to total expenses before interest expense and income tax provision of approximately $8,421,000 for the twelve months ended January 31, 2020. The decrease was primarily due to a decrease in operating expenses related to decreased occupancy and revenues at the hotel properties, offset by sales and occupancy expense. Specific expense comparisons to the prior fiscal year are detailed in the following categories.

Room expenses consisting of salaries and related employment taxes for property management, front office, housekeeping personnel, reservation fees and room supplies were approximately $1,526,000 for the fiscal year ended January 31, 2021 compared to approximately $2,033,000 in the prior year period for a decrease of approximately $507,000, or 25%. Room expenses decreased as occupancy at the hotels decreased, and reduced expenses were incurred with the decreased occupancy.

General and administrative expenses include overhead charges for management, accounting, shareholder, and legal services. General and administrative expenses of approximately $1,958,000 for the twelve months ended January 31, 2021, decreased approximately $215,000 from approximately $2,173,000 for the twelve months ended January 31, 2020 primarily due to lower charges in corporate staffing in support of the hotels and property sales efforts.

Sales and marketing expense decreased approximately $190,000, or 33%, to approximately $380,000 for the twelve months ended January 31, 2021 from approximately $570,000 for the twelve months ended January 31, 2020. Open positions for sales and marketing resources, due to a tight labor market, remained unfilled, and accounted for the decrease.

Repairs and maintenance expense decreased by approximately $48,000, or 12%, to approximately $355,000 for the twelve months ended January 31, 2021 from approximately $403,000 for the twelve months ended January 31, 2020. Having completed the property improvements at our Tucson, Arizona hotel Management anticipates the improvements which complies with the increasing Best Western standards, will (after the adverse effects of travel restrictions and slowdown), lead to improvement in guest satisfaction and will drive additional revenue growth through increased occupancy and increased rates in the year ahead.

Hospitality expense decreased by approximately $359,000, or 70%, to approximately $151,000 for the twelve months ended January 31, 2021 from approximately $510,000 for the twelve months ended January 31, 2020. The decrease was primarily due to the reduced occupancy and reduced breakfast offerings at the hotel properties due to COVID-19 restrictions.

Utility expenses decreased approximately $26,000, or 7%, to approximately $357,000 reported for the twelve months ended January 31, 2021 from approximately $383,000 for the twelve months ended January 31, 2020. The decrease was primarily due to the decrease in Hotel occupancy.

Hotel property depreciation expenses decreased by approximately $71,000 to approximately $831,000 for the twelve months ended January 31, 2021 from approximately $902,000 for the twelve months ended January 31, 2020. Decreased depreciation resulted from the capital expenditures being fully depreciated, and thus less expense was incurred and recorded.

Real estate and personal property taxes, Insurance and Ground Rent expenses decreased approximately $10,000, or 2%, to approximately $482,000 for the twelve months ended January 31, 2021 from approximately $492,000 for the twelve months ended January 31, 2020. The decrease was due primarily to savings in insurance expense.

Sales and occupancy tax expenses increased approximately $844,000, or 100%, to approximately $844,000 for the twelve months ended January 31, 2021 from approximately $0 for the twelve months ended January 31, 2020. This represents a liability arising from an occupancy tax discrepancy generated from our Tucson Oracle and Albuquerque hotels from prior periods. These additional amounts due for Hotel sales and occupancy expenses are not expected to be recurring, since the Trust collects and remits all necessary occupancy taxes to the state monthly. No additional assessments have transpired since September 2020. Management has assessed the materiality of the discrepancy on prior reported periods and has concluded it is qualitatively immaterial to the readers of our Consolidated Financial Statements. The Trust is currently reviewing the sufficiency of the extra-ordinary assessments.

LIQUIDITY AND CAPITAL RESOURCES

#### Overview – Hotel Operations & Hotel Management Services

One principal source of cash to meet our cash requirements, including dividends to our shareholders, is our share of the Partnership’s cash flow of the Tucson hotel, and quarterly distributions from the Albuquerque, New Mexico properties. Another principal source of cash is management fees earned in the operation of the Trusts’ two hotels and potential future real estate hotel sales. An affiliated hotel was sold on December 16, 2020. Also, another source of cash is repayment of the intercompany loans, which was recently facilitated with the Tempe Hotel sale. The Partnership’s principal source of revenue is hotel operations for the hotel property it owns in Tucson, Arizona. Our liquidity, including our ability to make distributions to our shareholders, will depend upon our ability, and the Partnership’s ability, to generate sufficient cash flow from hotel operations, from management fees, and from the potential sale and/or refinance of the hotel, and to service our debt and the source of repayment of intercompany loan from Tucson and Albuquerque.

