UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K10-K/A
Amendment No. 1

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

ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
For the fiscal year ended January 31, 2011.2012.
  
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
For the transition period from                            to                          .
  
Commission File No. 1-7062

InnSuites Hospitality Trust
(Exact Name of Registrant as Specified in Its Charter)
   
Ohio 34-6647590
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)
   
InnSuites Hotels Centre, 1625 E. Northern Avenue,
Suite 105, Phoenix, Arizona
 85020
(Address of Principal Executive Offices) (ZIP Code)
   
Registrant’s Telephone Number, including area code: (602) 944-1500
 

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

Title of Each Class Name of Exchange on Which Registered
Shares of Beneficial Interest,
without par value
 NYSE AmexMKT


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

 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o  No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o  No ý

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).  Yes oý No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large Accelerated Filer ¨        Accelerated Filer  ¨             Non-Accelerated Filer  ¨        Smaller reporting company  ý
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No ý
 
Aggregate market value of Shares of Beneficial Interest held by non-affiliates of the registrant as of July 30, 2010,29, 2011, based upon the closing sales price of the registrant’s Shares of Beneficial Interest on that date, as reported on the NYSE Amex:  $2,628,546.MKT: $2,897,541.

Number of Shares of Beneficial Interest outstanding as of AprilMay 15, 2011:  8,577,583.2012: 8,424,365.

Documents incorporated by reference:  Portions of the following documents are incorporated by reference:  Proxy Statement for 2011 Annual Meeting of Shareholders (portions of which are incorporated by reference into Part III hereof)None.




 
 
 


PART I

Item 1.                      BUSINESS

INTRODUCTION TO OUR BUSINESSEXPLANATORY NOTE

InnSuites Hospitality Trust (the “Trust”) is headquartered in Phoenix, Arizona and is an unincorporated Ohio real estate investment trust. The Trust, withfiling this Amendment No. 1 on Form 10-K/A (this “Amendment”) to amend its affiliates RRF Limited Partnership, a Delaware limited partnership (the “Partnership”), and InnSuites Hotels, Inc., a Nevada corporation (“InnSuites Hotels”), owns and operates five hotels, provides management servicesAnnual Report on Form 10-K for eight hotels, and provides trademark license services for ten hotels.  Onthe fiscal year ended January 31, 2011,2012 (or “fiscal year 2012”), filed with the Trust owned a 71.41% sole general partner interestSecurities and Exchange Commission (the “SEC”) on April 30, 2012 (the “Original 10-K”).

This Amendment is being filed to amend the Original 10-K to include the information required by Items 10 through 14 of Part III of Form 10-K.  This Amendment also amends the cover page of the Original 10-K to (i) delete the reference in the Partnership, which wholly-owned three InnSuites® hotels located in Arizona and southern California and owned a 33.32% interest in one InnSuites® hotel located in New Mexico.  The Trust also owned one InnSuites® hotel located in Yuma, Arizona (all five InnSuites® hotels are hereinafter referredOriginal 10-K to as the “Hotels”).  InnSuites Hotels, a wholly owned subsidiaryincorporation by reference of the Trust, provides management servicesdefinitive Proxy Statement for our 2012 Annual Meeting of Shareholders (the “2012 Annual Meeting”), (ii) change references from “NYSE Amex” to “NYSE MKT” to reflect the Hotelsexchange’s name change and three hotels owned by affiliates(iii) update the number of James F. Wirth, the Trust’s Chairman, President and Chief Executive Officer.  InnSuites Hotels also provides trademark and licensing services to the Hotels, three hotels owned by affiliates of Mr. Wirth and one unrelated hotel property.  The Trust has 368 employees.

The Hotels have an aggregate of 843 hotel suites and operate as moderate and full-service hotels that apply a value studio and two-room suite operating philosophy formulated in 1980 by Mr. Wirth.  The Trust owns and operates hotels as studio and two-room suite hotels that offer services such as free hot breakfast buffets and complimentary afternoon social hours plus amenities, such as microwave ovens, refrigerators, free high-speed hard wired and wireless internet access and coffee makers in each studio or two-room suite.

The Trust believes that a significant opportunity for revenue growth and profitability will arise from the skillful management of the Trust’s Hotels or managed hotel properties for both increased occupancy and rates.  The Trust’s primary business objectives are to maximize returns to its shareholders through increases in asset value and long-term total returns to shareholders.  The Trust seeks to achieve these objectives through participation in increased revenues from the Hotels as a result of intensive management and marketing of the InnSuites® hotels and the “InnSuites Boutique Hotel Collection” brands in the southwestern region of the United States.  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 ofour outstanding Shares of Beneficial Interest without par value, that are traded on the NYSE Amex under the symbol “IHT.”  The Partnership has two outstanding classes(“Shares”).  In addition, Item 9B of limited partnership interests, Class A and Class B, which are identical in all respects.  Each Class A limited partnership unit is convertible, at the optionPart II of the Class A holder, into one newly-issued ShareOriginal Form 10-K is amended to include new deadlines for submission of Beneficial Interestshareholder proposals in connection with the 2012 Annual Meeting and to report the Trust’s extension of its revolving bank line of credit, and Item 15 of Part IV of the Trust and each Class B limited partnership unitOriginal 10-K is convertible, upon approvalamended to include an amendment to the bank line 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.  Under the management agreements, InnSuites Hotels provides the personnel for the Hotels, the expenses of which are reimbursed at cost, and manages the Hotels’ daily operations.  All such expenses and reimbursements between InnSuites Hotelscredit and the Partnership have been eliminatedcertifications specified in consolidation.    During the first eleven months of fiscal year 2010, InnSuites Hotels received 2.5% of room revenue from the four hotels (reduced to three as of July 28, 2010) owned by affiliates of Mr. Wirth in exchange for management services and an additional monthly accounting fee of $2,000. Beginning January 1, 2010 and effective through January 31, 2011, the management fees for these hotels remained at 2.5% of room revenue and the annual accounting fee was adjusted to $27,000, payable $1,000 per month with an additional payment of $15,000 due at year end for annual accounting closing activities.  These agreements have no expiration date and may be cancelled by either party with 90-days written notice or 30-days written notice in the event the property changes ownership.

The Trust also provides the use of the “InnSuites” trademark to the Hotels through the Trust’s wholly owned subsidiary, InnSuites Hotels.  All such fees between InnSuites Hotels and the Partnership have been eliminated in consolidation.  During the first eleven months of fiscal year 2010, InnSuites Hotels received 1.25% of room revenue from the four hotels (reduced to three as of July 28, 2010) owned by affiliates of Mr. Wirth in exchange for use of the “InnSuites” trademark.  Effective January 1, 2010 and through January 31, 2011, the fees for hotels owned by affiliates of Mr. Wirth were amended to a per-room calculation, with fees equal to $10 per month per room for the first 100 rooms, and $2 per month per room for the amount above 100 rooms. These agreements have no expiration date and may be cancelled by either party with 12-months written notice or 90-days written notice in the event the property changes ownership.   InnSuites Hotels received 0.5% of room revenue from the unrelated hotel in Buena Park, California in exchange for licensing services during fiscal years 2011 and 2010.  This agreement has no expiration date and may be cancelled by either party with 30-days written notice.

FRANCHISE AGREEMENTS

InnSuites Hotels has entered into franchise arrangements with Best Western International with respect to four of the Hotels.  In exchange for use of the Best Western name, trademark and reservation system, the participating Hotels pay fees to Best Western International based on reservations received through the use of the Best Western reservation system and the number of available suites at the participating Hotels.  The agreements with Best Western have no specific expiration terms and may be cancelled by either party.  Best Western requires that the participating hotels meet certain requirements for room quality, and the Hotels are subject to removal from its reservation system if these requirements are not met.  The Hotels with third-party franchise agreements received significant reservations through the Best Western reservation system.  The Trust incurred $324,084 and $290,224 in total fees related to these agreements for the twelve months ended January 31, 2011 and 2010, respectively.

1
COMPETITION IN THE HOTEL INDUSTRY

The hotel industry is highly competitive.  The Trust expects the major challenge for fiscal year 2012 to be the overall economy and strong competition for all business in the markets in which it operates, which may affect the Trust’s ability to increase room rates while maintaining market share.  Each of the Hotels experiences competition primarily from other mid-market hotels located in its immediate vicinity, but also competes with hotel properties located in other geographic markets.  While none of the Hotels’ competitors dominate any of the Trust’s geographic markets, some of those competitors may have greater marketing and financial resources than the Trust.

Certain additional hotel property developments have recently been completed by competitors in a number of the Hotels’ markets, and additional hotel property developments may be built in the future.  Such hotel developments have had, and could continue to have, an adverse effect on the revenue of the Hotels in their respective markets.

The Trust has chosen to focus its hotel investments in the southwest region of the United States.   The Trust has a concentration of assets in the southern Arizona market.  In the markets in which the Trust operates, in particular, the Yuma, Arizona and Ontario, California markets, supply has increased.  In the Tucson, Arizona market, demand has declined.  Either an increase in supply or a decline in demand could result in increased competition, which could have an adverse effect on the revenue of the Hotels in their respective markets.

The Trust may also compete for investment opportunities with other entities that have greater financial resources.  These entities also may generally accept more risk than the Trust can prudently manage.  Competition may generally reduce the number of suitable future investment opportunities available to the Trust and increase the bargaining power of owners seeking to sell their properties.

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.  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.  In addition, the Trust’s success in expanding our hotel operations depends upon its ability to obtain necessary building permits and zoning variances from local authorities.  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 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 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, which could reduce the number of total available rooms, increase operating costs and have a negative impact on the Trust’s results of operations.

In addition, our Hotels, like all real property, are subject to governmental regulations designed to protect the environment.  If the Trust fails to comply with such laws and regulations, it may become subject to significant liabilities, fines and/or penalties, which could adversely affect its financial condition and results of operations.
The Trust is also subject to laws governing our relationship with employees, including minimum or living wage requirements, overtime, working conditions and work permit requirements. Additional increases to the state or federal minimum wage rate, employee benefit costs or other costs associated with employees could increase expenses and result in lower operating margins.

Lastly, 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 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 seasonal.  The three southern Arizona hotels experience their highest occupancy in the first fiscal quarter and, to a lesser extent, the fourth fiscal quarter.  The second fiscal quarter tends to be the lowest occupancy period at those three southern Arizona hotels.  This seasonality pattern can be expected to cause fluctuations in the Trust’s quarterly revenues.  The two hotels located in California and New Mexico historically experience their most profitable periods during the second and third fiscal quarters (the summer season), providing some 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 problems.  Further, if an adverse event such as an actual or threatened terrorist attack, international conflict, regional economic downturn or poor weather conditions should occur during the first or fourth fiscal quarters, the adverse impact to the Trust’s revenues could likely be greater as a result of its southern Arizona 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)Rule 13a-14 of the Securities Exchange Act of 1934, as amended as soon as reasonably practicable after we file such material(the “Exchange Act”), required to be filed with or furnish itthis Amendment.  Except for the addition of the Part III information, updates to the Securitiescover page, new deadlines for submission of shareholder proposals, a disclosure regarding the Trust’s extension of its bank line of credit and Exchange Commission (the “SEC”).the filing of the amendment to the bank line of credit and related certifications, no other changes have been made to the Original 10-K. This Amendment does not modify or update disclosures in the Original 10-K affected by subsequent events.

1


 
FORWARD-LOOKING STATEMENTS

Certain statements in the Original Form 10-K and this Amendment, 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 (the “Securities Act”), and Section 21E of the Exchange Act.  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, those of our Trustees or our officers in respect of (i) the declaration or payment of dividends; (ii) the leasing, management or operation of our hotels (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:

·  local, national or international 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 business;
·  interest rate fluctuations;
·  changes in governmental regulations, including federal income tax laws and regulations;
·  competition;
·  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 franchise contracts;
·  real estate and hospitality market conditions;
·  hospitality industry factors;
·  our ability to meet present and future debt service obligations;
·  our inability to refinance or extend the maturity of indebtedness at, prior to or after the time it matures;
·  terrorist attacks or other acts of war;
·  outbreaks of communicable diseases;
·  natural disasters;
·  data breaches; and
·  loss of key personnel.

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.  Pursuant to Section 21E(b)(2)(E) of the Exchange Act, the qualifications set forth hereinabove are inapplicable to any forward-looking statements in the Original Form 10-K or this Amendment relating to the operations of the Partnership.


 
2
 
Item 1A.  RISK FACTORS
 
Not required for smaller reporting companies.

Item 1B. UNRESOLVED STAFF COMMENTS

Not required for smaller reporting companies.
Item 2.                      PROPERTIES

The Trust maintains its administrative offices at the InnSuites Hotels Centre, at 1625 E. Northern Avenue, Suite 105, Phoenix, Arizona 85020 in a space leased by the Trust from a third party.  On January 31, 2011, the Partnership wholly owned three Hotels and 33.32% of a fourth Hotel, and the Trust owned one Hotel.  All of the Hotels are operated as InnSuites® Hotels, while four are also marketed as Best Western® Hotels.  All of the Hotels operate in the following locations:

PROPERTY 
NUMBER
OF
SUITES
 
YEAR OF
CONSTRUCTION/
ADDITION
 
MOST RECENT
RENOVATION (1)
 PERCENT OWNERSHIP BY THE TRUST
         
InnSuites Hotel and Suites Airport Albuquerque Best Western
 
101
 
1975/1985
 
2004
 
23.79% (2)
 
 
 
 
 
 
   
InnSuites Hotel and Suites Tucson, Catalina Foothills Best Western
 
159
 
1981/1983
 
2005
 
71.41% (3)
 
 
 
 
 
 
   
InnSuites Hotels and Suites Yuma Best Western
 
166
 
1982/1984
 
2010
 
99.9% (4)
 
 
 
 
 
 
   
InnSuites Hotel and Suites Ontario Airport Best Western
 
150
 
1990
 
2005
 
71.41% (3)
 
 
 
 
 
 
   
InnSuites Hotels and Suites Tucson St. Mary’s
 
267
 
1960/1971
 
2006
 
71.41% (3)
 
 
 
 
 
 
  
 
Total suites
 
843
 
 
 
  
 

(1) The Trust defines a renovation as the remodeling of more than 10% of a property’s available suites.
(2) The Partnership owns a 33.32% interest in the Albuquerque, New Mexico Hotel.  The Trust owns a 71.41% general partner interest in the Partnership.
(3) The Partnership owns a 100% interest in the two Tucson, Arizona and the Ontario, California Hotels.  The Trust owns a 71.41% general partner interest in the Partnership.
(4) The Trust holds a direct 99.9% ownership interest in the Yuma, Arizona Hotel.

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

See Note 8 to the Trust’s Consolidated Financial Statements – “Mortgage Notes Payable” herein for a discussion of mortgages encumbering the Hotels.

Item 3.                      LEGAL PROCEEDINGS

The Trust is not a party to, nor are any of its properties subject to, any material litigation or environmental regulatory proceedings.

Item 4.                      REMOVED AND RESERVED

 
3
PART IIFORWARD-LOOKING STATEMENTS

Certain statements in the Original Form 10-K and this Amendment, 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 (the “Securities Act”), and Section 21E of the Exchange Act.  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, those of our Trustees or our officers in respect of (i) the declaration or payment of dividends; (ii) the leasing, management or operation of our hotels (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:

Item 5.·  MARKET FOR THE TRUST’S SHARES, RELATED SHAREHOLDER MATTERS AND TRUST PURCHASES OF SHARESlocal, national or international 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 business;
·  interest rate fluctuations;
·  changes in governmental regulations, including federal income tax laws and regulations;
·  competition;
·  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 franchise contracts;
·  real estate and hospitality market conditions;
·  hospitality industry factors;
·  our ability to meet present and future debt service obligations;
·  our inability to refinance or extend the maturity of indebtedness at, prior to or after the time it matures;
·  terrorist attacks or other acts of war;
·  outbreaks of communicable diseases;
·  natural disasters;
·  data breaches; and
·  loss of key personnel.

