INNSUITES HOSPITALITY TRUST MANAGEMENT REPORT OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

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GENERAL

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes appearing elsewhere in this Form 10-Q and our Form 10-K for the year ended January 31, 2022.



FORWARD-LOOKING STATEMENTS



Certain statements in this Form 10-Q, 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) expansion of UniGen; (vii) our plans and expectations regarding future
sales of hotel properties; and (viii) 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:



    ?   Virus Pandemic and its effect on the Travel Industry;

    ?   inflation and economic recession;

    ?   terrorist attacks or other acts of war;

    ?   local, national or international, political economic and business
        conditions, including, without limitation, conditions that may, or may

continue to affect government securities markets in general, hospitality

        industry or the markets in which we operate or will operate;

    ?   available cash, supply chain issues, and increased labor costs for
        diversified clean energy development and production;

    ?   fluctuations in hotel occupancy rates;

? changes in room rental rates that may be invoiced 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, or at all;

    ?   interest rate fluctuations;

? changes or reinterpretations of government regulations, including,

but not limited to, environmental and other regulations, Americans

        with Disability Act, Covid-19 restrictions, 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 debt to, before,

    or after the time it matures;

  ? any changes in our financial condition or operating results due to
    acquisitions or dispositions of hotel properties;

  ? 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 relationships with “Best Western” and

    potential future franchises or brands;

  ? real estate and hospitality market conditions;

  ? 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 and cyber security;




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? the need to periodically repair and renovate our hotels at a cost equal to or equal to

    excess of our standard 4% reserve;

  ? tariffs and health travel restrictions may affect trade and travel;

? our ability to profitably integrate any acquisition with the Trust into a

in right time ;

? increased cost and availability of labor, energy, health care, insurance

and other operating expenses due to inflation, or have changed or increased

    regulation, or otherwise;

  ? terrorist attacks or other acts of war;

? communicable disease outbreaks attributed to our hotels or impacting

hospitality in general;

? natural disasters, including adverse climate change in areas where we

    have or serve hotels;

  ? airline strikes;

  ? transportation and fuel price increases;

? adequacy of insurance coverage and rising cost of healthcare coverage

for employees and potential government health care regulations

cover;

? data breaches or cybersecurity attacks, including breaches

the integrity and security of employee and guest data; and

? loss of key personnel and uncertainties in interpretation and application

    of ever-changing tax laws.




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 inapplicable to any forward-looking statements in this Form 10-K
relating to the operations of the Partnership.



OVERVIEW


We are engaged in the ownership and operation of hotel properties. On July 31,
2022 the Trust had two moderate service hotels in Tucson, Arizona and
Albuquerque, New Mexico with 270 hotel suites. Both of our Hotels are branded
through membership agreements with Best Western, and both are also trademarked
as "InnSuites". We are also involved in various operations incidental to the
operation of hotels, such as the operation of a restaurant and bar, and
meeting/banquet room rentals.



To July 31, 2022we held a 21.00% working interest in Albuquerque, New Mexico Hoteland, together with the limited partnership, held an indirect 51.01% interest in Tucson, Arizona Hotel.

Our operations consist of one reportable segment - Hotel Ownership & Hotel
Management Services. Hotel Ownership Operations derives its revenue from the
operation of the Trust's two hotel properties with an aggregate of 270 hotel
suites in Arizona and New Mexico. Hotel management services, provides management
services for the Trust's two Hotels. As part of our management services, we also
provide trademark and licensing services.



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 hotel and travel industries. Although
hotel operations have now bounced back, virus-related travel slowdown in the
Fiscal Year 2021, (February 1, 2020 to January 31, 2021), and Fiscal Year 2022,
(February 1, 2021 to January 31, 2022), negatively impacted hotel room demand
and pricing, which reduced our profit margins. Increases in supply or decline in
demand could result in increased competition, which could have an adverse effect
on the rates and occupancy revenue of the Hotels in their respective markets.



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Over time, we expect our UniGen diversification of investments in clean and efficient energy generation to grow and provide a substantial source of revenue for the foreseeable future.



We expect the current Fiscal Year 2023 to be continued recovery of the travel
industry, continued recovery of our Hotel's occupancy levels, continued recovery
of room rates, as well as continuation of current cost control all leading to
improved profitability of our hotels. We believe that we have positioned the
Hotels to remain competitive through our now fully completed Tucson and
Albuquerque hotel refurbishments, by offering fully refurbished studios and
two-room suites at each location, and by maintaining 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 ultimately obtaining full market value for our two Hotels at market
value which is believed by management to be substantially higher than lower book
values, 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 in
December 2019, and invested $1 million in UniGen Power, Inc. ("UniGen"), an
innovative efficient clean energy power generation company. The Trust has
invested $1 million in 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 three years,
which could result up to 25% ownership in UniGen. 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



HOTEL 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. Under the
terms of its Partnership Agreement, the Partnership is required to reimburse us
for all such expenses. Accordingly, 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.