Hotel operations are significantly affected by occupancy and room rates at the Hotels in the Fiscal year 2021. We anticipate occupancy will partially recover from the Virus, and the related economic and travel slowdown during Fiscal 2022. Capital improvements are expected to decrease from the prior year.

With approximately $1,703,000 of cash as of January 31, 2021 and the availability of a $250,000 bank lines of credit, an up to $2,000,000 related party Demand/Revolving Line of Credit/Promissory Note, and the availability of Advances to Affiliate credit facilities and available Bank line of Credit, we believe that we will have enough cash on hand to meet all of our financial obligations as they become due for at least the next twelve months from the issuance date of the these consolidated financial statements. In addition, our management is analyzing other strategic options available to us, including raising additional funds, additional asset sales, increasing borrowings at our Tucson hotel. However, such transactions may not be available on terms that are favorable to us, or at all.

IHT and InnDependent Boutique Collections Hotels (IBC), agreed to extend the payment schedule on IBC’s note receivable by one (1) year, extending the first payment from November 2020 to November 2021. The reason for the extension is in support of IBC’s cash requirements; related to IBC’s realization of fully benefiting from a return in occupancy and travel. These potential benefits in turn improve IHT’s secured position on its note receivable from IBC. Management also believes that even with an additional extension repayment term due to COVID-19 that the future collectability of the current carrying value of the note is probable and not subject to further impairment, or allowance for the year ended January 31, 2021.

Refer to Note 6 – “Note Receivable” for information related to the Sale of IBC Hospitality Technologies (IBC).

There can be no assurance that we will be successful in refinancing debt or raising additional or replacement funds, or that these funds may be available on terms that are favorable to us. If we are unable to raise additional or replacement funds, we may be required to sell certain of our assets to meet our liquidity needs, which may not be on terms that are favorable.

We anticipate no additional new-build hotel supply during the remaining fiscal year 2022, and accordingly we anticipate some recovery of revenues and operating margins. We expect the major challenge for the upcoming fiscal year to be the economic and travel recovery of leisure, corporate, group, and government business in the markets in 2022 which we operate, which may affect our ability to recover occupancy and eventually increase room rates while maintaining and/or building market share.

Negative cash used in operating activities totaled approximately $807,000 during the twelve months ended January 31, 2021 as compared to net cash used of approximately $953,000 during the twelve months ended January 31, 2020. Consolidated net loss was approximately $2,828,000 for the twelve months ended January 31, 2021 as compared to consolidated net loss for the twelve months ended January 31, 2020 of approximately $1,978,000 a major explanation in each Fiscal Year was non-cash depreciation expense. Explanation of the differences between these fiscal years are explained above in the results of operations of the Trust.

Changes in the adjustments to reconcile net loss for the twelve months ended January 31, 2021 and 2020, respectively, consist primarily of operating lease costs, stock-based compensation, hotel property depreciation, and changes in assets and liabilities. Hotel property depreciation was approximately $831,000 during the twelve months ended January 31, 2021 compared to approximately $902,000 during the twelve months ended January 31, 2020, a decrease of $71,000 as the Trust recognized less depreciation as capitalized fixed assets became fully depreciated. During Fiscal Year ended January 31, 2020, IHT impaired the note receivable by $825,000 and no further impairment was required in the year ended January 31, 2021.

Changes in assets and liabilities for accounts receivable, prepaid expenses and other assets and accounts payable and accrued expenses totaled approximately $909,000 and ($438,000) for the twelve months ended January 31, 2021 and 2020, respectively. This significant increase in changes in assets and liabilities for the twelve months ended January 31, 2021 compared to the twelve months ended January 31, 2020 was due to the increase in operating liabilities related to ongoing operations.

Net cash provided by investing activities totaled approximately $503,000 for the twelve months ended January 31, 2021 compared to net cash provided by investing activities of approximately $1,305,000 for twelve months ended January 31, 2020. The decrease in net cash provided by investing activities during the twelve months ended January 31, 2021 was due primarily due to the additional investment into UniGen.

Net cash provided by financing activities totaled approximately $807,000 and $99,000, respectively, for the twelve months ended January 31, 2021 and 2020. The increase of approximately $708,000 was primarily due to the repayments of the Tempe Hotel related party note payable, borrowings on the Rare Earth related party note payable, and SBA PPP loans, which became available soon after the Covid-19 Pandemic arose, as previously discussed.