The Trust’s SharesWe do not undertake any obligation to update publicly or revise any forward-looking statements whether as a result of Beneficial Interestnew information, future events or otherwise.  Pursuant to Section 21E(b)(2)(E) of the Exchange Act, the qualifications set forth hereinabove are traded oninapplicable to any forward-looking statements in the NYSE Amex underOriginal Form 10-K or this Amendment relating to the symbol “IHT.” On April 15, 2011,operations of the Trust had 8,577,583 shares outstanding and 421 holders of record.Partnership.


The following table sets forth, for the periods indicated, the high and low sales prices of the Trust’s Shares of Beneficial Interest, as quoted by the NYSE Amex, as well as dividends declared thereon:
 
Fiscal Year 2011 High Low Dividends
First Quarter 1.45 1.12 —
Second Quarter
 
1.55
 
1.21
 
—
Third Quarter
 
1.52
 
1.06
 
—
Fourth Quarter
 
1.55
 
1.10
 
.01

Fiscal Year 2010 High Low Dividends
First Quarter 1.53 0.79 —
Second Quarter
 
2.00
 
1.01
 
—
Third Quarter
 
1.40
 
1.00
 
—
Fourth Quarter
 
1.85
 
0.97
 
.01

The Trust intends to maintain a conservative dividend policy to facilitate the reduction of debt and internal growth.  In fiscal years 2011 and 2010, the Trust paid dividends of $0.01 per share in the fourth quarter of each year.  The Trust has paid dividends each fiscal year since its inception in 1971.

On January 2, 2001, the Board of Trustees approved a share repurchase program under Rule 10b-18 of the Securities Exchange Act of 1934, as amended, for the purchase of up to 250,000 limited partnership units in the Partnership and/or Shares of Beneficial Interest in open market or privately negotiated transactions.  On September 10, 2002, August 18, 2005 and September 10, 2007, the Board of Trustees approved the purchase of up to 350,000 additional limited partnership units in the Partnership and/or Shares of Beneficial Interest in open market or privately negotiated transactions.  Additionally, on January 5, 2009, September 15, 2009 and January 31, 2010, the Board of Trustees approved the purchase of up to 300,000, 250,000 and 350,000, respectively, additional limited partnership units in the Partnership and/or Shares of Beneficial Interest in open market or privately negotiated transactions.  Acquired Shares of Beneficial Interest will be held in treasury and will be available for future acquisitions and financings and/or for awards granted under the InnSuites Hospitality Trust 1997 Stock Incentive and Option Plan.  During the three months ended January 31, 2011, the Trust acquired 15,225 Shares of Beneficial Interest in open market transactions at an average price of $1.62 per share.  The average price paid includes brokerage commissions. The Trust intends to continue repurchasing Shares of Beneficial Interest in compliance with applicable legal and NYSE Amex requirements.  The Trust remains authorized to repurchase an additional 320,232 limited partnership units and/or Shares of Beneficial Interest pursuant to the share repurchase program, which has no expiration date.

  Issuer Purchases of Equity Securities 
Period 
Total Number
of Shares
Purchased
 
Average Price
Paid per
Share
 
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans
 
Maximum Number of
Shares that May Be Yet
Purchased Under the
Plans
 
November 1 – November 30, 2010
 
5,945
 
$
1.57
 
5,945
 
329,512
 
December 1 – December 31, 2010
 
5,840
 
$
1.65
 
5,840
 
323,672
 
January 1 – January 31, 2011
 
3,440
 
$
1.65
 
3,440
 
320,232
 
Total
 
15,225
    
15,225
   

See Part III, Item 12 for a description of our equity compensation plans.


Item 6.                      SELECTED FINANCIAL DATA

Not required for smaller reporting companies.

 
42
 
Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW
We are engaged in the ownership and operation of hotel properties. At January 31, 2011, the InnSuites system included five moderate and full-service hotels with 843 hotel suites. Four of our Hotels are branded through franchise agreements with Best Western.  All five Hotels are trademarked as InnSuites Hotels. We are also involved in various operations incidental to the operation of hotels, such as the operation of restaurants and meeting/banquet room rentals.
Our operations consist of one reportable segment, hotel ownership, which derives its revenue from the operation of the Hotels.  In addition, we receive management fees, trademark license fees and reservation fees from three hotels owned by Mr. Wirth and his affiliates and trademark license fees from one hotel owned by a non-related third party.
Our results are significantly affected by occupancy and room rates at the Hotels, our ability to manage costs, and changes in the number of available suites caused by acquisition and disposition activities.  Results are also significantly impacted by overall economic conditions and conditions in the travel industry. Unfavorable changes in these factors could negatively impact hotel room demand and pricing, which would reduce our profit margins on rented suites.  Additionally, our ability to manage costs could be adversely impacted by significant increases in operating expenses, resulting in lower operating margins.  Supply of hotels has increased in the markets we operate, particularly in the Yuma, Arizona and Ontario, California markets.  Market demand has declined in the Tucson, Arizona market.  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 revenue of the Hotels in their respective markets.
Weak economic conditions, both generally and specifically in the travel industry, had a negative impact on our operations in fiscal years 2011 and 2010.  We anticipate moderate improvement in these conditions during fiscal year 2012. We expect moderate improvements in overall economic conditions to result in improved business and leisure travel and relatively steady room rates.  We expect the major challenge for fiscal year 2012 to be the continuation of strong competition for group and other business in the markets in which we operate, which may affect our ability to increase room rates while maintaining market share.  We believe that we have positioned the hotels to remain competitive through selective refurbishment and by carrying a relatively large number of two-room suites at each location.

GENERAL

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

The accounting policies that we believe are most critical and involve the most subjective judgments include our estimates and assumptions of future revenue and expenditures used to project hotel cash flows.  Future cash flows are used in the valuation calculation of our hotel properties to determine the recoverability (or impairment) of the carrying amounts in the event management is required to test the asset for recoverability of its carrying value under guidance codified in the Accounting Standards Codification (“ASC”) Topic 360-10-35 related to accounting for the impairment or disposal of long-lived assets.  If the carrying amount of an asset exceeds the estimated future cash flows over its estimated remaining life, the Trust recognizes an impairment expense to reduce the asset’s carrying value to its fair value.  Fair value is determined by either the most current third-party property appraisal, if available, or the present value of future undiscounted cash flows over the remaining life of the asset.  Our evaluation of future cash flows is based on our historical experience and other factors, including certain economic conditions and committed future bookings.  See “– Critical Accounting Policies and Estimates” below.

At January 31, 2011 through our sole  general partner’s interest in the Partnership we owned a 71.41% interest in three of the Hotels and a 23.79% in one of the Hotels, and we owned a 99.9% direct interest in one Hotel.  At January 31, 2010 through our sole  general partner’s interest in the Partnership we owned a 71.41% interest in four of the Hotels and we owned a 99.9% direct interest in one Hotel.  We did not purchase any Partnership units during the year ended January 31, 2011.  We purchased 62,207 Partnership units during the year ended January 31, 2010.
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.  In fiscal year 2011, occupancy decreased 1.53% to 54.96% from 56.49% in the prior year.  ADR decreased by $2.15 to $71.21 in fiscal year 2011 from $73.36 in fiscal year 2010, which resulted in a decrease in REVPAR of $2.30 to $39.14 in fiscal year 2011 from $41.44 in fiscal year 2010.  The decreased occupancy and rates reflect the softened economy and travel industry during fiscal year 2011.

5
 
The following table shows certain historical financial and other information for the periods indicated:


  For the Year Ended January 31, 
  2011 2010 
 
 
 
 
 
 
Occupancy
 
      54.96
%
56.49
%
 
 
 
 
 
 
Average Daily Rate (ADR)
 
$         71.21
 
$           73.36
 
 
 
 
 
 
 
Revenue Per Available Room (REVPAR)
 
$         39.14
 
$           41.44
 

No assurance can be given that occupancy, ADR and 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 8 to our Consolidated Financial Statements – “Mortgage Notes Payable.”
•           For a discussion of our equity sales and restructuring agreements involving certain related parties, see Note 3 to our Consolidated Financial Statements – “Sale of Ownership Interests
in Albuquerque Subsidiary” and Note 19 to our Consolidated Financial Statements - "Subsequent Events."
•           For a discussion of other related party transactions, see Note 14 to our Consolidated Financial Statements – “Other Related Party Transactions.”
Results of operations of the Trust for the year ended January 31, 2011 compared to the year ended January 31, 2010.

Overview

A summary of operating results for the fiscal years ended January 31, 2011 and 2010 is:

  2011 2010 Change % Change 
Revenue
 
$
15,740,427
 
$
16,924,494
 
$
(1,184,067
)
(7.0)
%
Operating Loss
 
$
(1,082,293
)
$
(247,794
)
$
(834,499
)
>(100.0)
%
Net Loss Attributable to Controlling Interest
 
$
(2,007,691
)
$
(1,061,419
)
$
(946,272
)
(89.2)
%
Loss Per Share – Basic
 
$
(0.23
)
$
(0.12
)
$
(0.11
)
(91.7)
%
Loss Per Share – Diluted
 
$
(0.23
)
$
(0.12
)
$
(0.11
)
(91.7)
%

Our overall results in fiscal year 2011 were negatively affected by the challenging overall economic environment and the hospitality industry in particular.

For the twelve months ended January 31, 2011, we had total revenue of $15.7 million compared to $16.9 million for the twelve months ended January 31, 2010, a decrease of approximately $1.2 million. This decrease in total revenue is primarily due to lower occupancies and rates at the Hotels, resulting in decreased room revenues. During fiscal year 2012, we expect improvements in occupancy and modest improvements in rates. Total expenses of $18.4 million for the twelve months ended January 31, 2011 reflect a decrease of approximately $321,000 compared to total expenses of $18.7 million for the twelve months ended January 31, 2010.  The decrease was primarily due to reduced advertising expenditures and reduced payroll expense under the management contracts.

General and administrative expenses include overhead charges for management, accounting, shareholder and legal services.  General and administrative expenses of $2.9 million for the twelve months ended January 31, 2011 were consistent with the prior year.

Sales and marketing expenses decreased $170,000, or 12.9%, to $1.1 million from $1.3 million for the twelve months ended January 31, 2011 and 2010, respectively.

Total operating expenses for the twelve months ended January 31, 2011 were $16.8 million, a decrease of approximately $350,000, or 2.0%, from $17.2 million in the twelve months ended January 31, 2010.  The decrease was primarily due to reduced advertising expenditures and reduced payroll expense under the management contracts.
Total interest expense for the twelve months ended January 31, 2011 was $1.6 million, consistent with the prior year total.  Interest on other notes payable increased $21,000, or greater than 100%, to $40,000 from $19,000 during the years ended January 31, 2011 and 2010, respectively. The increase is due to large share repurchases using promissory notes in the last half of fiscal year 2010.

We had a consolidated net loss before income taxes of $2.7 million for the twelve months ended January 31, 2011, compared to $1.8 million in the prior year.  After deducting the loss allocated to the minority interest of $689,065, we had a net loss attributable to controlling interests of approximately $2.0 million for fiscal year 2011, which represented approximately $919,000 in additional net loss attributable to controlling interests as compared to the twelve months ended January 31, 2010.  Basic and diluted net loss per share was $(0.23) for the twelve months ended January 31, 2011, compared to $(0.12) for fiscal year 2010.   The change from the prior year is primarily attributable to reduced business levels at the hotel properties.

6
LIQUIDITY AND CAPITAL RESOURCES

Overview
Our principal source of cash to meet our cash requirements, including distributions to our shareholders, is our share of the Partnership’s cash flow and our direct ownership of the Yuma, Arizona property.  The Partnership’s principal source of revenue is hotel operations for the four hotel properties it owns.  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.
Hotel operations are significantly affected by occupancy and room rates at the Hotels, both of which decreased from fiscal year 2010 to 2011, our ability to manage costs, and changes in the number of available suites caused by acquisition and disposition activities.  Results are also significantly impacted by overall economic conditions and conditions in the travel industry. Unfavorable changes in these factors negatively impact hotel room demand and pricing, which reduces our profit margins on rented suites.
In past years, we have relied on our cash flows from operations and hotel refinancings to meet our financial obligations as they come due. For the remainder of fiscal year 2012 (April 1, 2011 through January 31, 2012), our management has projected that cash flows from operations alone may not be sufficient  to meet all of our financial obligations as they become due during  fiscal year 2012. Based on this projection, we began syndicating up to 49% of our ownership in the Tucson Oracle hotel property by entering into a restructuring agreement on February 17, 2011.  The first funds related to this syndication were received on April 15, 2011.  The syndication will be conducted in the same manner as our Albuquerque property in fiscal year 2011.  Additionally, the Trust’s management is actively working to extend our $500,000 bank line of credit which matures in May 2011.

With the expected proceeds from the sale of ownership interests in the Tucson Oracle hotel property and the availability of the $500,000 bank line of credit, management believes that it will have enough cash on hand to meet all of our financial obligations as they become due, assuming the extension or refinance of the mortgage note payable secured by the Ontario hotel property. The Trust’s management is currently working with the current lender to obtain a one year or longer extension on the Ontario hotel property mortgage to allow us to obtain long-term refinancing of the mortgage note during the next twelve months or longer.  The Trust’s management is also actively discussing a potential refinance with other lenders.  In addition, due to the economy, our management has analyzed other strategic options available to us, including the refinancing of another property or raising additional funds through additional minority interest sales.
We anticipate a moderate improvement in the weak overall economic situation that negatively affected results in fiscal year 2011, which could result in higher revenues and operating margins.  Challenges in fiscal year 2012 are expected to include continued competition for all types of business in the markets in which we operate and our ability to maintain room rates while maintaining market share.
Net cash provided by (used in) operating activities totaled $(679,000) and $449,000 for the years ended January 31, 2011 and 2010, respectively.  The decrease in fiscal year 2011 compared to fiscal year 2010 was due to reduced business levels and room rates at the hotel properties, reflecting the slow economy and its impact on the travel industry.
Net cash used in investing activities totaled $(1.1) million and $(861,000) for the years ended January 31, 2011 and 2010, respectively.  The increase in funds used in 2011 as compared to 2010 was due to increased capital refurbishment projects, primarily at the Yuma, Arizona hotel property.
Net cash provided by (used in) financing activities totaled $1.9 million and $(323,000) for the years ended January 31, 2011and 2010, respectively.  The increase was due to the $2.2 million of funds raised in the sale of non-controlling interests in the Albuquerque subsidiary.
As of January 31, 2011, we had no commitments for capital expenditures beyond a 4% reserve for refurbishment and replacements that is set aside annually, as described below.
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 four of our properties.  As of January 31, 2011, $137,174 was held in these accounts and is 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, 2011 and 2010, the Hotels spent approximately $1.1 million and $876,000, respectively, for capital expenditures.  We consider the majority of these improvements to be revenue producing.  Therefore, these amounts are capitalized and depreciated over their estimated useful lives.  We plan to spend approximately $530,000 for capital expenditures in fiscal year 2012.  The Hotels also spent approximately $1.3 million and $1.2 million during fiscal years 2011 and 2010, respectively, on repairs and maintenance and these amounts have been charged to expense as incurred.
We have minimum debt payments of $8.4 million and $869,000 due during fiscal years 2012 and 2013, respectively.  The mortgage note payable secured by the Ontario, California property matures in May 2011, at which time a final principal payment of approximately $7.5 million will be due.  We are actively seeking to either extend our current loan agreement or refinance the balance with another lender.  Our ability to extend or refinance the Ontario note will depend on several factors, including the condition of credit markets and economic trends in both the hospitality industry in general and at the property specifically.
On March 3, 2008, we established an $850,000 revolving line of credit. The line of credit matured on June 30, 2010.  On November 23, 2010, the Trust established a new revolving bank line of credit, with a credit limit of $500,000.  The line of credit bears interest at the prime rate plus 2.75% per annum with a 6.0% rate floor, has no financial covenants and matures on May 23, 2011.  The Trust’s management is actively working with the lender to extend this line of credit.  If the Trust maintains bank balances of at least $250,000 with the lender, the line of credit bears interest at the prime rate plus 1.0% with a 6.0% rate floor.  The line is secured by a junior security interest in the Yuma, Arizona property and trade receivables.  Mr. Wirth is a guarantor on the new line of credit.  As of January 31, 2011, the Trust had drawn no funds under the line of credit.
As of January 31, 2011, we had mortgage notes payable of $22.1 million outstanding with respect to the Hotels, $481,000 in secured promissory notes outstanding to unrelated third parties arising from the Share of Beneficial Interest and Partnership unit repurchases, and no principal due and payable under notes and advances payable to Mr. Wirth and his affiliates.
Management believes that cash on hand, available funds on its bank line of credit, proceeds from the sale of minority ownership interests in the Tucson Oracle property and future cash receipts from operations in fiscal year 2012 will be sufficient to meet the Trust’s obligations as they become due for the next twelve months, assuming the extension or refinance of the mortgage note secured by the Ontario hotel property, which the Trust’s management is actively working on extending.
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.