  The following tables show historical financial and other information for the
                               periods indicated:


                                                   For the Six Months Ended
            Albuquerque                                    July 31,
                                        2022        2021       Change       %-Incr/Decr
Occupancy                                85.10 %     78.60 %      6.50 %            8.27 %
Average Daily Rate (ADR)              $ 100.37     $ 68.08     $ 32.29             47.43 %
Revenue Per Available Room (REVPAR)   $  85.42     $ 53.50     $ 31.92     
       59.66 %



                                                  For the Six Months Ended
              Tucson                                      July 31,
                                       2022        2021       Change       %-Incr/Decr
Occupancy                               71.26 %     79.00 %     -7.74 %           -9.80 %
Average Daily Rate (ADR)              $ 98.22     $ 76.89     $ 21.33             27.74 %
Revenue Per Available Room (REVPAR)   $ 69.99     $ 60.74     $  9.25      
      15.23 %



                                                  For the Six Months Ended
             Combined                                     July 31,
                                       2022        2021       Change       %-Incr/Decr
Occupancy                               77.00 %     78.85 %     -1.85 %           -2.35 %
Average Daily Rate (ADR)              $ 99.21     $ 74.84     $ 24.37             32.56 %
Revenue Per Available Room (REVPAR)   $ 76.39     $ 59.01     $ 17.38      
      29.45 %




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 more information on these related party transactions, see the following:

? For a discussion of management and license agreements with certain

parties, see “Note 2 to our unaudited condensed consolidated financial statements

Disclosures – Summary of Important Policies – Revenue Recognition – Hotel

Operations”

? For a discussion of the guarantees of our mortgage notes payable by certain

related parties, see Note 6 to our unaudited condensed consolidated financial statements.

Statements – “Mortgage bills payable.”

? For a discussion of our stock sales and restructuring agreements involving

certain related parties, see note 3 of our unaudited condensed consolidated financial statements

Financial statements – “Sale of interests in subsidiaries”.

? For an analysis of other related party transactions, see note 11 of our

    Unaudited Condensed Consolidated Financial Statements - "Related Party
    Transactions."




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RESULTS OF OPERATIONS FOR THE TWELVE FINANCIAL MONTHS ENDED JULY 31, 2022
COMPARED TO THE TWELVE FINANCIAL MONTHS ENDED JULY 31, 2021.

A summary of the Trust’s total operating results for the twelve month periods ended July 31, 2022 and 2021 is as follows:


                                  FY 2022/2023      FY 2021/2022         Change          % Change
Total Revenues                   $    7,175,813     $   4,900,965     $  2,274,848               46 %
Operating Expenses                    7,081,308         6,440,691          640,617               10 %
Operating Income (Loss)                  94,505        (1,539,726 )      1,634,231              106 %
Interest Income and Other               126,194         1,179,431       (1,053,237 )            (89 )%
Interest Expense                       (460,767 )        (357,239 )       (103,528 )            (29 )%
Employee Retention Benefit            1,052,373                 -        1,052,373              100 %
Income Tax Benefit                           50            68,661          (68,611 )           (100 )%

Consolidated net income (net loss) 812,355 (648,873) 1,461,228

              125 %




RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JULY 31, 2022 COMPARED TO THE SIX MONTHS ENDED JULY 31, 2021

A summary of the Trust’s total operating results for the six months ended July 31, 2022 and 2021 is as follows:


                                2022            2021           Change       % Change
Total Revenues               $ 3,835,202     $ 3,069,189     $  766,013            25 %
Operating Expenses             3,681,510       3,313,337        368,173            11 %
Operating Income (Loss)          153,692        (244,148 )      397,840           163 %
Interest Income and Other         32,193         967,463       (935,270 )         (97 )%
Interest Expense                (258,122 )      (164,590 )      (93,532 )         (57 )%
Employee Retention Benefit       701,582               -        701,582           100 %
Consolidated Net Income          629,345         558,725         70,620            13 %




The Trust operations are comprised of one reportable segment, Hotel Ownership &
Hotel Management Services (continuing operations) segment that performs
management services and has ownership interest in two hotel properties with an
aggregate of 270 suites in Arizona and New Mexico.



The Trust has chosen to concentrate its hotel investments in the south-west region of
United States. The Trust does not review assets by geographic region; therefore, no information on the income statement or the balance sheet by geographical area is provided.