Principal payments on mortgage notes payable were approximately $168,000 and $119,000 during the twelve months ended January 31, 2021 and 2020, respectively. Net payments and borrowings on notes payable to banks was approximately ($17,000) and approximately $8,000 during the twelve months ended January 31, 2021 and 2020, respectively.

Borrowing on notes payables – related party, netted against collections on note payable–related party, was approximately $1,434,000 and ($323,000) of cash used in financing activities during the twelve months ended January 31, 2021 and 2020, respectively.

Borrowings on other notes payables netted against payments on other note payable was approximately $168,000 and ($613,000) of net cash provided by (used in) financing activities during the twelve months ended January 31, 2021 and 2020, respectively.

Net proceeds from sales of non-controlling ownership interests in subsidiaries decreased by approximately $20,000 as net purchases of non-controlling ownership interest was ($20,000) for the twelve months ended January 31, 2021 and approximately $0 for the twelve months ended January 31, 2020.

We had no sales of our IHT stock for cash for the twelve months ended January 31, 2021 and 2020.

During the twelve months ended January 31, 2021, our distributions to non-controlling interest holders was approximately $150,000 compared with approximately $521,000 for the twelve months ended January 31, 2020.

We continue to contribute to a Capital Expenditures Fund (the “Fund”) an amount equal to 4% of the InnSuites Hotels’ revenues from operation of the Hotels. The Fund is restricted by the mortgage lender for one of our properties. As of January 31, 2021, and 2020, there were no monies held in these accounts reported on our Consolidated Balance Sheet as “Restricted Cash.” The Fund is intended to be used for capital improvements to the Hotels and refurbishment and replacement of furniture, fixtures, and equipment. During the twelve months ended January 31, 2021 and 2020, the Hotels spent approximately $37,000 and $324,000, respectively, for capital expenditures. The capital expenditures were primarily associated with the property improvements at the Hotels, as required to meet continuing Best Western standards. We consider most of these improvements to be revenue producing. Therefore, these amounts are capitalized and depreciated over their estimated useful lives. For the remaining fiscal year 2022 capital expenditures, we plan on spending less on capital improvements as we have completed our property improvements at our Tucson, Arizona hotel which required significant amounts of capital improvements during the nine months ending October 31, 2019. Repairs and maintenance were charged to expense as incurred and approximated $355,000 and $403,000 for the twelve months ended January 31, 2021 and 2020, respectively.

We have minimum debt payments, net of debt discounts, of approximately $216,015 and approximately $1,177,729 due during fiscal years 2022 and 2023, respectively. Minimum debt payments due during fiscal year 2022 and 2023 include approximately $169,000 and $177,000 of mortgage notes payable, and approximately $47,216 and $1,000,877 of other notes payable, which are secured promissory notes outstanding to unrelated third parties arising from the Shares of Beneficial Interest and Partnership unit repurchases, respectively.

We may seek to negotiate additional credit facilities or issue debt instruments. Any debt incurred or issued by us may be secured or unsecured, long-term, medium-term, or short-term, bear interest at a fixed or variable rate and be subject to such other terms as we consider prudent.

SALE OF OWNERSHIP INTERESTS IN ALBQUERQUE, AND TUCSON SUBSIDIARIES

See Notes 3, and 4 of the Trust’s Consolidated Financial Statements for a detailed discussion of the sale of ownership interests in the Trust’s subsidiaries.

COMPLIANCE WITH CONTINUED LISTING STANDARDS OF NYSE AMERICAN

On May 16, 2020, the Trust received a letter from NYSE AMERICAN giving an official notice of noncompliance of the Trust with continued listing standards of NYSE American LLC (the “Exchange”) because the Trust failed to timely file with the Securities and Exchange Commission (the “SEC”) its Annual Report on Form 10-K for the year ended January 31, 2020 (the “Delinquent Report”). This filing delinquency subjected the Trust to the procedures and requirements of Section 1007 of the NYSE American Company Guide. The requisite Form 8-K and associated press release were issued on May 22, 2020, and the Trust filed the annual Form 10-K on August 14, 2020.

On December 12, 2020, the Trust requested and was granted an extension for their quarterly reports for the First, Second, and Third Fiscal Quarters, under the Covid-19 SEC Relief and Late Filer Extension Request process. The Late Filer Extension was initially granted until February 15, 2021 for all three delinquent Quarters. Subsequently, after filing the First Quarter 10-Q on January 11, 2021, the Trust requested and was granted an additional extension for the Second and Third Quarters respectively, until April 15, 2021. The Trust filed their Second Quarterly Report on March 1, 2021. The Trust filed their Third Quarterly Report on March 25, 2021 and is now compliant.