7
 SALE OF OWNERSHIP INTERESTS IN ALBUQUERQUE SUBSIDIARY

On July 22, 2010, the Board of Trustees unanimously approved, with Mr. Wirth abstaining, for the Partnership to enter into an agreement with Rare Earth Financial, LLC (“Rare Earth”), an affiliate of Mr. Wirth, to sell additional units in Albuquerque Suite Hospitality, LLC (the “Albuquerque entity”).  Under the agreement, Rare Earth agreed to purchase or bring in other investors to purchase at least 51% of the membership interests in the Albuquerque entity and the parties agreed to restructure the current operating agreement of the Albuquerque entity.  A total of 400 units were available for sale for $10,000 per unit, with a two unit minimum subscription.  On October 29, 2010, the parties revised the operating agreement.

Under the new operating agreement, Rare Earth became the administrative member of the Albuquerque entity, in charge of the day-to-day management of the company.  Additionally, the membership interests in the Albuquerque entity were allocated to three classes with differing distribution preference rights.  Class A units will be owned by unrelated third parties and will have first priority for distributions, Class B units will be owned by the Trust and/or the Partnership and will have second priority for distributions, and Class C units will be owned by Rare Earth or other affiliates of Mr. Wirth and will have the lowest priority for distributions from the Albuquerque entity.  Rare Earth is also entitled to a formation fee equal to $320,000, payable in either cash or units in the Albuquerque entity, if at least 160 units are sold.  Rare Earth earned this fee in the fourth quarter of fiscal year 2011 and received 32 Class C units in the Albuquerque entity.  After all investors have received their initial capital plus a 7% per annum simple return, any additional profits will be allocated 50% to Rare Earth, with the remaining 50% allocated proportionately to all unit classes.  InnSuites Hotels will continue to provide management, licensing and reservation services to the property.
On July 29, 2010, the Partnership sold approximately 11% of its sole membership interest in the Albuquerque entity, which owns and operates the Albuquerque, New Mexico property, for $400,000 to Rare Earth.  The price paid reflects the net assets of the Albuquerque entity calculated using the third-party appraisal value for the hotel property and the carrying cost of all other assets and liabilities.  Subsequently, Rare Earth received an additional 32 units, or approximately 8%, worth $320,000 as a formation fee resulting in Rare Earth having a total ownership interest of approximately 19% as of January 31, 2011.  During the fiscal year ended January 31, 2011, the Partnership sold an additional approximately 47% of its membership interests for $1,754,000 to unrelated third parties and approximately 1% for $20,000 to Mr. Lawrence Pelegrin, who is a member of the Board of Trustees.  The transactions were a reduction in the Partnership’s controlling interest (see Note 4 – “Variable Interest Entity”), and therefore no gain or loss was reflected in the statements of operations and funds received in excess of cost basis were recorded to equity.  As of January 31, 2011, the Partnership holds a 33.32% ownership interest in the Albuquerque entity, Mr. Wirth and his affiliates hold a 19.25% interest, and other parties hold a 47.43% interest.

RESTRUCTURING AGREEMENT FOR TUCSON HOSPITALITY PROPERTIES SUBSIDIARY

At the January 31, 2011 Board of Trustees meeting, the Board authorized the Trust’s management to enter into a contract to sell up to 49% of the Partnership’s ownership in Tucson Hospitality Properties, LP (the “Tucson entity”), which is wholly owned by the Partnership.  On February 17, 2011, the Trust and Partnership entered into a restructuring agreement with Rare Earth to allow for the sale of minority interest units in the Tucson entity.  Under the agreement, Rare Earth agreed to purchase or bring in other investors to purchase up to 232 units of the Tucson entity for $10,000 per unit and the parties agreed to restructure the limited partnership agreement of the Tucson entity.

Under the restructured limited partnership agreement, Rare Earth became the a general partner of the Tucson entity along with the Partnership.  Rare Earth will relinquish its status as general partner if it fails to sell at least 160 units in the Tucson entity.  Additionally, the partnership interests in the Tucson entity were allocated to three classes with differing distribution preference rights.  Class A units will be owned by unrelated third parties and will have first priority for distributions, Class B units will be owned by the Trust and/or the Partnership and will have second priority for distributions, and Class C units will be owned by Rare Earth or other affiliates of Mr. Wirth and will have the lowest priority for distributions from the Tucson entity.  Rare Earth is also entitled to a formation fee equal to $320,000, payable in either cash or units in the Tucson entity, if at least 160 units are sold.  After all investors have received their initial capital plus a 7% per annum simple return, any additional profits will be allocated 50% to Rare Earth, with the remaining 50% allocated proportionately to all unit classes.  InnSuites Hotels will continue to provide management, licensing and reservation services to the property.

COMPLIANCE WITH CONTINUED LISTING STANDARDS OF NYSE AMEX
On September 30, 2010, the Trust received a letter from the NYSE Amex LLC (the "NYSE Amex") informing the Trust that the staff of the NYSE Amex's Corporate Compliance Department has determined that the Trust is not in compliance with Section 1003(a)(ii) of the NYSE Amex Company Guide due to the Trust having stockholders' equity of less than $4.0 million and losses from continuing operations in three of its four most recent fiscal years.

The NYSE Amex's letter informed the Trust that, to maintain its listing, it was required to submit a plan of compliance by November 1, 2010, addressing how it intended to regain compliance with the NYSE Amex's continued listing standards within a maximum of 18 months.  The NYSE Amex's letter provided that if the plan submitted by the Trust were accepted by the NYSE Amex, the Trust would likely be able to continue its listing during the 18-month plan period, during which time it would be subject to periodic review to determine whether it was making progress consistent with the Trust's plan.

The Trust submitted its plan on November 1, 2010.  The plan includes improved hotel operating profits as the economy and hospitality industry continue to recover, the sale of membership interests in the Albuquerque entity above carrying value, and the potential sale of membership interests in other hotel properties owned by the Trust and Partnership above carrying value.  The Trust expects to regain compliance within the 18-month plan period.

8
FUTURE POSITIONING
In viewing the hotel industry cycles, the Board of Trustees determined that 2008 may have been the high point of the current hotel industry cycle and further determined it was appropriate to actively seek buyers for our properties.  We engaged the services of several hotel brokers and began independently advertising our Hotels for sale.  We continue to independently advertise our Hotels for sale.
Our long-term strategic plan is to obtain the full benefit of our real estate equity and to migrate our focus from a hotel owner to a hospitality service company by expanding our trademark license, management, reservation, and advertising services. This plan is similar to strategies followed by international diversified hotel industry leaders, which over the last several years have reduced real estate holdings and concentrated on hospitality services. We began our long-term corporate strategy when we relinquished our REIT income tax status in January 2004, which had previously prevented us from providing management services to hotels. In June 2004, we acquired our trademark license and management agreements and began providing management, trademark and reservations services to our Hotels.
The table below lists the hotel properties, their respective carrying and mortgage value and the estimated sales value for the hotel properties.

Hotel Property Asset Values as of January 31, 2011 
Hotel Property Book Value  Mortgage Balance  Listed Sales Price 
Albuquerque
 
$
1,458,839
 
 
$
1,407,352
 
 
$
4,900,000
 
Ontario
 
 
6,277,919
 
 
 
7,555,870
 
 
 
12,500,000
 
Tucson Oracle
 
 
4,430,318
 
 
 
2,532,396
 
 
 
8,300,000
 
Tucson City Center
 
 
7,997,515
 
 
 
5,585,097
 
 
 
9,500,000
 
Yuma
 
 
5,752,672
 
 
 
5,000,000
 
 
 
10,740,000
 
Totals
 
$
25,917,263
 
 
$
22,080,716
 
 
$
45,940,000
 
There is no assurance that the listed sales price for the individual hotel properties will be realized.  However, our management believes that these values are reasonable based on local market conditions and comparable sales. Changes in market conditions have in part and may in the future result in our changing one or all of the sales prices.
We provide trademark licensing, management, reservation and advertising services to all the hotel properties listed above and expect to continue the trademark licensing services, which includes the reservation and advertising services, and/or continue the management services, which also includes the reservation and advertising services, after the Hotels are sold. If any or all of these hotel properties are sold, our future management and/or licensing fees could be reduced if the purchaser did not continue to retain InnSuites Hotels to provide those services. In the past, when we have sold hotel properties to unrelated third parties, we have continued to provide management and/or trademark licensing and reservation services after a sale.  However, there can be no assurance that we will be able to successfully do so in the future.
As part of the Board study for 2008-2009, greater emphasis has been placed on priority for additional management, trademark and reservations fee income. We have determined that it is easier to sell management contracts when the trademark services are also provided.  As part of the emphasis on trademark services, we have developed two trademark packages. The first is the “Traditional InnSuites Hotels & Suites” regional package and the second is the “InnSuites Boutique Hotel Collection,” which now includes three affiliate hotels managed by us.  Sales and marketing for the expansion of the InnSuites Boutique Hotel Collection are being handled internally.
9
SHARE REPURCHASE PROGRAM

On January 2, 2001, the Board of Trustees approved a share repurchase program under Rule 10b-18 of the Securities Exchange Act of 1934, as amended, for the purchase of up to 250,000 limited partnership units in the Partnership and/or Shares of Beneficial Interest in open market or privately negotiated transactions.  On September 10, 2002, August 18, 2005 and September 10, 2008, the Board of Trustees approved the purchase of up to 350,000 additional limited partnership units in the Partnership and/or Shares of Beneficial Interest in open market or privately negotiated transactions.  Additionally, on January 5, 2009, September 15, 2009 and January 31, 2010, the Board of Trustees approved the purchase of up to 300,000, 250,000 and 350,000, respectively, additional limited partnership units in the Partnership and/or Shares of Beneficial Interest in open market or privately negotiated transactions.  Acquired Shares of Beneficial Interest will be held in treasury and will be available for future acquisitions and financings and/or for awards granted under the InnSuites Hospitality Trust 1997 Stock Incentive and Option Plan. During fiscal year 2011, we acquired 56,040 Shares of Beneficial Interest in open market transactions at an average price of $1.50 per share and 2,600 Shares of Beneficial Interest in privately-negotiated transactions at an average price of $1.47 per share.  The average price paid in open market transactions includes brokerage commissions.  We intend to continue repurchasing Shares of Beneficial Interest and RRF Limited Partnership Units in compliance with applicable legal and NYSE Amex requirements.

OFF-BALANCE SHEET FINANCINGS AND LIABILITIES

Other than lease commitments and legal contingencies incurred in the normal course of business, we do not have any off-balance sheet financing arrangements or liabilities.  We do not have any majority-owned subsidiaries that are not included in the consolidated financial statements.  See “– Accounting Matters” below for a discussion of new accounting interpretations with respect to variable interest entities and the impact of such interpretations on us.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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.  In cases where we do not expect to recover the carrying cost of hotel properties “held for sale,” we will reduce the carrying value to the sales price less costs to sell.  We did not recognize impairment loss in fiscal years 2011 or 2010.  As of January 31, 2011, our management does not believe that the carrying values of any of its hotel properties are impaired.

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 or faster than inflation.  Room rates declined in the most recent fiscal year ended January 31, 2011.

FORWARD-LOOKING STATEMENTS

Certain statements in thisthe Original Form 10-K and this Amendment, 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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended.  The Trust intendsAct.  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, those of our Trustees or our officers in respect of (i) the declaration or payment of dividends; (ii) the leasing, management or operation of the Hotels;our hotels (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.

10
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:

·  local, national or nationalinternational 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 business;
·  interest rate fluctuations;
·  changes in governmental regulations, including federal income tax laws and regulations;
·  increased competition resulting from further increases in supply or reductions in demand;competition;
·  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 franchise contracts;
·  real estate and hospitality market conditions;
·  hospitality industry factors;
·  our ability to meet present and future debt service obligations;
·  our inability to refinance or extend the maturity of indebtedness at, prior to or after the time it matures;
·  terrorist attacks or other acts of war;
·  outbreaks of communicable diseases;
·  natural disasters;
·  data breaches; and
·  loss of key personnel.

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.  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 thisthe Original Form 10-K or this Amendment relating to the operations of the Partnership.

Item 7A.                       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.


 
112
 

Item 8.                      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INNSUITES HOSPITALITY TRUST
LIST OF CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

The following consolidated financial statements of InnSuites Hospitality Trust are included in Item 8:

Report of Independent Registered Public Accounting Firm –January 31, 2011 and 201013
Consolidated Balance Sheets – January 31, 2011 and 201014
Consolidated Statements of Operations – Years Ended January 31, 2011 and 201015
Consolidated Statements of Shareholders’ Equity – Years Ended January 31, 2011 and 201016
Consolidated Statements of Cash Flow – Years Ended January 31, 2011 and 201017
Notes to the Consolidated Financial Statements – January 31, 2011 and 201018

The following financial statement schedules of InnSuites Hospitality Trust are included in Item 8:

Schedule III – Real Estate and Accumulated Depreciation30
Schedule IV – Mortgage Loans on Real Estate33

All other schedules are omitted, as the information is not required or is otherwise furnished.