REVENUE:



For the six months ended July 31, 2022, we had total revenue of approximately
$3.84 million compared to approximately $3.07 million for the six months ended
July 31, 2021, an increase of approximately $0.8 million. In the prior fiscal
years ended January 31, 2022, 2020 and 2019, we made significant improvements to
our Albuquerque, New Mexico and Tucson, Arizona hotels. During the six months
ended July 31, 2022, we had an increase in total revenue resulting from the
recovery of demand after the virus related travel restrictions imposed due to
COVID-19, and benefitting from prior refurbishments.



Total Consolidated Net Income for the six months ended July 31, 2022 was
approximately $629,000 compared to approximately $559,000 for the six months
ended July 31, 2021, an increase of approximately $70,000. Earnings Per Share
based on this Consolidated Net Income amount were $0.07, up $0.01 from the prior
year of $0.06, which is an increase of 13%, and also far exceeding their
pre-Covid counterpart of Fiscal Year 2020. Earnings Per Share based on net
income (loss) attributable to Controlling Interest was $0.03, up from the prior
year similar three month period of ($0.02).



Total Trust Equity increased to approximately $4,058,000 at the end of Fiscal
First Quarter 2023, up approximately $0.9 million, from the approximately
$3,159,000 reported at the end of the 6 months in the prior fiscal year 2022.
Net Income before non-cash depreciation expense was approximately $974,000 for
the six months ended July 31 2022, compared to approximately $922,000 for the
six months ended July 31, 2021, which is an increase of approximately $52,000.



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We realized a 27% increase in room revenues during the six months ended July 31,
2022 as room revenues were approximately $3.75 million for the six months ending
July 31, 2022 as compared to approximately $2.95 million for the six months
ending July 31, 2021. During Fiscal Year 2023, we expect modest additional
improvements in occupancy, rates, and food and beverage revenues.



EXPENSES:


Total expenses net of interest expense was approximately $3.68 million for the
six months ended July 31, 2022 reflecting an increase of approximately $0.37
million, or 11%, compared to total expenses net of interest expense of
approximately $3.31 million for the six months ended July 31, 2021. The increase
was primarily due to an increase in operating expenses related to increased
occupancy and revenues at the hotel properties.



Room expenses consisting of salaries and related employment taxes for property
management, front office, housekeeping personnel, reservation fees and room
supplies were approximately $1.11 million for the six months ended July 31, 2022
compared to approximately $0.92 million in the prior year six month period for
an increase of approximately $193,000, or 21%. Room expenses increased as
occupancy at the hotels increased, and increased expenses were incurred with the
increased occupancy.


Food and beverage expenses included food and beverage costs, personnel and
miscellaneous costs to provide banquet events. For the six months ended July 31,
2022, food and beverage expenses increased approximately $11,000, or 12%, to
approximately $106,000 for the six months ended July 31, 2022, compared to
approximately $95,000 for the six months ended July 31, 2021. The increase in
cost relative to the increase in food and beverage revenue is due to increasing
food and beverage purchasing costs.



General and administrative expenses include overhead charges for management,
accounting, shareholder and legal services. General and administrative expenses
of approximately $1.12 million for the six months ended July 31, 2022, increased
approximately $169,000 from approximately $0.95 million for the six months ended
July 31, 2021 primarily due to higher charges in corporate staffing in support
of the hotels and property sales efforts.



Sales and marketing expense increased approximately $62,000, or 33%, to
approximately $247,000 for the six months ended July 31, 2022 from approximately
$185,000 for the six months ended July 31, 2021. Increased focus on sales and
marketing due to the rebound in hotel occupancy drove the increase.



Repairs and maintenance expense remained relatively flat from approximately
$194,000 reported for the six months ended July 31, 2021 compared to
approximately $192,000 for the six months ended July 31, 2022. 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.



Hospitality expense increased by approximately $57,000, or 55%, from $105,000
for the six months ended July 31, 2021 to approximately $162,000 for the six
months ended July 31, 2022. The increase was primarily due to COVID-19
regulations minimizing and reducing food service availability, restricting our
complimentary breakfast and social hour offerings.



Spending on utilities increased by approximately $22,000i.e. 11%, at approximately
$222,000 reported for the six months ended July 31, 2022 against approximately $220,000 for the six months ended July 31, 2021.



Hotel property depreciation expenses decreased by approximately $19,000 from
approximately $363,000 reported for the six months ended July 31, 2021 compared
to approximately $344,000 for the six months ended July 31, 2022. Decreased
depreciation resulted from the capital expenditures being fully depreciated.



Real estate and personal property taxes, Insurance and Ground Rent expenses
decreased approximately $92,000, or 37%, to approximately $160,000 reported for
the six months ended July 31, 2022 compared with approximately $252,000 for the
six months ended July 31, 2021 due to adjustments in our operating lease
accounts.



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