Due to COVID-19 disruptions, and consistent with SEC guidelines, the Trust extended their filing dates of the 10-K for the fiscal year timeperiod ended January 31, 2020, the first quarter 10-Q for the fiscal year ended April 30, 2020, the second quarter 10-Q for the fiscal quarter ended July 31, 2020, and the third quarter 10-Q for the fiscal year ended October 31, 2020. The 45-day SEC extension for the second fiscal quarter extended the filing compliance date to October 31, 2020. An additional 45-day SEC extension for the second fiscal quarter extended the filing compliance date to February 15, 2021. The Trust applied for and was granted an additional 60-day SEC compliance extension to April 15, 2021 for both the second and third fiscal quarters. All late filings are now complete, and IHT is once again considered to be in compliance with the SEC and NYSE AMERICAN as of March 25, 2021.

NON-GAAP FINANCIAL MEASURES

The following non-GAAP presentations of earnings before interest, taxes, depreciation, and amortization (“***EBITDA”***) and funds from operations (“***FFO”***) are made to assist our investors in evaluating our operating performance.

Adjusted EBITDA is defined as earnings before interest expense, amortization of loan costs, interest income, income taxes, depreciation and amortization, and non-controlling interests in the Trust. We present Adjusted EBITDA because we believe these measurements (a) more accurately reflect the ongoing performance of our hotel assets and other investments, (b) provide more useful information to investors as indicators of our ability to meet our future debt payments and working capital requirements, and (c) provide an overall evaluation of our financial condition. Adjusted EBITDA as calculated by us may not be comparable to Adjusted EBITDA reported by other companies that do not define Adjusted EBITDA exactly as we define the term. Adjusted EBITDA does not represent cash generated from operating activities determined in accordance with GAAP and should not be considered as an alternative to (a) GAAP net income or loss as an indication of our financial performance or (b) GAAP cash flows from operating activities as a measure of our liquidity.

A reconciliation of Adjusted EBITDA to net loss attributable to controlling interests for the fiscal years ended January 31, 2021 and 2020 approximate follows:

|  | Twelve Months Ended January 31, 2021 | 2020 |
| --- | ---: | ---: |
| Net loss attributable to controlling interests | $(1,626,000) | $(1,742,000) |
| Add back: |  |  |
| Depreciation | 831,000 | 902,000 |
| Interest expense | 361,000 | 567,000 |
| Taxes | - | - |
| Less: |  |  |
| Tax benefit | (69,000) | (294,000) |
| Interest Income | (130,000) | (147,000) |
| Adjusted EBITDA | $(633,000) | $(714,000) |

FFO is calculated on the basis defined by the National Association of Real Estate Investment Trusts (“***NAREIT”***), which is net income (loss) attributable to common shareholders, computed in accordance with GAAP, excluding gains or losses on sales of properties, asset impairment adjustments, and extraordinary items as defined by GAAP, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated joint ventures and non-controlling interests in the operating partnership. NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP. The Trust is an unincorporated Ohio real estate investment trust; however, the Trust is not a real estate investment trust for federal taxation purposes. Management uses this measurement to compare itself to REITs with similar depreciable assets. We consider FFO to be an appropriate measure of our ongoing normalized operating performance. We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other companies that either do not define the term in accordance with the current NAREIT definition or interpret the NAREIT definition differently than us. FFO does not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to (a) GAAP net income or loss as an indication of our financial performance or (b) GAAP cash flows from operating activities as a measure of our liquidity, nor is it indicative of funds available to satisfy our cash needs, including our ability to make cash distributions. However, to facilitate a clear understanding of our historical operating results, we believe that FFO should be considered along with our net income or loss and cash flows reported in the consolidated financial statements.

A reconciliation of FFO to net income (loss) attributable to controlling interests for fiscal year ended January 31, 2021 and 2020 follows:

|  | Twelve Months Ended January 31, 2021 | 2020 |
| --- | ---: | ---: |
| Net loss attributable to controlling interests | $(1,626,000) | $(1,742,000) |
| Add back: |  |  |
| Depreciation | 831,000 | 902,000 |
| Non-controlling interest | (1,202,000) | (237,000) |
| FFO | $(1,997,000) | $(1,077,000) |

The Trust reported Consolidated Net Loss from operations of approximately $2,828,000 for the fiscal year ended January 31, 2021 compared to Consolidated Net Loss from operations of approximately $1,978,000 for the fiscal year ended January 31, 2020. Fiscal 2021 and 2020 Consolidated Net Loss from operations included non-cash depreciation of approximately $831,000 and $902,000, respectively. Fiscal 2021 Consolidated Net Loss from operations before non-cash depreciation and impairment notes receivable was approximately $1,997,000 as compared with $1,077,000 for fiscal 2020. Fiscal 2021 Consolidated Net Revenues from continuing operations were approximately $4,203,000 as compared with fiscal 2020 Revenues of approximately $6,568,000.