 
12



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Shareholders and Board of Trustees of
InnSuites Hospitality Trust


We have audited the accompanying consolidated balance sheets of InnSuites Hospitality Trust and subsidiaries (the “Trust”) as of January 31, 2011 and 2010, and the related consolidated statements of operations, shareholders’ equity and cash flows for the years then ended. These consolidated financial statements and financial statement schedules listed in Item 15(a) are the responsibility of the Trust’s management.  Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of InnSuites Hospitality Trust and subsidiaries as of January 31, 2011 and 2010, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.  Also, in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Moss Adams LLP

Scottsdale, Arizona
April 29, 2011


13


INNSUITES HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


   
JANUARY 31,
 
   
2011
   
2010
 
ASSETS
        
Current Assets:
        
Cash and Cash Equivalents ($10,107 and $16,917 of variable interest entity (VIE), Note 4)
 
$
494,844
 
 
$
406,385
 
Restricted Cash ($26,763 and $25,143 of VIE)
 
 
137,174
 
 
 
81,421
 
Accounts Receivable, including $290,232 and $179,818 from related parties, net of Allowance for Doubtful Accounts of $41,000 and $39,000, as of January 31, 2011 and 2010, respectively ($19,179 and $22,005 of VIE)
 
 
661,024
 
 
 
439,167
 
Prepaid Expenses and Other Current Assets ($45,173 and $61,830 of VIE)
 
 
443,043
 
 
 
495,537
 
Total Current Assets
 
 
1,736,085
 
 
 
1,422,510
 
Hotel Properties, net ($1,458,838 and $1,512,695 of VIE)
 
 
25,917,263
 
 
 
26,722,832
 
Property, Plant and Equipment, net
 
 
139,887
 
 
 
177,183
 
Deferred Finance Costs and Other Assets ($17,485 and $19,111 of VIE)
 
 
141,863
 
 
 
151,791
 
TOTAL ASSETS
 
$
27,935,098
 
 
 $
28,474,316
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
Current Liabilities :
 
 
 
 
 
 
 
 
    Accounts Payable and Accrued Expenses ($101,345 and $97,952 of VIE)
 
$
2,093,228
 
 
$
1,846,455
 
Notes Payable to Banks
 
 
—
 
 
 
110,137
 
Current Portion of Mortgage Notes Payable
 
 
8,214,759
 
 
 
826,249
 
Current Portion of Other Notes Payable
 
 
172,939
 
 
 
165,326
 
Total Current Liabilities
 
 
10,480,926
 
 
 
2,948,167
 
Mortgage Notes Payable
 
 
13,865,957
 
 
 
21,080,705
 
Other Notes Payable
 
 
307,614
 
 
 
480,553
 
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES
 
 
24,654,497
 
 
 
24,509,425
 
 
 
 
 
 
 
 
 
 
COMMITMENTS AND CONTINGENCIES (SEE NOTE 17)
        
         
SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
Shares of Beneficial Interest, without par value; unlimited authorization; 8,546,783 and 8,605,426 shares issued and outstanding at January 31, 2011 and  2010, respectively
 
 
15,412,926
 
 
 
15,903,170
 
Treasury Stock, 8,239,963 and 8,181,323 shares held at January 31, 2011 and 2010, respectively
 
 
(11,456,375
)
 
 
(11,368,630
)
TOTAL TRUST SHAREHOLDERS’ EQUITY
 
 
3,956,551
 
 
 
4,534,540
 
NON-CONTROLLING INTEREST
  
(675,950
)
  
(569,649
)
TOTAL EQUITY
  
3,280,601
   
3,964,891
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
27,935,098
 
 
 $
28,474,316
 


See accompanying notes to
consolidated financial statements


14

INNSUITES HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
  YEARS ENDED JANUARY 31, 
 
 
2011
 
 
2010
 
REVENUE
 
 
 
 
 
 
Room
 
$
12,043,627
 
 
$
12,751,208
 
Food and Beverage
 
 
765,851
 
 
 
873,678
 
Telecommunications
 
 
14,314
 
 
 
13,369
 
Other
 
 
208,266
 
 
 
294,940
 
Management and Trademark Fees, including $275,306 and $337,570 from related parties for 2011 and 2010, respectively
 
 
281,096
 
 
 
343,089
 
Payroll Reimbursements from Related Parties
 
 
2,427,273
 
 
 
2,648,210
 
 
 
 
 
 
 
 
 
 
TOTAL REVENUE
 
 
15,740,427
 
 
 
16,924,494
 
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Room
 
 
3,448,986
 
 
 
3,423,816
 
Food and Beverage
 
 
818,657
 
 
 
766,564
 
Telecommunications
 
 
62,171
 
 
 
44,013
 
General and Administrative
 
 
2,937,016
 
 
 
2,917,205
 
Sales and Marketing
 
 
1,148,629
 
 
 
1,318,508
 
Repairs and Maintenance
 
 
1,291,422
 
 
 
1,212,838
 
Hospitality
 
 
730,961
 
 
 
726,047
 
Utilities
 
 
1,158,771
 
 
 
1,175,443
 
Hotel Property Depreciation
 
 
1,853,164
 
 
 
1,934,227
 
Real Estate and Personal Property Taxes, Insurance and Ground Rent
 
 
929,923
 
 
 
995,101
 
Other
 
 
15,747
 
 
 
10,316
 
Payroll Costs Related to Management Contracts
 
 
2,427,273
 
 
 
2,648,210
 
 
 
 
 
 
 
 
 
 
TOTAL OPERATING EXPENSES
 
 
16,822,720
 
 
 
17,172,288
 
OPERATING LOSS
 
 
(1,082,293
)
 
 
(247,794
)
Interest Income
 
 
1,297
 
 
 
12,291
 
TOTAL OTHER INCOME
 
 
1,297
 
 
 
12,291
 
Interest on Mortgage Notes Payable
 
 
1,548,724
 
 
 
1,531,708
 
Interest on Notes Payable to Banks
 
 
76
 
 
 
8,962
 
Interest on Other Notes Payable
 
 
39,960
 
 
 
19,344
 
TOTAL INTEREST EXPENSE
 
 
1,588,760
 
 
 
1,560,014
 
CONSOLIDATED LOSS BEFORE INCOME TAX BENEFIT (PROVISION)
 
 
(2,669,756
)
 
 
(1,795,517
)
Income Tax Benefit (Provision)
 
 
(27,000
)
 
 
35,828
 
CONSOLIDATED NET LOSS
 
$
 (2,696,756
)
 
$
(1,759,689
)
LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
  
(689,065
)
  
(698,270
 
)
NET LOSS ATTRIBUTABLE TO CONTROLLING INTERESTS
 
$
(2,007,691
)
 
$
(1,061,419
)
NET LOSS PER SHARE – Basic and Diluted
 
$
(0.23
)
 
$
(0.12
)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING – Basic and Diluted
 
 
8,577,558
 
 
 
8,825,931
 
CASH DIVIDENDS PER SHARE
 
$
0.01
 
 
$
0.01
 
See accompanying notes to
consolidated financial statements

15


INNSUITES HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED JANUARY 31, 2011 and 2010


  
 
Controlling Interest
 Non-Controlling Interest 
 
Total
BALANCE, JANUARY 31, 2009 $
6,383,688
 $127,040 $6,510,728
Net Loss (1,061,419) (698,270) (1,759,689)
Dividends (85,704) — (85,704)
Purchase of Treasury Stock (618,092) — (618,092)
Shares of Beneficial Interest issued for Services Rendered 23,400 — 23,400
Purchase of Partnership Units above Carrying Value (103,694) (2,058) (105,752)
Reallocation of Non-Controlling Interests (3,639) 3,639 —
       
BALANCE, JANUARY 31, 2010 4,534,540 (569,649) 3,964,891
Net Loss (2,007,691) (689,065) (2,696,756)
Dividends (85,472) — (85,472)
Purchase of Treasury Stock (87,745) — (87,745)
Shares of Beneficial Interest issued for Services Rendered 48,600 — 48,600
Sale of Ownership Interests in Subsidiary 1,540,314 616,686 2,157,000
Distribution to Minority Interest Holders (14,223) (5,695) (19,918)
Reallocation of Non-Controlling Interests 28,228 (28,227) 1
       
BALANCE, JANUARY 31, 2011 $3,956,551 $(675,950) $3,280,601

See accompanying notes to
consolidated financial statements


16


INNSUITES HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

  YEARS ENDED JANUARY 31, 
  2011  2010 
CASH FLOW FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Consolidated Net Loss
 
$
 (2,696,756
)
 
$
(1,759,689
)
Adjustments to Reconcile Consolidated Net Loss to Net Cash Provided by Operating Activities:
 
 
 
 
 
 
 
 
Stock-Based Compensation
 
 
48,600
 
 
 
23,400
 
Provision for Uncollectible Receivables
 
 
1,929
 
 
 
50,436
 
Hotel Property Depreciation
 
 
1,853,164
 
 
 
1,934,227
 
Loss on Disposal Sale of Hotel Property
 
 
2,643
 
 
 
2,452
 
Amortization of Deferred Loan Fees
 
 
43,875
 
 
 
62,908
 
Changes in Assets and Liabilities:
 
 
 
 
 
 
 
 
Prepaid Expenses and Other Assets
 
 
47,495
 
 
 
37,077
 
Accounts Receivable
 
 
(206,516
)
 
 
21,339
 
Accounts Payable and Accrued Expenses
 
 
226,855
 
 
 
76,720
 
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
 
 
(678,711
)
 
 
448,870
 
 
 
 
 
 
 
 
 
 
CASH FLOW FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
Proceeds from Casualty Loss
  
116,309
   
—
 
Improvements and Additions to Hotel Properties
 
 
(1,146,520
)
 
 
(876,273
)
Change in Restricted Cash
 
 
(55,753
)
 
 
14,841
 
NET CASH USED IN INVESTING ACTIVITIES
 
 
(1,085,964
)
 
 
(861,432
)
 
 
 
 
 
 
 
 
 
CASH FLOW FROM FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
Increase in Deferred Loan Fees
  
(28,948
)
  
(19,654
)
Principal Payments on Mortgage Notes Payable
 
 
(826,238
)
 
 
(1,663,611
)
Net Proceeds from Refinancings of Mortgage Notes Payable
 
 
1,000,000
 
 
 
1,500,000
 
Payments on Notes Payable to Banks
 
 
(544,856
)
 
 
(4,916,018
)
Borrowings on Notes Payable to Banks
 
 
434,719
 
 
 
5,026,155
 
Proceeds from Sale of Non-Controlling Ownership Interests in Subsidiary
 
 
2,157,000
 
 
 
—
 
Repurchase of Partnership Units
 
 
—
 
 
 
(98
)
Repurchase of Treasury Stock
 
 
(87,745
)
 
 
(101,732
)
Payment of Dividends
 
 
(85,472
)
 
 
(85,704
)
Payments on Other Notes Payable
 
 
(165,326
)
 
 
(61,911
)
 
 
 
 
 
 
 
 
 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
 
1,853,134
 
 
 
(322,573
)
 
 
 
 
 
 
 
 
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
 
88,459
 
 
 
(735,135
)
 
 
 
 
 
 
 
 
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
 
 
406,385
 
 
 
1,141,520
 
 
 
 
 
 
 
 
 
 
CASH AND CASH EQUIVALENTS AT END OF YEAR
 
$
494,844
 
 
$
406,385
 

See Note 16 for Supplemental Cash Flow Disclosures
See accompanying notes to
consolidated financial statements

17

INNSUITES HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED JANUARY 31, 2011 and 2010

1.  NATURE OF OPERATIONS AND BASIS OF PRESENTATION

InnSuites Hospitality Trust (the “Trust” or “we”) owns, as of January 31, 2011, directly and through a partnership interest, five hotels with an aggregate of 843 suites in Arizona, southern California and New Mexico (the “Hotels”).  The Hotels operate under the tradename “InnSuites Hotels.”

The Trust is the sole general partner of RRF Limited Partnership, a Delaware limited partnership (the “Partnership”) and owned 71.41% of the Partnership as of January 31, 2011 and 2010.  The Trust’s weighted average ownership for the years ended January 31, 2011 and 2010 was 71.41% and 71.26%, respectively.  The Partnership owns 100% of three of the hotel properties and 33.32% of one of the hotel properties and incurs the related expenses.  The Trust owns and operates the Yuma, Arizona hotel property directly, which it acquired from the Partnership on January 31, 2005.

Under the management agreements, InnSuites Hotels provides the personnel for the Hotels, the expenses of which are reimbursed at cost, and manages the Hotels’ daily operations.  The Trust also provides the use of the “InnSuites” trademark to the Hotels through the Trust’s wholly owned subsidiary, InnSuites Hotels.  All such expenses and reimbursements between InnSuites Hotels and the Partnership have been eliminated in consolidation.


PARTNERSHIP AGREEMENT

The Partnership Agreement of the Partnership provides for the issuance of two classes of limited partnership units, Class A and Class B.  Class A and Class B limited partnership units are identical in all respects, except that each Class A limited partnership unit shall be convertible into one newly-issued Share of Beneficial Interest of the Trust at any time at the option of the particular limited partner.  The Class B limited partnership units may only become convertible with the approval of the Board of Trustees, in its sole discretion.  As of both January 31, 2011 and 2010, 369,391 Class A limited partnership units were issued and outstanding representing 2.80% of the total partnership units. Additionally, as of both January 31, 2011 and 2010, 3,407,938 Class B limited partnership units were outstanding to Mr. Wirth and his affiliates, in lieu of the issuance of Class A limited partnership units representing 25.8% of the total partnership units. If all of the Class A and B limited partnership units were converted, the limited partners in the Partnership would receive 3,777,329 Shares of Beneficial Interest of the Trust.  As of January 31, 2011 and 2010, the Trust owns 9,434,188 general partner units in the Partnership, representing 71.41% of the total partnership units. The Trust purchased no Partnership units during the year ended January 31, 2011.  The Trust purchased 62,207 Partnership units during the year ended January 31, 2010 at an average price of $1.70 per unit.

LIQUIDITY
Our principal source of cash to meet our cash requirements, including distributions to our shareholders, is our share of the Partnership’s cash flow and our direct ownership of the Yuma, Arizona property.  The Partnership’s principal source of revenue is hotel operations for the four hotel properties it owns.  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.
Hotel operations are significantly affected by occupancy and room rates at the Hotels, both of which decreased from fiscal year 2010 to 2011, our ability to manage costs, and changes in the number of available suites caused by acquisition and disposition activities.  Results are also significantly impacted by overall economic conditions and conditions in the travel industry. Unfavorable changes in these factors negatively impact hotel room demand and pricing, which reduces our profit margins on rented suites.
In past years, we have relied on our cash flows from operations and hotel refinancings to meet our financial obligations as they come due. For the remainder of fiscal year 2012 (April 1, 2011 through January 31, 2012), our management has projected that cash flows from operations alone may not be sufficient  to meet all of our financial obligations as they become due during  fiscal year 2012. Based on this projection, we began syndicating up to 49% of our ownership in the Tucson Oracle hotel property by entering into a restructuring agreement on February 17, 2011 (See Note 19 – “Subsequent Events”).  The first funds related to this syndication were received on April 15, 2011.  The syndication will be conducted in the same manner as our Albuquerque property in fiscal year 2011.  Additionally, the Trust’s management is actively working to extend our $500,000 bank line of credit which matures in May 2011.
With the expected proceeds from the sale of ownership interests in the Tucson Oracle hotel property, management believes that it will have enough cash on hand to meet all of our financial obligations as they become due, assuming the extension or refinance of the non-recourse mortgage note payable secured by the Ontario hotel property. The Trust’s management is currently working with the current lender to obtain a one year or longer extension on the Ontario hotel property mortgage to allow us to obtain long-term refinancing.  The Trust’s management is also actively discussing a potential refinance with other lenders.  In addition, due to the economy, our management has analyzed other strategic options available to us, including the refinancing of another property or raising additional funds through additional minority interest sales.
We anticipate a moderate improvement in the weak overall economic situation that negatively affected results in fiscal year 2011, which may result in higher revenues and operating margins.  Challenges in fiscal year 2012 are expected to include continued competition for all types of business in the markets in which we operate and our ability to maintain room rates while maintaining market share.

18
BASIS OF PRESENTATION

As sole general partner of the Partnership, the Trust exercises unilateral control over the Partnership, and the Trust owns all of the issued and outstanding classes of shares of InnSuites Hotels. Therefore, the financial statements of the Partnership and InnSuites Hotels are consolidated with the Trust, and all significant intercompany transactions and balances have been eliminated.

Under ASC Topic 810-10-25, Albuquerque Suite Hospitality, LLC has been determined to be a variable interest entity with the Partnership as the primary beneficiary (see Note 4 – “Variable Interest Entity”).  Therefore, the financial statements of Albuquerque Suite Hospitality, LLC are consolidated with the Partnership and the Trust, and all significant intercompany transactions and balances have been eliminated.