FUTURE POSITIONING

In viewing the hotel industry cycles, recently reconfirmed by the COVID-19 disruption of travel and hospitality, the Board of Trustees determined that it was appropriate to actively seek buyers for our two remaining Hotel properties. We continue to make our Tucson Hotel and Albuquerque Hotel available for sale at market value, on the website www.suitehotelsrealty.com.

The table below provides book values, mortgage balances and listed asking price for the Hotels.

| Hotel Property | Book Value | Mortgage Balance | Estimated Market Asking Price |
| --- | ---: | ---: | ---: |
| Albuquerque | $1,394,528 | $1,354,704 | 7,995,000 |
| Tucson Oracle | 6,734,602 | 4,582,880 | 16,600,000 |
|  | $8,129,130 | $5,937,584 | $24,595,000 |

The “Estimated Market Asking Price” is the amount at which we believe would sell each of the Hotels and is adjusted to reflect hotel sales in the Hotels’ areas of operation and projected upcoming 12 month earnings of each of the Hotels. The Estimated Market Asking Price is not based on appraisals of the properties.

We have from time to time listed each of the properties with a local real estate hotel broker who has successfully sold four of our hotel properties and we believe that each of the assets are being marketed at a price that is reasonable in relation to its current fair value. We plan to sell our remaining two Hotel properties one within 12-36 months, based on feedback received by our local hotel real estate property professional brokers, who specialize in the selling/buying hotel real estate properties. We can provide no assurance that we will be able to sell either or both of the Hotel properties on terms favorable to us or within our expected time frame, or at all.

Although believed feasible, we may be unable to realize the asking price for the individual Hotel properties or to sell and/or refinance one or both. However, we believe that the asking price values are reasonable based on upturn local market conditions, comparable sales, and anticipated upturns in occupancy, rates, and profits per hotel. Changes in market conditions have in part resulted, and may in the future result, in our changing one or all of the asking prices.

Our long-term strategic plan is to obtain the full benefit of our real estate equity, to benefit from our UniGen Power, Inc., (UPI) clean energy operation diversified investment, and to pursue a merger with another company, likely a private larger entity that seeks to go public to list on the NYSE AMERICAN Exchange.

SHARE REPURCHASE PROGRAM

For information on the Trust’s Share Repurchase Program, see Part II, Item 5. “Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.” We plan to continue the stock and unit buy backs in the current Fiscal Year 2022.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet financing arrangements or liabilities. We do not have any majority-owned or controlled subsidiaries that are not included in our consolidated financial statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

As a partial offset to the current hotel industry Virus induced drop in demand pressure, the Trust looks to benefit from, and expand, its UPI clean energy operation diversification investments in the months, and years ahead. See Note 7 of the Audited Consolidated Financial Statements for discussion on UPI.

#### Asset Impairment

We believe that the policies we follow for the valuation of our hotel properties, which constitute the majority of our assets, are our most critical policies. The Financial Accounting Standards Board (“FASB”) has issued authoritative guidance related to the impairment or disposal of long-lived assets, codified in ASC Topic 360-10-35, which we apply to determine when it is necessary to test an asset for recoverability. On an events and circumstances basis, we review the carrying value of our hotel properties. We will record an impairment loss and reduce the carrying value of a property when anticipated undiscounted future cash flows and the current market value of the property do not support its carrying value. In cases where we do not expect to recover the carrying cost of hotel properties held for use, we will reduce the carrying value to the fair value of the hotel, as determined by a current appraisal or other acceptable valuation methods. We did not recognize a hotel properties impairment loss in fiscal years 2021 or 2020. As of January 31, 2021, our management does not believe that the carrying values of any of our hotel properties are impaired. The Trust did take a reserve for bad debt as of January 31, 2020 reflecting its concern with the collectability of the Obasa note receivable, related to the sale of the IBC technology segment.

#### Sale of Hotel Assets

Management believes that our currently owned Hotels are valued at prices that are reasonable in relation to their current fair market value. At this time, the Trust is unable to predict when, and if, either of its Hotel properties will be sold. The Trust seeks to sell one hotel per year or both over the next 12-36 months. We believe that each of the assets is available at a price that is reasonable in relation to its current fair market value. The plan is to work to sell the remaining two hotel properties over the next 12-36 months, and if needed beyond.

#### Revenue Recognition

Revenues are primarily derived from the following sources and are recognized as services are rendered and when collectability is reasonably assured. Amounts received in advance of revenue recognition are considered deferred liabilities.

Revenues primarily consist of room rentals, food and beverage sales, management and trademark fees and other miscellaneous revenues from our properties. Revenues are recorded when rooms are occupied and when food and beverage sales are delivered. Management and trademark fees from non-affiliated hotels include a monthly accounting fee and a percentage of hotel room revenues for managing the daily operations of the Hotels and the one hotel owned by affiliates of Mr. Wirth until December 2020.

Each room night consumed by a guest with a cancellable reservation represents a contract whereby the Trust has a performance obligation to provide the room night at an agreed upon price. For cancellable reservations, the Trust recognizes revenue as each performance obligation (i.e., each room night) is met. Such contract is renewed if the guest continues their stay. For room nights consumed by a guest with a non-cancellable reservation, the entire reservation period represents the contract term whereby the Trust has a performance obligation to provide the room night or nights at an agreed upon price. For non-cancellable reservations, the Trust recognizes revenue over the term of the performance period (i.e., the reservation period) as room nights are consumed. For these reservations, the room rate is typically fixed over the reservation period. The Trust uses an output method based on performance completed to date (i.e., room nights consumed) to determine the amount of revenue it recognizes on a daily basis if the length of a non-cancellable reservation exceeds one night since consumption of room nights indicates when services are transferred to the guest. In certain instances, variable consideration may exist with respect to the transaction price, such as discounts, coupons and price concessions made upon guest checkout.

In evaluating its performance obligation, the Trust bundles the obligation to provide the guest the room itself with other obligations (such as free Wi-Fi, grab and go breakfast, access to on-site laundry facilities and parking), as the other obligations are not distinct and separable because the guest cannot benefit from the additional amenities without the consumed room night. The Trust’s obligation to provide the additional items or services is not separately identifiable from the fundamental contractual obligation (i.e., providing the room and its contents). The Trust has no performance obligations once a guest’s stay is complete.

We are required to collect certain taxes and fees from customers on behalf of government agencies and remit these back to the applicable governmental agencies on a periodic basis. We have a legal obligation to act as a collection agent. We do not retain these taxes and fees and, therefore, they are not included in revenues. We record a liability when the amounts are collected and relieve the liability when payments are made to the applicable taxing authority or other appropriate governmental agency.

SEASONALITY

See Item 1 for related discussion of seasonality.

INFLATION

We rely entirely on the performance of the Hotels and InnSuites Hotels’ ability to increase revenue to keep pace with inflation. Operators of hotels in general, and InnSuites Hotels in particular, can change room rates quickly, but competitive pressures may limit InnSuites Hotels’ ability to raise rates as fast as or faster than inflation

INVESTMENT IN UNIGEN POWER, INC.

On December 16, 2019, the Trust entered into a Convertible Debenture Purchase Agreement with UniGen Power Inc. (“UPI” or “UniGen”).

The Trust purchased secured convertible debentures (“Debentures”) in the aggregate amount of $1,000,000 (the “Loan Amount”) (the “Loan”) at an annual interest rate of 6%. The Debentures are convertible into Class A shares of UniGen Common Stock at an initial conversion rate of $1.00 per share. The Loan was structured into two (2) payments of $600,000 and $400,000. The first payment of $600,000 was made by the Trust at closing on December 16, 2020 and the second payment was made on February 3, 2020.

UniGen issued the Trust common stock purchase warrants (the “Debenture Warrants”) to purchase up to 1,000,000 shares of Class A Common Stock (600,000 issued on January 31, 2020, and 400,000 issued on February 3, 2020). The Debenture Warrants are exercisable at an exercise price of $1.00 per share of Class A Common Stock.

UniGen, also, issued the Trust additional common stock purchase warrants (“Additional Warrants”) to purchase up to 200,000 shares of Class A Common Stock (120,000 issued on January 31, 2020, and 80,000 issued on February 3, 2020). The Additional Warrants are exercisable at an exercise price of $2.25 per share of Class A Common Stock.

On the Trust’s balance sheet, the investment of the $1,060,000 consists of approximately $700,000 in note receivables, approximately $300,000 as the fair value of the warrants issued with the Trust’s investment in UniGen, and $60,000 of UniGen Common Stock. The value of the premium related to the fair value of the warrant will accrete over the life of the debentures.