RECLASSIFICATIONS

Certain reclassifications have been made to previously reported figures on the balance sheet in order to conform to current year presentations with no effect on previously reported net loss or equity.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Trust’s operations are affected by numerous factors, including the economy, competition in the hotel industry and the effect of the economy on the travel and hospitality industries.  The Trust cannot predict if any of the above items will have a significant impact in the future, nor can it predict what impact, if any, the occurrence of these or other events might have on the Trust’s operations and cash flows.  Significant estimates and assumptions made by management include, but are not limited to, the estimated useful lives of long-lived assets and estimates of future cash flows used to test a long-lived asset for recoverability and the fair values of the long-lived assets.

PROPERTY, PLANT AND EQUIPMENT AND HOTEL PROPERTIES

Property, plant, and equipment and hotel properties are stated at cost and are depreciated using the straight-line method over estimated lives ranging from 5 to 40 years for buildings and improvements and 3 to 10 years for furniture and equipment.

Management applies guidance issued by the Financial Accounting Standards Board ("FASB"), codified in ASC Topic 360-10-35, to determine when it is required to test an asset for recoverability of its carrying value.  If the carrying amount of an asset exceeds the estimated undiscounted future cash flows over its estimated remaining life, the Trust recognizes an impairment expense to reduce the asset’s carrying value to its fair value.  The estimated future cash flows are based upon, among other things, assumptions about expected future operating performance, and may differ from actual cash flows.  Long-lived assets evaluated for impairment are analyzed on a property-specific basis independent of the cash flows of other groups of assets.  If the sum of the projected undiscounted cash flows (excluding interest) is less than the carrying value of the assets, the assets will be written down to the estimated fair value in the period in which the determination is made.  The Trust determines the estimated useful lives of its assets based on the expected future economic benefit of the asset and its ability to hold such assets.  In the decision-making process to determine fair value of long-lived assets and to test an asset for impairment, third party property appraisals are used as one of the indicators (benchmarks) to determine the necessity for testing for impairment.  Other indicators include a drop in the performance of a long-lived asset, a decline in the hospitality industry and a decline in the economy.  Third party property appraisals are useful because they consider historical occupancy and average rate levels in determining fair value.  Evaluation of future cash flows is based on historical experience and other factors, including certain economic conditions and committed future bookings.  Management has determined that no impairment of long-lived assets exists during the Trust’s fiscal years ended 2011 and 2010.

 CASH AND CASH EQUIVALENTS

The Trust considers all highly liquid short-term investments with original maturities of three months or less to be cash equivalents. The carrying amount approximates fair value.

RESTRICTED CASH

Restricted cash consists of amounts held in reserve by lenders to fund capital improvements to the properties.  The carrying amount approximates fair value.

REVENUE RECOGNITION

Room, food and beverage, telecommunications, management and licensing fees, and other revenue are recognized as earned as services are provided and items are sold.  Payroll reimbursements are recorded as the Trust provides its personnel to the hotels under management and are not netted with the corresponding payroll expense.  Sales taxes collected are excluded from gross revenue.

19
RECEIVABLES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable are carried at original amounts less an estimate made for doubtful accounts based on a review of outstanding amounts on a quarterly basis.  Management records an allowance for doubtful accounts for 50% of the balances over 90 days and 100% of the balances over 120 days.  Accounts receivables are written off when deemed uncollectible.  Recoveries, if any, of receivables previously written off are recorded when received.  The Trust does not charge interest on accounts receivable balances.

 The amounts charged to the allowance for doubtful accounts are as follows for the fiscal years ended January 31:
 
             
  Balance at the          
  Beginning of  Charged to     Balance at the 
Year Year  Expense  Deductions  End of Year 
2010
 
$
34,041
 
 
 
50,436
 
 
 
(45,409
)
 
 $
39,068
 
2011
 
$
39,068
 
 
 
10,118
   
(8,189
)
 
 $
40,997
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

STOCK-BASED COMPENSATION
We have an employee equity incentive plan, which is described more fully in Note 18 - “Stock Option Plan.”  Restricted shares are measured based on the fair market value of the underlying shares on the date of grant.  We use the straight-line attribution method to recognize share-based compensation over the service period of the award.
For both fiscal year 2011 and 2010, the Trust has paid the annual fees due to its Trustees using Shares of Beneficial Interest issued from treasury stock.  Upon issuance, the Trust reclassifies the shares from held in treasury to outstanding.  The Trust recognizes expense related to the issuance based on the fair value of the shares upon the date of issuance and amortizes the expense equally over the period during which the shares vest to the Trustees.
During fiscal year 2010, the Trust granted restricted stock awards of 36,000 Shares to members of the Board of Trustees.  In fiscal year 2011, 36,000 of these shares vested in equal monthly amounts resulting in stock-based compensation of $48,600.
During fiscal year 2009, the Trust granted restricted stock awards of 72,000 Shares to members of the Board of Trustees, of which 36,000 vested in fiscal year 2009.  In fiscal year 2010, 36,000 of these shares vested in equal monthly amounts resulting in stock-based compensation of $23,400.

The following table summarizes restricted share activity during fiscal years 2010 and 2011.

  Restricted Shares 
  Shares  Weighted-Average Grant Date Fair Value 
Balance of unvested awards at January 31, 2009
 
 
36,000
 
 
$
0.65
 
Granted
 
 
36,000
 
 
$
1.35
 
Vested
 
 
(36,000
)
 
$
0.65
 
Forfeited
 
 
—
 
 
 
—
 
Balance of unvested awards at January 31, 2010
 
 
36,000
 
 
$
1.35
 
Granted
 
 
—
 
 
 
—
 
Vested
 
 
(36,000
)
 
$
1.35
 
Forfeited
 
 
—
 
 
 
—
 
Balance of unvested awards at January 31, 2011
 
 
—
 
 
 
—
 

20
TREASURY STOCK

Treasury stock is carried at cost, including any brokerage commissions, paid to repurchase the shares.  Any shares issued from treasury stock are removed at cost, with the difference between cost and fair value at the time of issuance recorded against common stock as an adjustment to additional paid in capital.

INCOME TAXES

The Trust is subject to federal and state corporate income tax and accounts for deferred taxes utilizing a liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when it is determined to be more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

DIVIDENDS AND DISTRIBUTIONS

In fiscal years 2011 and 2010, the Trust paid dividends of $0.01 per share in the fourth quarter of each year.  The Trust’s ability to pay dividends is largely dependent upon the operations of the Hotels.

NON-CONTROLLING INTEREST

Non-controlling interest in the Partnership represents the limited partners’ proportionate share of the capital and earnings of the Partnership.  Income or loss is allocated to the minority interest based on its weighted average ownership percentage in the Partnership throughout the period, and capital is allocated based on its ownership percentage at year-end.  Any difference is recorded as a reallocation of non-controlling interest as a component of shareholders’ equity.

INCOME (LOSS) PER SHARE

Basic and diluted income (loss) per Share of Beneficial Interest have been computed based on the weighted-average number of Shares of Beneficial Interest and potentially dilutive securities outstanding during the periods.

For the twelve months ended January 31, 2011 and 2010, there were Class A and Class B limited partnership units outstanding, which are convertible into Shares of Beneficial Interest of the Trust.  Assuming conversion at the beginning of each period, the aggregate weighted-average of these Shares of Beneficial Interest would have been 3,777,329 and 3,797,269 in addition to the basic shares outstanding for fiscal year 2011 and 2010, respectively.  These Shares of Beneficial Interest issuable upon conversion of the Class A and Class B limited partnership units were anti-dilutive during both fiscal year 2011 and 2010 and are excluded from the calculation of diluted earnings per share for those years and no reconciliation is provided of basic earnings per share to diluted earnings per share.

SEGMENT REPORTING

The Trust views its operations as one operating business segment, a hospitality company that owns five hotel properties with an aggregate of 843 suites in Arizona, southern California and New Mexico. The Trust has a concentration of assets in the southern Arizona market.

ADVERTISING COSTS

Amounts incurred for advertising costs with third parties are expensed as incurred.  Advertising expense totaled approximately $788,000 and $907,000 for the years ended January 31, 2011 and 2010, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS

For disclosure purposes, fair value is determined by using available market information and appropriate valuation methodologies.  Due to their short maturities, cash and cash equivalents, restricted cash, accounts receivable, accounts payable and notes payable to banks are carried at cost, which reasonably approximates fair value.

The fair value of mortgage notes payable, notes payable to banks and notes and advances payable to related parties is estimated by using the current rates which would be available for similar loans having the same remaining maturities.  The carrying value of accounts payable and accrued expenses and other notes payable approximates fair value, due to their short-term nature.  See Note 15 – “Fair Value of Financial Instruments.”

21
NEW ACCOUNTING PRONOUNCEMENTS

In June 2009, FASB issued Accounting Standards Update No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. The new guidance requires a qualitative approach to identifying a controlling financial interest in a variable interest entity (VIE) and requires an ongoing assessment of whether an interest in a VIE makes the holder the primary beneficiary of the VIE. The Trust adopted this guidance on January 1, 2010.  Adoption did not have a material impact on our consolidated financial statements beyond the expanded disclosures included in Note 4 - "Variable Interest Entity."

3.   SALE OF OWNERSHIP INTERESTS IN ALBUQUERQUE SUBSIDIARY

On July 22, 2010, the Board of Trustees unanimously approved, with Mr. Wirth abstaining, for the Partnership to enter into an agreement with Rare Earth, an affiliate of Mr. Wirth, to sell additional units in Albuquerque Suite Hospitality, LLC (the “Albuquerque entity”).  Under the agreement, Rare Earth agreed to either purchase or bring in other investors to purchase at least 51% of the membership interests in the Albuquerque entity and the parties agreed to restructure the current operating agreement of the Albuquerque entity.  A total of 400 units were available for sale for $10,000 per unit, with a two unit minimum subscription.  On October 29, 2010, the parties revised the operating agreement.

Under the new operating agreement, Rare Earth became the administrative member of the Albuquerque entity, in charge of the day-to-day management of the company.  Additionally, the membership interests in the Albuquerque entity were allocated to three classes with differing distribution preference rights.  Class A units will be owned by unrelated third parties and will have first priority for distributions, Class B units will be owned by the Trust and/or the Partnership and will have second priority for distributions, and Class C units will be owned by Rare Earth or other affiliates of Mr. Wirth and will have the lowest priority for distributions from the Albuquerque entity.  Rare Earth is also entitled to a formation fee equal to $320,000, payable in either cash or units in the Albuquerque entity, if at least 160 units are sold.  Rare Earth earned this fee in the fourth quarter of fiscal year 2011 and received 32 Class C units in the Albuquerque entity.  After all investors have received their initial capital plus a 7% per annum simple return, any additional profits will be allocated 50% to Rare Earth, with the remaining 50% allocated proportionately to all unit classes.  InnSuites Hotels will continue to provide management, licensing and reservation services to the property.
During the fiscal year ended January 31, 2011, the Partnership sold approximately 47% of its membership interests for $1,754,000 to unrelated third parties, approximately 19% to Mr. Wirth and his affiliates for $400,000 and approximately 1% for $20,000 to Mr. Lawrence Pelegrin, who is a member of the Board of Trustees.  The transactions were a reduction in the Partnership’s controlling interest (see Note 4 – “Variable Interest Entity”), and therefore no gain or loss was reflected in the statements of operations and funds received in excess of cost basis were recorded to equity.  As of January 31, 2011, the Partnership holds a 33.32% ownership interest in the Albuquerque entity, Mr. Wirth and his affiliates hold a 19.25% interest, and other parties hold a 47.43% interest.

4.   VARIABLE INTEREST ENTITY
Management evaluates the Trust’s explicit and implicit variable interests to determine if they have any variable interests in VIEs. Variable interests are contractual, ownership, or other pecuniary interests in an entity whose value changes with changes in the fair value of the entity’s net assets, exclusive of variable interests. Explicit variable interests are those which directly absorb the variability of a VIE and can include contractual interests such as loans or guarantees as well as equity investments. An implicit variable interest acts the same as an explicit variable interest except it involves the absorbing of variability indirectly, such as through related party arrangements or implicit guarantees. The analysis includes consideration of the design of the entity, its organizational structure, including decision making ability over the activities that most significantly impact the VIE’s economic performance. Generally accepted accounting principles require a reporting entity to consolidate a VIE when the reporting entity has a variable interest, or combination of variable interest, that provides it with a controlling financial interest in the VIE.  The entity that consolidates a VIE is referred to as the primary beneficiary of that VIE.
The Partnership has determined that the Albuquerque entity is a variable interest entity with the Partnership as the primary beneficiary, as determined under the guidance of ASC Topic 810-10-25.  In its determination, management considered the following qualitative and quantitative factors:

a)The Partnership, Trust and their related parties, which share common ownership and management, have guaranteed material financial obligations of the Albuquerque entity, including its mortgage note payable and distribution obligations, which based on the capital structure of the Albuquerque entity, management believes could potentially be significant.

b)The Partnership, Trust and their related parties have maintained, as a group, a controlling ownership interest in the Albuquerque entity, with the largest ownership belonging to the Partnership.

c)The Partnership, Trust and their related parties have maintained control over the decisions which most impact the financial performance of the Albuquerque entity, including providing the personnel to operate the property on a daily basis.
During the fiscal year ending January 31, 2011, neither the Trust nor the Partnership have provided any implicit or explicit financial support for which they were not previously contracted.  During the fiscal year ending January 31, 2010, both the Partnership and the Trust provided mortgage loan guarantees which allowed the Albuquerque entity to obtain new financing.

22
5.   PROPERTY, PLANT, AND EQUIPMENT, HOTEL PROPERTIES

As of January 31, 2011 and 2010 property, plant and equipment consisted of the following:

  2011  2010 
Land
 
$
7,005
 
 
$
7,005
 
Building and improvements
 
 
75,662
 
 
 
75,662
 
Furniture, fixtures and equipment
 
 
391,808
 
 
 
342,930
 
Total property, plant and equipment
 
 
474,475
 
 
 
425,597
 
Less accumulated depreciation
 
 
(334,588
)
 
 
(248,414
)
Property, Plant and Equipment, net
 
$
139,887
 
 
$
177,183
 

As of January 31, 2011 and 2010 and the hotel properties consisted of the following:

  2011  2010 
Land
 
$
2,817,515
 
 
$
2,817,515
 
Building and improvements
 
 
34,298,863
 
 
 
34,260,699
 
Furniture, fixtures and equipment
 
 
5,207,459
 
 
 
4,783,497
 
Work in progress
  
62,146
   
44,142
 
Total hotel properties
 
 
42,385,983
 
 
 
41,905,853
 
  Less accumulated depreciation
 
 
(16,468,720
)
 
 
(15,183,021
)
Hotel properties, net
 
$
25,917,263
 
 
$
26,722,832
 

6.   PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets are carried at face value and expect to be consumed within one year. As of January 31, 2011 and 2010, prepaid expenses and other current assets consisted of the following:

    
  2011 2010 
Prepaid Insurance
 
$
177,054
 
  $
73,386
 
Tax and Insurance Escrow
 
 
206,068
 
 
357,726
 
Other Prepaid Expenses and Current Assets
 
 
59,921
 
 
64,425
 
Total Prepaid Expenses and Current Assets
 
$
443,043
 
  $
495,537
 

23
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of January 31, 2011 and 2010, accounts payable and accrued liabilities consisted of the following:

   
  2011 2010
Accounts Payable
 
$
608,905
 
  $
378,143
Accrued Salaries and Wages
 
 
454,681
 
 
390,229
Accrued Vacation
 
 
218,711
 
 
248,623
Sales Tax Payable
 
 
168,751
 
 
149,470
Income Tax Payable   27,000   --
Accrued Interest Payable
 
 
91,293
 
 
87,726
Advanced Customer Deposits
 
 
80,214
 
 
137,491
Accrued Property Taxes
 
 
218,069
 
 
247,219
Accrued Land Lease
 
 
101,811
 
 
85,825
Accrued Other
 
 
123,793
 
 
121,729
Total Accounts Payable and Accrued Liabilities
 
$
2,093,228
 
  $
1,846,455

8.  MORTGAGE NOTES PAYABLE

At January 31, 2011, the Trust had mortgage notes payable outstanding with respect to each of the Hotels.  The mortgage notes payable have various repayment terms and have scheduled maturity dates ranging from May 11, 2011 to November 1, 2021.  Weighted average interest rates on the mortgage notes payable for the fiscal years ended January 31, 2011 and 2010 were 6.70% and 6.65%, respectively.

The following table summarizes the Trust’s mortgage notes payable as of January 31, 2011 and 2010:

  2011 2010 
Mortgage note payable, due in interest only monthly payments of $23,333 at an interest rate of 7.0% per year, through December 30, 2013, plus a balloon payment of $4,023,333 in December 2013, secured by the Yuma property with a carrying value of $5.8 million at January 31, 2011.
 
$
4,000,000
 
$
4,000,000
 
 
 
 
 
 
 
Mortgage note payable, due in interest only monthly payments of $6,667 at an interest rate of 8.0% per year, through December 30, 2013, plus a balloon payment of $1,006,667 in December 2013, secured by the Yuma property with a carrying value of $5.8 million at January 31, 2011.
 
1,000,000
 
—
 
 
 
 
 
 
 
Mortgage note payable, due in monthly installments of $48,738, including interest at 8% per year, through May 1, 2016, secured by the Tucson Oracle property with a carrying value of $4.4 million at January 31, 2011.
 
2,532,396
 
2,898,601
 
 
 
 
 
 
 
Mortgage note payable, due in monthly installments of $71,141, including interest at 8.28% per year, through May 11, 2011, plus a balloon payment of $7,550,198 in May 2011, secured by the Ontario property with a carrying value of $6.3 million at January 31, 2011.
 
7,555,870
 
7,765,740
 
 
 
 
 
 
 
Mortgage note payable, due in monthly installments of $16,032, including interest at 7.75% per year, through November 1, 2021, secured by the Albuquerque with a carrying value of $1.5 million at January 31, 2011.  At the discretion of the lender, the interest rate can be increased to the market rate, as determined by lender, on November 1, 2014.
 
1,407,352
 
1,487,270
 
 
 
 
 
 
 
Mortgage note payable, due in variable monthly installments ($29,776 as of January 31, 2011) including interest at prime rate (3.25 % as of January 31, 2011), through January 28, 2015, plus a balloon payment of $4,874,612 in January 2015, secured by the Tucson St. Mary’s property with a carrying value of $8.0 million at January 31, 2011.
 
5,585,098
 
5,755,343
 
 
 
 
 
 
 
Totals
 
$
22,080,716
 
$
21,906,954
 
The mortgage notes payable secured by the Albuquerque and Tucson St. Mary’s hotel properties are recourse to the Partnership and Trust as full guarantors.  None of the other mortgage notes are recourse to the Partnership or the Trust.

Mr. Wirth has guaranteed 100% of the Tucson St. Mary’s mortgage note payable.

On April 7, 2010, we increased our mortgage note payable secured by the Yuma, Arizona property by $1.0 million.  The new balance of the mortgage note payable is $5.0 million.  The additional $1.0 million borrowed bears interest at 8.0% and matures on December 31, 2013.  The note is due in monthly interest-only installments of $30,000, an increase of $6,667 from the previous monthly interest-only installments of $23,333.  The proceeds of the mortgage financing were used for working capital purposes.

On October 2, 2009, the Trust refinanced the Albuquerque property with a mortgage note of $1,500,000. The proceeds from the mortgage note were used to pay in full the previous mortgage note on the Albuquerque property of $883,000 and for working capital purposes.
See Note 11 – “Minimum Debt Payments” for scheduled minimum payments.

24
9.  NOTES PAYABLE TO BANKS

As of January 31, 2011, the Trust has a revolving bank line of credit agreement, with a credit limit of $500,000.  The line of credit bears interest at the prime rate plus 2.75% per annum, has no financial covenants and matures on May 23, 2011.  If the Trust maintains bank balances of at least $250,000 with the lender, the line of credit bears interest at the prime rate plus 1.0% with a 6.0% rate floor.  The line is secured by a junior security interest in the Yuma, Arizona property and trade receivables.  Mr. Wirth is a guarantor on the new line of credit.  The Trust had no funds drawn on this line of credit as of January 31, 2011.

10.  OTHER NOTES PAYABLE

As of January 31, 2011, the Trust had $480,553 in secured promissory notes outstanding to unrelated third parties arising from the repurchase of 99,118 Class A limited partnership units in the Partnership and the repurchase of 404,698 Shares of Beneficial Interest in privately negotiated transactions.  The promissory notes bear interest at 7% per year and are due in varying monthly payments through May 2014.  The repurchased Class A limited partnership units and Shares of Beneficial Interest secure the notes.  As of January 31, 2010, the Trust had $645,879 in secured promissory notes outstanding to unrelated third parties arising from the repurchase of 99,118 Class A limited partnership units in the Partnership and the repurchase of 404,698 Shares of Beneficial Interest in privately negotiated transactions.

11.  MINIMUM DEBT PAYMENTS

Scheduled minimum payments of debt as of January 31, 2011 are as follows in the respective fiscal years indicated:

FISCAL YEAR MORTGAGES OTHER NOTES PAYABLE TOTAL 
2012
 
$
8,214,760
 
$
172,939
 
$
8,387,699
 
2013
 
704,124
 
164,848
 
868,972
 
2014
 
5,753,834
 
127,309
 
5,881,143
 
2015
 
5,652,535
 
15,457
 
5,667,992
 
2016
 
663,186
 
—
 
663,186
 
Thereafter
 
1,092,277
 
—
 
1,092,277
 
 
 
 
 
 
 
 
 
 
 
$
22,080,716
 
$
480,553
 
$
22,561,269
 

12.  DESCRIPTION OF CAPITAL STOCK

Holders of the Trust’s Shares of Beneficial Interest are entitled to receive dividends when and if declared by the Board of Trustees of the Trust out of funds legally available therefor.  The holders of Shares of Beneficial Interest, upon any liquidation, dissolution or winding-down of the Trust, are entitled to share ratably in any assets remaining after payment in full of all liabilities of the Trust.  The Shares of Beneficial Interest possess ordinary voting rights, each share entitling the holder thereof to one vote.  Holders of Shares of Beneficial Interest do not have cumulative voting rights in the election of Trustees and do not have preemptive rights.

On January 2, 2001, the Board of Trustees approved a share repurchase program under Rule 10b-18 of the Securities Exchange Act of 1934, as amended, for the purchase of up to 250,000 limited partnership units in the Partnership and/or Shares of Beneficial Interest in open market or privately negotiated transactions.  On September 10, 2002, August 18, 2005 and September 10, 2007, the Board of Trustees approved the purchase of up to 350,000 additional limited partnership units in the Partnership and/or Shares of Beneficial Interest in open market or privately negotiated transactions.  Additionally, on January 5, 2009, September 15, 2009 and January 31, 2010, the Board of Trustees approved the purchase of up to 300,000, 250,000 and 350,000, respectively, additional limited partnership units in the Partnership and/or Shares of Beneficial Interest in open market or privately negotiated transactions.  Acquired Shares of Beneficial Interest will be held in treasury and will be available for future acquisitions and financings and/or for awards granted under the InnSuites Hospitality Trust 1997 Stock Incentive and Option Plan.  During fiscal year 2011, we acquired 56,040 Shares of Beneficial Interest in open market transactions at an average price of $1.50 per share and 2,600 Shares of Beneficial Interest in privately-negotiated transactions at an average price of $1.47 per share.  We intend to continue repurchasing Shares of Beneficial Interest and RRF Limited Partnership Units in compliance with applicable legal and NYSE Amex requirements.

For the years ended January 31, 2011 and 2010, the Trust repurchased 58,640 and 446,111 Shares of Beneficial Interest at an average price of $1.50 and $1.39 per share, respectively.  Repurchased Shares of Beneficial Interest are accounted for as treasury stock in the Trust’s Consolidated Statements of Shareholders’ Equity.
25
13.  FEDERAL INCOME TAXES

The Trust and subsidiaries have income tax net operating loss carry forwards of approximately $13.5 million at January 31, 2011.  In 2005, the Trust had an ownership change within the meaning of Internal Revenue Code Section 382. The Trust determined that such ownership change would not have a material impact on the future use of the net operating losses. However, future changes in ownership could limit the use of the net operating losses.

The Trust and subsidiaries have federal and state net operating loss carryforwards.  The federal and state net operating loss carryforwards are estimated to expire as follows:


 Year  Federal   State
       
 2012  $ 2,846,215  $ -  
 2014  -     242,700
 2015   -     -  
 2016   -     1,603,675
 2019   1,163,799   1,492,444
 2020   1,979,025   -  
 2021   250,847   -  
 2022   1,580,590   -  
 2023   1,671,294       -  
 2024   697,877   -  
 2028   100,323   -  
 2029   354,667   31,940
 2030   960,063   166,377
 2031   1,878,257   343,847
       
   $ 13,482,958  $ 3,880,983


Total and net deferred income tax assets at January 31, 2011 2010
Net operating loss carryforwards $4,855,000 $4,071,000
Bad debt allowance  5,000  23,000
Accrued expenses  90,000  92,000
Prepaid insurance  42,000  -
Alternative minimum tax credit  61,000  61,000
Total deferred income tax assets  5,053,000  4,247,000
Deferred income tax liability associated with book/tax differences in hotel properties  (2,996,000)  (2,658,000)
Net deferred income tax asset  2,057,000  1,589,000
Valuation allowance  (2,057,000)  (1,589,000)
Net deferred income tax asset $-   $-  


Income taxes for the year ended January 31, 2011 2010
Current income tax provision (benefit) $27,000 $(35,828)
Deferred income tax benefit (provision)  -   - 
Net income tax provision (benefit) $27,000 $(35,828)
26
The differences between the statutory and effective tax rates are as follows for the year ended January 31, 2011:

Federal statutory rates $(673,000) (34%)
State income taxes  (140,000) (7%)
Change in valuation allowance  468,000 24%
True-ups to prior year return  270,000 14%
Other  102,000 5%
Effective rate $27,000 1%

 The differences between the statutory and effective tax rates are as follows for the year ended January 31, 2010:

Federal statutory rates $(361,000) (34%)
State income taxes  (50,000) (5%)
Change in valuation allowance  523,000 49%
True-ups to prior year return  (94,000) (9%)
Other  (53,828) (5%)
Effective rate $(35,828) (3%)

The valuation allowance increased by approximately $468,000 and $523,000 in the years ended January 31, 2011 and 2010, respectively, primarily due to a reduction in deferred tax liabilities associated with hotel properties due to timing differences in depreciation recognition.
The Trust and certain of its subsidiaries file income tax returns in the US federal jurisdiction and several states.  Neither the Trust nor any of its subsidiaries are currently under audit examination by federal or state taxing authorities for any previous tax years.
The Trust's practice is to recognize interest and/or penalties related to income tax matters in income tax expense.  The Trust had no accrued interest or penalties at January 31, 2011 and 2010.

14.  OTHER RELATED PARTY TRANSACTIONS

The Partnership is responsible for all operating expenses incurred by the Trust in accordance with the Partnership Agreement.

As of January 31, 2011 and 2010, Mr. Wirth and his affiliates held 3,407,938 Class B limited partnership units, which represented 25.8% of the total outstanding partnership units.  As of January 31, 2011 and 2010, Mr. Wirth and his affiliates held 5,573,624 Shares of Beneficial Interest in the Trust, which represented 65.2% and 64.8%, respectively, of the total issued and outstanding Shares of Beneficial Interest.

At January 31, 2011, the Trust owned a 71.41% interest in three of the Hotels and a 23.79% interest in the Albuquerque hotel through its sole general partner’s interest in the Partnership.  At January 31, 2010, the Trust owned a 71.41% interest in all four of the above hotels through its sole general partner’s interest in the Partnership.
During the first eleven months of fiscal year 2010, InnSuites Hotels received 2.5% of room revenue from the four hotels (reduced to three as of July 28, 2010) owned by affiliates of Mr. Wirth in exchange for management services and an additional monthly accounting fee of $2,000. Beginning January 1, 2010 and effective through January 31, 2011, the management fees for these hotels remained at 2.5% of room revenue and the annual accounting fee was adjusted to $27,000, payable $1,000 per month with an additional payment of $15,000 due at year end for annual accounting closing activities.  These agreements have no expiration date and may be cancelled by either party with 90-days written notice or 30-days written notice in the event the property changes ownership.

During the first eleven months of fiscal year 2010, InnSuites Hotels received 1.25% of room revenue from the four hotels (reduced to three as of July 28, 2010) owned by affiliates of Mr. Wirth in exchange for use of the “InnSuites” trademark.  Effective January 1, 2010 and through January 31, 2011, the fees for hotels owned by affiliates of Mr. Wirth were amended to a per-room calculation, with fees equal to $10 per month per room for the first 100 rooms, and $2 per month per room for the amount above 100 rooms. These agreements have no expiration date and may be cancelled by either party with 12-months written notice or 90-days written notice in the event the property changes ownership.

27
15.  FAIR VALUE OF FINANCIAL INSTRUMENTS

FASB has issued guidance that defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.
The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 Quoted prices in active markets for identical assets or liabilities;
Level 2Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or
Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Trust has no financial assets or liabilities measured at fair value in the accompanying balance sheets at January 31, 2011 and 2010.  For footnote disclosure purposes, the fair value of notes payable and long-term debt was estimated based on the borrowing rates currently available to the Trust for bank loans with similar terms and maturities.
The following table presents the estimated fair values of the Trust’s debt instruments not recognized in the accompanying consolidated balance sheets at January 31, 2011 and 2010:

  2011 2010 
  
CARRYING
AMOUNT
 
FAIR
VALUE
 
CARRYING
AMOUNT
 
FAIR
VALUE
 
Mortgage notes payable
 
$
22,080,716
 
$
21,280,238
 
$
21,906,954
 
$
20,907,254
 
 
 
 
 
 
 
 
 
 
 
Notes payable to banks
 
—
 
—
 
110,137
 
110,137
 
 
 
 
 
 
 
 
 
 
 
Other notes payable
 
480,553
 
483,356
 
645,879
 
649,251
 

16.  SUPPLEMENTAL CASH FLOW DISCLOSURES

  2011 2010
Cash paid for interest
 
$
1,541,317
 
$
1,497,965
 
 
 
 
 
Cash refunded from (paid for) income taxes
 
—
 
58,189
 
 
 
 
 
Promissory notes issued by the Trust to acquire Class A limited partnership units
 
—
 
105,564
 
 
 
 
 
Promissory notes issued by the Trust to acquire Shares of Beneficial Interest
 
—
 
516,360

28
17.  COMMITMENTS AND CONTINGENCIES

Two of the Hotels are subject to non-cancelable ground leases expiring in 2050 and 2033.  Total expense associated with the non-cancelable ground leases for the fiscal years ended January 31, 2011 and 2010 was $204,206 and $203,638, respectively, plus a variable component based on gross revenues of each property that totaled approximately $95,000 and $77,000, respectively.

During the second quarter of fiscal year 2010, the Trust entered into a five-year office lease for its corporate headquarters.  The Trust recorded $25,034 and $12,312 of general and administrative expense related to the lease during fiscal year 2011 and 2010, respectively.  The lease includes a base rent charge of $24,000 for the first lease year with annual increases to a final year base rent of $39,600.  The Trust has the option to cancel the lease after each lease year for penalties of four months rent after the first year with the penalty decreasing by one month’s rent each successive lease year.  It is the Trust’s intention to remain in the office for the duration of the five-year lease period.