InnSuites Hospitality Trust (IHT) made an initial $1 million diversification investment in late Fiscal Year 2020 and early Fiscal Year 2021 that could expand into a multi-million-dollar investment totaling up to approximately 25 percent ownership in privately held UniGen Power, Inc. (UPI) to develop a patented high profit potential new efficient clean energy generation innovation. The initial investment was made December 16, 2019, with significant positive progress to date despite the virus, economic, and travel disruptions of 2020. During the first Fiscal Quarter of 2021, an additional investment of $400,000 was made bringing the total to $1 Million. The investment includes warrants convertible to UPI stock upon election of the Trust. The investment is valued at fair value (level 3), as defined in Note 2 of the Consolidated Financial Statements. There is no Investment Commitment to Unigen requiring any restriction of cash.

Based on subsequent events, IHT is likely to obtain an opportunity to convert a $500,000 UniGen line of credit into 500,000 shares of UniGen. IHT has obtained an additional 300,000 warrants at $2.25 per share. Full conversion of all IHT held convertible debt and UniGen warrants could result in 3 million shares of UniGen stock and if all shares from all parties are fully exercised, it would result in approximately 15 million UniGen shares outstanding, or approximately up to 25% of the total equity of UniGen held by IHT. Trust owns less than 1% of the outstanding shares of Unigen as of January 31, 2021.

According to UniGen Management, the UniGen clean energy innovation project has made positive progress and is on budget, with the first GenSet prototype anticipated to be in operation by year-end, 2021, and possibly as soon as September 2021 or later. The significant time delay is related to several factors, including the Covid-19 travel restrictions to UniGen China suppliers, time needed to incorporate three additional patentable innovations discovered, design improvements, and the pursuit of four additional patents recently discovered and in process. Global Supply sources include China, Italy, Israel, and the United States. IHT has confidence in the UniGen technical team based in Detroit and in the encouraging progress to date. Unigen profitability is anticipated to be 18-24 months into the future, but future high profit potential is encouraging for IHT investors, especially considering 16 months of successful design and development work, now complete.

James Wirth (President) and Marc Berg (Executive Vice President) both lack significant control. They have two of the six Board of Directors seats or 33% and were elected in December 2019 to serve on the board of UPI to closely monitor and assist in the success of this potentially power industry disruptive relatively clean energy generation innovation.

FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-K, including statements containing the phrases “believes,” “intends,” “expects,” “anticipates,” “predicts,” “projects,” “will be,” “should be,” “looking ahead,” “may” or similar words, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend that such forward-looking statements be subject to the safe harbors created by such Acts. These forward-looking statements include statements regarding our intent, belief or current expectations in respect of (i) the declaration or payment of dividends; (ii) the leasing, management or operation of the Hotels; (iii) the adequacy of reserves for renovation and refurbishment; (iv) our financing plans; (v) our position regarding investments, acquisitions, developments, financings, conflicts of interest and other matters; (vi) our plans and expectations regarding future sales of hotel properties; and (vii) trends affecting our or any Hotel’s financial condition or results of operations.

These forward-looking statements reflect our current views in respect of future events and financial performance but are subject to many uncertainties and factors relating to the operations and business environment of the Hotels that may cause our actual results to differ materially from any future results expressed or implied by such forward-looking statements. Examples of such uncertainties include, but are not limited to:

- Covid-19 Virus Pandemic and its effect on the Economic and Travel Industry slowdown;
- local, national, or international, political economic and business conditions, including, without limitation, conditions that may, or may continue to, affect public securities markets generally, the hospitality industry or the markets in which we operate or will operate;
- fluctuations in hotel occupancy rates;
- changes in room rental rates that may be charged by InnSuites Hotels in response to market rental rate changes or otherwise;
- seasonality of our hotel operations business;
- our ability to sell any of our Hotels at market value, listed sale price, or at all;
- interest rate fluctuations;
- changes in, or reinterpretations of, governmental regulations, including, but not limited to, environmental and other regulations, the Americans with Disability Act and federal income tax laws and regulations;
- competition including supply and demand for hotel rooms and hotel properties;
- availability of credit or other financing;
- our ability to meet present and future debt service obligations;
- our ability to refinance or extend the maturity of indebtedness at, prior to, or after the time it matures;
- any changes in our financial condition or operating results due to acquisitions or dispositions of hotel properties;
- insufficient resources to pursue our current strategy;
- concentration of our investments in the InnSuites Hotels® brand;
- loss of membership contracts;
- the financial condition of franchises, brand membership companies and travel related companies;
- ability to develop and maintain positive relations with “Best Western” and potential future franchises or brands;
- real estate and hospitality market conditions;