Future minimum lease payments under these non-cancelable ground leases and office lease are as follows:

Fiscal Year Ending   
2012
 
$
217,027
 
2013
 
239,760
 
2014
 
247,760
 
2015
 
228,160
 
2016
 
206,560
 
Thereafter
 
5,340,892
 
 
 
 
 
Total
 
$
6,480,159
 

The Trust is obligated under loan agreements relating to four of its hotels to deposit 4% of the individual hotel’s room revenue into an escrow account to be used for capital expenditures.  The escrow funds applicable to the four hotel properties for which a mortgage lender escrow exists are reported on the Trust’s Consolidated Balance Sheet as “Restricted Cash.”

InnSuites Hotels has entered into franchise arrangements with Best Western International for four of the hotel properties.  These agreements provide for fees to be paid by the Hotels based on revenue and reservations received, and contain no minimum payment provisions.

The nature of the operations of the Hotels exposes them to risks of claims and litigation in the normal course of their business.  Although the outcome of these matters cannot be determined, management does not expect that the ultimate resolution of these matters will have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Trust.

The Trust is involved from time to time in various other claims and legal actions arising in the ordinary course of business.  In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Trust’s consolidated financial position, results of operations or liquidity.

18.  STOCK OPTION PLAN

During fiscal year 1999, the shareholders of the Trust adopted the 1997 Stock Incentive and Option Plan (the “Plan”).  Pursuant to the Plan, the Compensation Committee may grant options to the Trustees, officers, other key employees, consultants, advisors and similar employees of the Trust and certain of its subsidiaries and affiliates.  The number of options that may be granted in a year is limited to 10% of the total Shares of Beneficial Interest and limited partnership units in the Partnership (Class A and Class B) outstanding as of the first day of such year.

Generally, granted options expire 10 years from the date of grant, are exercisable during the optionee’s lifetime only by the recipient and are non-transferable.  Unexercised options held by employees of the Trust generally terminate on the date the individual ceases to be an employee of the Trust.

There were no options granted in fiscal year 2011 or 2010, and no options outstanding as of January 31, 2011.  The Plan currently has 1,000,000 options available to grant.  The Plan also permits the Trust to award stock appreciation rights, none of which, as of January 31, 2011, have been issued.
See Note 2 – "Summary of Significant Accounting Policies" for information related to grants of restricted shares.

19.  SUBSEQUENT EVENTS

On February 17, 2011, the Trust and Partnership entered into a restructuring agreement with Rare Earth to allow for the sale of minority interest units in the Tucson entity.  Under the agreement, Rare Earth agreed to purchase or bring in other investors to purchase up to 232 units of the Tucson entity and the parties agreed to restructure the limited partnership agreement of the Tucson entity.

Under the restructured limited partnership agreement, Rare Earth became the a general partner of the Tucson entity along with the Partnership.  Rare Earth will relinquish its status as general partner if it fails to sell at least 160 units in the Tucson entity.  Additionally, the partnership interests in the Tucson entity were allocated to three classes with differing distribution preference rights.  Class A units will be owned by unrelated third parties and will have first priority for distributions, Class B units will be owned by the Trust and/or the Partnership and will have second priority for distributions, and Class C units will be owned by Rare Earth or other affiliates of Mr. Wirth and will have the lowest priority for distributions from the Tucson entity.  Rare Earth is also entitled to a formation fee equal to $320,000, payable in either cash or units in the Tucson entity, if at least 160 units are sold.  After all investors have received their initial capital plus a 7% per annum simple return, any additional profits will be allocated 50% to Rare Earth, with the remaining 50% allocated proportionately to all unit classes.  InnSuites Hotels will continue to provide management, licensing and reservation services to the property.


29


SCHEDULE III

INNSUITES HOSPITALITY TRUST AND SUBSIDIARY
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF JANUARY 31, 2011


    
Initial
Cost
to Tenant
 
Cost
Capitalized
Subsequent to Acquisition
 
Gross Amounts at
Which Carried at
Close of Period
 
Properties Encumbrances Land 
Building and
Improvements
 Land 
Building and
Improvements
 Land 
Building and
Improvements
 
                
InnSuites Hotel and Suites
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tucson, Catalina Foothills Best Western
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tucson, Arizona
 
$
2,532,396
 
$
—
 
$
4,220,820
 
$
—
 
$
2,415,388
 
$
—
 
$
6,636,208
 
InnSuites Hotels and Suites
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Yuma
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Yuma, Arizona
 
5,000,000
 
251,649
 
4,983,292
 
53,366
 
2,500,739
 
305,015
 
7,484,031
 
Best Western
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Airport Ontario Hotel and Suites
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ontario, California
 
7,555,870
 
1,633,064
 
5,450,872
 
—
 
1,667,433
 
1,633,064
 
7,118,305
 
InnSuites Hotels and Suites
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tucson St. Mary’s
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tucson, Arizona
 
5,585,098
 
900,000
 
9,166,549
 
(20,564
)
1,621,327
 
879,436
 
10,787,876
 
InnSuites Hotels and Suites
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Albuquerque Airport Best Western
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Albuquerque, New Mexico
 
1,407,352
 
—
 
1,903,970
 
—
 
368,473
 
—
 
2,272,443
 
InnSuites Hospitality Trust
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Phoenix, Arizona
 
—
 
7,005
 
75,662
 
—
 
—
 
7,005
 
75,662
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
22,080,716
 
$
2,791,718
 
$
25,801,165
 
$
32,802
 
$
8,573,360
 
$
2,824,520
 
$
34,374,525
 




30



  
Gross Land
and Building
 
Accumulated
Depreciation
 
Net
Book Value
Land and
Buildings
and Improvements
 
Date of
Construction
 
Date of
Acquisition
 
Depreciation
in Income
Statement is
Computed
 
              
InnSuites Hotel and Suites
 
 
 
 
 
 
 
 
 
 
 
 
 
Tucson, Catalina Foothills Best Western
 
 
 
 
 
 
 
 
 
 
 
 
 
Tucson, Arizona
 
$
6,636,208
 
$
2,449,082
 
$
4,187,126
 
1981
 
1998
 
5-40 years
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
InnSuites Hotels and Suites
 
 
 
 
 
 
 
 
 
 
 
 
 
Yuma
 
 
 
 
 
 
 
 
 
 
 
 
 
Yuma, Arizona
 
7,789,046
 
2,514,848
 
5,274,198
 
1982
 
1998
 
5-40 years
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Best Western
 
 
 
 
 
 
 
 
 
 
 
 
 
Airport Ontario Hotel and Suites
 
 
 
 
 
 
 
 
 
 
 
 
 
Ontario, California
 
8,751,369
 
2,794,775
 
5,956,594
 
1990
 
1998
 
5-40 years
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
InnSuites Hotels and Suites
 
 
 
 
 
 
 
 
 
 
 
 
 
Tucson St. Mary’s
 
 
 
 
 
 
 
 
 
 
 
 
 
Tucson, Arizona
 
11,667,312
 
4,006,105
 
7,661,207
 
1960
 
1998
 
5-40 years
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
InnSuites Hotels and Suites
 
 
 
 
 
 
 
 
 
 
 
 
 
Albuquerque Airport Best Western
 
 
 
 
 
 
 
 
 
 
 
 
 
Albuquerque, New Mexico
 
2,272,443
 
979,814
 
1,292,629
 
1975
 
2000
 
5-40 years
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
InnSuites Hospitality Trust
 
 
 
 
 
 
 
 
 
 
 
 
 
Phoenix, Arizona
 
82,667
 
15,476
 
67,191
 
2004
 
2004
 
33 years
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
37,199,045
 
$
12,760,100
 
$
24,438,945
 
 
 
 
 
 
 

(See accompanying independent auditors report.)




31



(A)           Aggregate cost for federal income tax purposes at January 31, 2011 and 2010 are as follows:

  2011  2010 
Land
 
$
1,856,788
 
 
 $
1,856,788
 
Buildings and improvements
 
 
20,223,866
 
 
 
19,930,009
 
 
 
$
22,080,654
 
 
 $
21,786,797
 

Reconciliation of Real Estate:

Balance at January 31, 2009 $36,864,441 
Improvement to Hotel Properties 307,162 
Disposal of Property Improvements  (10,722)
    
Balance at January 31, 2010 $37,160,881 
Improvement to Hotel Properties 346,358 
Disposal of Property Improvements (308,194)
    
Balance at January 31, 2011 $37,199,045 


(See accompanying independent auditors report.)



32

SCHEDULE IV

MORTGAGE LOANS ON REAL ESTATE

Description Interest Rate Maturity Date Periodic Payment Term Face Amount of Mortgages 1/31/11 Carrying Amount 
            
Mortgage Note Secured by Albuquerque, NM property
 
7.75
%
11/1/2021
 
144 monthly installments
 
$
1,500,000
 
$
1,407,352
 
              
Mortgage Note Secured by Ontario, CA property
 
8.280
%
5/11/2011
 
120 monthly installments, with balloon payment of $7,498,458 due at maturity
 
 
9,000,000
 
 
7,555,870
 
              
Mortgage Note Secured by Yuma, AZ property
 
7.0
%
12/30/2013
 
60 monthly interest only installments, with balloon payment of $4,000,000 at maturity
 
 
4,000,000
 
 
4,000,000
 
              
Mortgage Note Secured by Yuma, AZ property
 
8.0
%
12/30/2013
 
43 monthly interest only installments, with balloon payment of $1,000,000 at maturity
  
1,000,000
  
1,000,000
 
              
Mortgage Note Secured by Tucson St. Mary’s, AZ property
 
Prime rate
 
1/28/2015
 
83 monthly installments, with balloon payment of $4,861,870 due at maturity
 
 
6,050,000
 
 
5,585,098
 
              
Mortgage Note Secured by Tucson Oracle, AZ property
 
8.000
%
5/1/2016
 
180 monthly installments
 
 
5,100,000
 
 
2,532,396
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
26,650,000
 
$
22,080,716
 


Mortgage Note Reconciliation

Balance last January 31, 2009
 
$
22,070,565
 
 
 
 
 
Deductions during period:
 
 
 
Net refinancings
 
1,500,000
 
Principal payments
 
(1,663,611
)
 
 
 
 
Balance at January 31, 2010
 
21,906,954
 
 
 
 
 
Deductions during period:
 
 
 
Net refinancings
 
1,000,000
 
Principal payments
 
(826,238
)
 
 
 
 
Balance at January 31, 2011
 
$
22,080,716
 


(See accompanying independent auditor’s report.)
33
Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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 upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our principal executive officer and principal 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

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act. 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.
Our management assessed the effectiveness of our internal control over financial reporting as of January 31, 2011.  In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control — Integrated Framework. Based on our assessment using those criteria, our management concluded that our internal control over financial reporting was effective as of January 31, 2011.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.PART II

Item  9B.  OTHER INFORMATION

None.Date of 2012 Annual Meeting of Shareholders and Shareholder Proposals

34The 2012 Annual Meeting is scheduled for August 9, 2012, which will be more than 30 days after the anniversary date of our 2011 Annual Meeting of Shareholders.  Therefore, in accordance with Rule 14a-5(f) promulgated under the Exchange Act and other applicable rules of the SEC, we are hereby notifying our shareholders that the deadline for submitting shareholder proposals for inclusion in our proxy statement and form of proxy for the 2012 Annual Meeting is June 6, 2012 pursuant to Rule 14a-8 of the Exchange Act, which we believe is a reasonable time before we will begin the printing and mailing of our proxy materials for the 2012 Annual Meeting.  A shareholder who wishes to present a proposal at the 2012 Annual Meeting, but does not wish to have that proposal included in our proxy statement and form of proxy relating to that meeting, must also notify us before June 6, 2012, which we believe is a reasonable time before we send our proxy materials for the 2012 Annual Meeting.  If notice of the proposal is not received by us by that date, then the proposal will be deemed untimely and we will have the right to exercise discretionary voting authority and vote proxies returned to us with respect to that proposal.

Shareholders should submit their proposals to InnSuites Hospitality Trust, 1625 E. Northern Avenue, Suite 105, Phoenix, Arizona 85020, Attention: Secretary.

Extension of the Trust’s Revolving Bank Line of Credit

On May 25, 2012, the maturity of the Trust’s bank line of credit was extended to June 23, 2012 by an amendment to the line of credit executed by the Trust, Yuma Hospitality Properties Limited Partnership and RRF Limited Partnership, as Borrowers, and James Wirth, as Guarantor, in favor of RepublicBankAZ, N.A., as Lender. This description is a summary only and is qualified by the full text of the extension, which is filed herewith as Exhibit 10.11.

PART III

 
Item 10.  TRUSTEES, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information required by this Item 10 as toTrustees and Executive Officers

The following table sets forth information about our Trustees and Executive Officersexecutive officers.  The information concerning our Trustees and executive officers set forth below is incorporated herein by referencebased in part on information received from the respective Trustees and executive officers and in part on our records.  The information below sets forth the name, age, term of office, outside directorships and principal business experience for each Trustee and executive officer of the Trust and includes the specific experience, qualifications, attributes and skills that led to the information set forth underconclusion that each Trustee should serve on our Board of Trustees, in light of the caption “ElectionTrust’s business and structure.

Name
Principal Occupations During Past
Five Years, Age as of May 15, 2012
and Directorships Held
Trustee
Since
Trustees Whose Terms Expire in 2014
Larry Pelegrin(1)(2)(3)(4)
Retired marketing executive with an extensive background in travel industry automation systems and call center sales.  Director of Sales and Marketing of ARINC, a provider of transportation communications services, from 1994 to 2000.  Previous employment included senior marketing positions with Best Western International and Ramada Inns.  Age:  74.
Mr. Pelegrin has forty years of operational, marketing and sales, management and financial experience in the hotel, airline, travel and computer industries.
August 25, 2005
Steven S. Robson(1)(2)(3)(5)
Owner of Scott Homes, residential real estate developers.  Age:  56.
Mr. Robson has strategic leadership and residential real estate development experience as well as experience in negotiating complex transactions and maintaining mission, vision and values.  In addition, Mr. Robson has served on our Board for nearly 15 years.
June 16, 1998
Trustees Whose Terms Expire in 2013
James F. Wirth
Chairman and Chief Executive Officer of the Trust since January 30, 1998, also serving as President of the Trust until February 1, 2012.  President and owner (together with his affiliates) of Suite Hotels, LLC, Rare Earth Financial, L.L.C. and affiliated entities, owners and operators of hotels, since 1980.  President of Rare Earth Development Company, a real estate investment company owned by Mr. Wirth and his affiliates, since 1973.  Age:  66.
Mr. Wirth has significant real estate and hotel industry experience and extensive experience with the Trust.  He also has a significant investment in our Shares, which we believe provides him with a strong incentive to advance shareholder interests.  In addition, Mr. Wirth has served on our Board for nearly 15 years.
January 30, 1998
Peter A. Thoma(1)(2)(3)(6)
Owner and operator of A&T Verleih, Hamburg, Germany, a hospitality service and rental company, since 1997.  Age:  45
Mr. Thoma brings to us years of experience in the hospitality industry.  In addition, Mr. Thoma has served on our Board for more than ten years.
April 13, 1999
Trustee Whose Term Expires in 2012
Marc E. Berg
Executive Vice President, Secretary and Treasurer of the Trust since February 10, 1999.  Vice President – Acquisitions of the Trust from December 16, 1998 to February 10, 1999.  Consultant to InnSuites Hotels since 1989.  Self-employed as a Registered Investment Advisor since 1985.  Age:  59.
Mr. Berg has in-depth familiarity with the operations of the Trust and extensive experience in property acquisitions.  In addition, Mr. Berg has served on our Board for nearly 15 years.
January 30, 1998

1  Member of Trustees”the Audit Committee.
2  Member of the Compensation Committee.
3   Member of the Governance and Nominating Committee.
4  Chair of the Audit Committee.
5  Chair of the Compensation Committee.
6   Chair of the Governance and Nominating Committee.