19

- hospitality industry factors;
- our ability to carry out our strategy, including our strategy regarding diversification and investments;
- the Trust’s ability to remain listed on the NYSE American;
- effectiveness of the Trust’s software program;
- the need to periodically repair and renovate our Hotels at a cost at or in excess of our standard 4% reserve;
- tariffs may affect trade and travel;
- our ability to cost effectively integrate any acquisitions with the Trust in a timely manner;
- increases in the cost of labor, energy, healthcare, insurance and other operating expenses as a result of changed or increased regulation or otherwise;
- terrorist attacks or other acts of war;
- outbreaks of communicable diseases attributed to our hotels or impacting the hotel industry in general;
- natural disasters, including adverse climate changes in the areas where we have or serve hotels;
- airline strikes;
- transportation and fuel price increases;
- adequacy of insurance coverage and increases in cost for health care coverage for employees and potential government regulation with respect to health care coverage;
- data breaches or cybersecurity attacks, including breaches impacting the integrity and security of employee and guest data; and
- loss of key personnel and uncertainties in the interpretation and application of the 2017 Tax Cuts and Jobs Act.

We do not undertake any obligation to update publicly or revise any forward-looking statements whether as a result of new information, future events or otherwise except as may be required by law. Pursuant to Section 21E(b)(2)(E) of the Securities Exchange Act of 1934, as amended, the qualifications set forth hereinabove are appropriate to any forward-looking statements in this Form 10-K relating to the operations of the Partnership.

## Controls and procedures

As filed, 7,056 characters.

### Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of January 31, 2021.

Our management, including our Principal Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

### Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of the Trust’s Principal Executive Officer and Chief Financial Officer and effected by the Trust’s Board of Trustees, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

### Assessment of Internal Control over Financial Reporting

Our management assessed the effectiveness of our internal control over financial reporting as of January 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Based on management’s assessment, management concluded our internal control over financial reporting was not effective as of January 31, 2021.

#### Management’s Remediation Initiatives

In an effort to remediate deficiencies and enhance the Trust’s internal control over financial reporting, the Trust made attempts to increase its technical accounting expertise by hiring a new Chief Financial Officer, Corporate Controller, and Staff Accountant with public company reporting experience to assist with the Trust’s technical accounting and internal control issues.

We need to take appropriate and reasonable steps to make necessary improvements to our internal control over financial reporting, which will require management past and future efforts to support the hiring and training of sufficient personnel with appropriate training and expertise in accounting principles generally accepted in the United States. This increase to staffing and training will allow us to make the necessary improvements, including:

- Continuing to improve the control environment through (i) being staffed with sufficient number of personnel to address segregation of duties issues, ineffective controls and to perform control monitoring activities, (ii) increasing the level of GAAP knowledge by retaining additional technical accountants, (iii) implementing formal process to account for non-standard transactions, and (iv) implementing and formalizing management oversight of financial reporting at regular intervals;
- Continuing to update the documentation of our internal control processes, including implementing formal risk assessment processes and entity level controls;
- Implementing control activities that address relevant risks and assure that all transactions are subject to such control activities; Ensure systems that impact financial information and disclosures have effective information technology controls;
- Implementing plan to increase oversight and review of ad hoc spreadsheets while also working to reduce their use;
- We are in the process of further enhancing the supervisory procedures to include additional levels of analysis and quality control reviews within the accounting and financial reporting functions; and
- We have filled the previously vacant position of Chief Financial Officer (CFO), to assist with the Trust’s internal controls oversight.

We believe that the remediation measures described above will strengthen our internal control over financial reporting. We expect these remediation efforts will be implemented throughout fiscal year 2022.

Despite the material weaknesses reported above, our management believes that our financial statements included in this Annual Report on Form 10-K for the fiscal year ended January 31, 2021 fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented and that this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report.

### Changes in Internal Control over Financial Reporting

Other than filling the previously vacant position of CFO, as described above, there were no other changes in our internal control over financial reporting during our most recently completed fiscal quarter ended January 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We had significant turnover in our accounting department over the last 24 months, with the several new additions aforementioned above. These new additions should assist with the Trust’s stability, technical accounting, and internal control issues.

Filed May 17, 2021.
Source: SEC EDGAR, the filing index for accession 0001493152-21-011629. Last ingested by Listed: Oct 24, 2026, 14:54 ET. No prices; not investment advice.