3


Other Executive Officers
Pamela J. Barnhill
President and Chief Operating Officer of the Trust since February 1, 2012.  Ms. Barnhill joined the Trust in 2002 as General Manager and progressed with the Trust through roles in revenue management, operations, sales and trademark licensing.  Prior to joining the Trust, Ms. Barnhill’s career included roles with Motorola Semiconductor, Franchise Finance Corporation of America (FFCA) and Pittiglio, Rabin, Todd & McGrath (PRTM) Management Consulting.  She has served as a Board Member for the Independent Lodging Industry Association since 2011.  She earned a Masters of Business Administration (MBA) from Carnegie Mellon University, and a Bachelor of Arts in Economics and Mathematics cum laude with honors from the University of Arizona.  Age:  37.
Anthony B. WatersChief Financial Officer of the Trust since February 25, 2000.  Controller of the Trust from June 17, 1999 to February 25, 2000.  Accountant and auditor with Michael Maastricht, CPA from June 16, 1998 to June 15, 1999, performing audits for InnSuites Hotels, Inc.  Self-employed, concentrating in computerized accounting and information systems, from 1990 to June 1998.  Age:  65.

Ms. Barnhill, our definitive proxy statement for our 2011 Annual Meeting of Shareholders to be held on July 7, 2011 (the “Proxy Statement”), whichPresident and Chief Operating Officer, is expected to be filed with the SECMr. Wirth’s daughter.  There are no other family relationships that require disclosure pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, within 120 days after the endSEC’s rules, and none of our fiscal year.Trustees or executive officers were nominated, elected or appointed to their positions pursuant to any arrangement or understanding between them and any other person.

Trustee Nominations and Qualifications

The information regardingGovernance and Nominating Committee expects to identify nominees to serve as our Trustees primarily by accepting and considering the Auditsuggestions and nominee recommendations made by members of the Board of Trustees and our management and shareholders.  Nominees for Trustee are evaluated based on their character, judgment, independence, financial or business acumen, diversity of experience, ability to represent and act on behalf of all of our shareholders, and the needs of the Board of Trustees.  In accordance with its charter, the Governance and Nominating Committee discusses diversity of ourexperience as one of many factors in identifying nominees for Trustee, but does not have a formal policy of assessing diversity with respect to any particular qualities or attributes and has not identified any specific attributes that the Committee would desire to diversify on the Board.  In general, before evaluating any nominee, the Governance and Nominating Committee first determines the need for additional Trustees to fill vacancies or expand the size of the Board of Trustees and the informationlikelihood that a nominee can satisfy the evaluation criteria.  The Governance and Nominating Committee would expect to re-nominate incumbent Trustees who have served well on the Board of Trustees and express an interest in continuing to serve.  Our Board of Trustees is satisfied that the backgrounds and qualifications of our Trustees, considered as a group, provide a mix of experience, knowledge and abilities that allows our Board to fulfill its responsibilities.

The Governance and Nominating Committee will consider shareholder recommendations for Trustee nominees.  A shareholder who wishes to suggest a Trustee nominee for consideration by the Governance and Nominating Committee should send a resume of the nominee’s business experience and background to Peter Thoma, Chairman of the Governance and Nominating Committee, InnSuites Hospitality Trust, 1625 E. Northern Avenue, Suite 105, Phoenix, Arizona 85020.  The mailing envelope and letter must contain a clear notation indicating that the enclosed letter is a “Shareholder-Board of Trustees Nominee.”

Audit Committee Information and Audit Committee Financial Expert

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent auditors, including reviewing the scope and results of audit and non-audit services.  The Audit Committee also reviews internal accounting controls and assesses the independence of our auditors.  In addition, the Audit Committee has established procedures for the receipt, retention and treatment of any complaints received by us regarding accounting, internal controls or auditing matters and the confidential, anonymous submission by our employees of any concerns regarding accounting or auditing matters.  The Audit Committee has the authority to engage independent counsel and other advisors as it deems necessary to carry out its duties.  The Audit Committee met four times during fiscal year 2012.

All members of the Audit Committee are “independent,” as such term is defined by the SEC’s rules and NYSE MKT listing standards.  The Board of Trustees has determined that Mr. Pelegrin, a member of our Audit Committee, qualifies as an “audit committee financial expert” are incorporated herein by reference to the information set forth under the caption “Board Committees—applicable SEC rules.  We have posted our Amended and Restated Audit Committee” in the Proxy Statement.

Information required by Item 405 of Regulation S-K is incorporated herein by reference to the information set forth under the caption “Certain Information Concerning the Trust—Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement.Committee Charter on our website at www.innsuitestrust.com.

Code of Ethics for Senior Financial Officers

 
We have adopted a Code of Ethics that applies to our Chief Executive Officer and Chief Financial Officer and principal accounting officer and persons performing similar functions.  We have posted our Code of Ethics on our website at www.innsuitestrust.com.  We intend to satisfy all SEC and NYSE AmexMKT disclosure requirements regarding any amendment to, or waiver of, the Code of Ethics relating to our Chief Executive Officer and Chief Financial Officer and principal accounting officer, and persons performing similar functions, by posting such information on our website.website unless the NYSE MKT requires a Form 8-K.  In addition, we have adopted a Code of Conduct and Ethics that applies to all of our employees, officers and Trustees.  It is also available on our website at www.innsuitestrust.com.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our Trustees, executive officers and beneficial holders of more than 10% of our Shares to file with the SEC initial reports of ownership and reports of subsequent changes in ownership.  The SEC has established specific due dates for these reports, and we are required to disclose in this report any late filings or failures to file.

Based solely on our review of the copies of such forms (and amendments thereto) furnished to us and written representations from reporting persons that no additional reports were required, we believe that all our Trustees, executive officers and holders of more than 10% of the Shares complied with all Section 16(a) filing requirements during the fiscal year ended January 31, 2012.
  
Item 11.  EXECUTIVE COMPENSATION

Executive Compensation Overview

The information required by this Item 11 is incorporated herein by referencefollowing overview relates to the informationcompensation of our executive officers listed in the Summary Compensation Table set forth below during fiscal year 2012.

Overview of the Compensation Committee

The Compensation Committee of the Board of Trustees is comprised of three independent Trustees.  The Committee sets the principles and strategies that serve to guide the design of the compensation programs for our executive officers.  The Committee annually evaluates the performance of our Chief Executive Officer, our Chief Financial Officer and our Executive Vice President (our executive officers) and intends to evaluate on an annual basis the performance of any new executive officers, including Ms. Barnhill who became our President and Chief Operating Officer effective as of February 1, 2012.  Taking into consideration the factors set forth below, the Committee then approves their compensation levels, including equity-based compensation, if any, and cash bonuses.  The Committee does not use an independent compensation consultant to assist it with its responsibilities.  The Committee does consider input from the Chief Executive Officer when determining compensation for the other executive officers.


4


Compensation Philosophy and Objectives

Under the supervision of the Compensation Committee, we have developed and implemented compensation policies, plans and programs that seek to enhance our ability to recruit and retain qualified management and other personnel.  In developing and implementing compensation policies and procedures, the Compensation Committee seeks to provide rewards for the long-term value of an individual’s contribution to the Trust.  The Compensation Committee seeks to develop policies and procedures that offer both recurring and non-recurring, and both financial and non-financial, incentives.

Our executive compensation program is designed to (i) attract, as needed, executives with the skills necessary for us to achieve our business plan priorities, (ii) reward our executives fairly over time, (iii) retain those executives who continue to perform at or above expected levels of performance, and (iv) align the compensation of our executives with our performance.

Compensation for our executive officers has two main monetary components, salary and bonus, as well as a benefits component.  The bonus can consist of cash or a grant of restricted Shares.  Although the Compensation Committee may, at its discretion, grant to our executive officers bonuses in a form of equity compensation under our 1997 Stock Incentive and Option Plan (the “Plan”), all our executive officers received cash bonuses for fiscal year 2012.  This decision was a result of discussions with our executive officers regarding the sufficiency of each executive officer’s current Share ownership and the restrictions upon transfer of Shares held by our executive officers due to their affiliate status.

The Plan was established to provide an incentive for employees, including our executive officers, and to align our executive officers’ interests with those of our shareholders.  The Plan permits our Board of Trustees or the Compensation Committee to grant restricted Shares to employees, including our executive officers, on such terms as our Board of Trustees or the Compensation Committee may determine.  In establishing future executive officer compensation packages, the Compensation Committee may, but in light of each executive officer’s current Share ownership does not currently intend to, utilize grants of equity awards available under our Plan and/or adopt additional long-term incentive and/or annual incentive plans to meet the needs of changing employment markets and economic, accounting and tax conditions.

The Plan provides for accelerated benefits to participants in the event of a change in control.  Generally, a change in control will be deemed to have occurred if (i) certain corporate reorganizations take place where the existing shareholders do not retain more than two-thirds of the combined voting power of our outstanding securities, (ii) any person or group becomes the beneficial owner of 15% or more of the combined voting power of our outstanding securities, (iii) there is a change in the majority of our Board of Trustees during any period of two consecutive years, or (iv) we announce that a change in control has occurred or will occur in the future pursuant to a then-existing contract or transaction. We chose these change in control triggers based on an evaluation of market practices at the time we implemented the Plan.  In the event of a change in control, each outstanding restricted Share award becomes fully vested as of the day before the event occurs.

Our compensation program does not rely to any significant extent on broad-based benefits or perquisites.  The benefits offered to our executive officers are those that are offered to all of our full-time employees. We do not offer our executive officers any perquisites.

Our management and the Compensation Committee work in a cooperative fashion. Management advises the Compensation Committee on compensation developments, compensation packages and our overall compensation program. The Compensation Committee then reviews, modifies, if necessary, and approves the compensation packages for our executive officers.


5


Elements of Compensation

In setting the compensation for each executive officer, the Compensation Committee considers (i) the responsibility and authority of each position relative to other positions within the Trust, (ii) the individual performance of each executive officer, (iii) the experience and skills of the executive officer, and (iv) the importance of the executive officer to the Trust.

Base Salary

We pay base salaries to our executive officers in order to provide a level of assured compensation reflecting an estimate of the value in the employment market of the executive officer’s skills, the demands of his or her position and the relative size of the Trust.  In establishing base salaries for our executive officers, the Compensation Committee considers our overall performance and the performance of each individual executive officer, as well as market forces and other general factors believed to be relevant, including time between salary increases, promotion, expansion of responsibilities, advancement potential, and the execution of special or difficult projects.  Additionally, the Compensation Committee takes into account the relative salaries of the executive officers and determine what it believes are appropriate compensation level distinctions between and among the executive officers, including between the Chief Executive Officer and the Chief Financial Officer and among the other executive officers.  While the Compensation Committee considers our financial performance, there is no specific relationship between achieving or failing to achieve budgeted estimates or our Shares or financial performance and the annual salaries determined by the Compensation Committee for any of our executive officers.  No specific weight is attributed to any of the factors considered by the Compensation Committee; the Compensation Committee considers all factors and makes a subjective determination based upon the experience of its members and the recommendations of our management.

Based upon a review of Mr. Wirth’s performance and upon the recommendation of the Compensation Committee, for fiscal years 2012 and 2011, Mr. Wirth’s, our Chairman and Chief Executive Officer’s, annual base salary remained set at $153,000.  The Compensation Committee does not rely on any particular set of financial or non-financial factors, measures or criteria when determining the compensation offered to Mr. Wirth.  The Compensation Committee does consider Mr. Wirth’s substantial Share ownership when setting his base salary.  During fiscal year 2012, Mr. Wirth voluntarily reduced his salary to $91,800, and during fiscal year 2011, Mr. Wirth voluntarily reduced his salary to $104,746, in both cases by reducing the number of hours worked per year due to the economic environment.

For fiscal years 2012 and 2011, the Compensation Committee kept Mr. Waters’ base salary frozen at $153,000 and Mr. Berg’s base salary frozen at $98,000.  During fiscal years 2012 and 2011, Mr. Waters’ salary was reduced to $122,400 and $137,700, respectively, and Mr. Berg’s salary was reduced to $58,800 and $67,092, respectively, in each case by reducing the number of hours worked per year due to the economic environment.

For fiscal year 2013, the Compensation Committee set the base salary for Ms. Barnhill, our President and Chief Operating Officer, at $100,000.  We expect that, in response to the economic environment, our executive officers will further reduce the number of hours worked per year, thus receiving lesser salaries in fiscal year 2013 than in fiscal year 2012.

Bonuses

Our executive officers are eligible to receive cash bonuses under the caption “CompensationGeneral Manager Bonus Plan equal to 10% of Trusteesthe aggregate cash bonuses received by the general managers of all of our hotels, regardless of region.  The general managers receive a bonus based on the achievement of budgeted gross operating profit (total revenues less operating expenses) (“GOP”) at their hotel on a quarterly and Executive Officers”annual basis.  Under the plan, if the hotel’s actual quarterly and annual GOP exceeds the budgeted GOP, each general manager is eligible for a potential maximum annual bonus of $20,000, consisting of a potential maximum quarterly bonus of $2,000 per quarter and a potential maximum year-end bonus of $12,000.

Quarterly General Manager GOP Bonus Potential:

Percentage of Budgeted Quarterly GOP Achieved
Cash Bonus
  
Less than 95%$0
95%$500
98%$1,000
102%$1,500
106% or more$2,000

Year-End General Manager GOP Bonus Potential:

Percentage of Budgeted Annual GOP Achieved
 
Cash Bonus
  
Less than 95%$0
95%$1,000
98%$2,000
102%$5,000
106%$9,000
108% or more$12,000

In fiscal year 2012, each of our executive officers received an annual cash bonus equal to 10% of the aggregate cash bonuses received by the general managers of all of our hotels, regardless of region.  The general manager aggregate cash bonuses for fiscal year 2012 were:

PeriodGM Aggregate Cash Bonus
First Quarter$3,500
Second Quarter$8,000
Third Quarter$4,000
Fourth Quarter$6,000
Year End$21,000

Accordingly, each of our executive officers received a cash bonus of $4,250 for fiscal year 2012.

Benefits and Other Compensation

We maintain broad-based benefits that are provided to all employees, including health and dental insurance, life insurance and a 401(k) plan.  We also have a mandatory matching contribution for our 401(k) plan.  We do not have a pension plan.  Our executive officers are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees.


6


Summary Compensation Table

The table below shows individual compensation information earned by or paid to our executive officers for our fiscal years ended January 31, 2012 and 2011:
Name and
Principal Position(1)
Fiscal
Year
 
Salary
($)
  
Bonus
($)
  
Non-Equity Incentive Plan Compensation
($)
  
 
All Other Compensation
($)(2)
  
 
 
Total
($)
 
                 
James F. Wirth,2012 $91,800  $0  $4,250  $500  $96,550 
Chief Executive Officer2011 $104,746  $0  $3,500  $500  $108,746 
                      
Anthony B. Waters,2012 $122,400  $0  $4,250  $0  $126,650 
Chief Financial Officer2011 $137,700  $0  $3,500  $0  $141,200 
                      
Marc E. Berg,2012 $58,800  $0  $4,250  $0  $63,050 
Executive Vice President2011 $67,092  $2,750  $3,500  $0  $73,342 
______________________________
(1)Pamela J. Barnhill became our President and Chief Operating Officer effective as of February 1, 2012, following the end of our fiscal year 2012.  She was not serving as an officer at any time during our fiscal years 2012 and 2011 and, therefore, is not included in this table.  Effective February 1, 2012, in recognition of additional responsibilities, Ms. Barnhill received an $8,000 per year increase in base salary to a total of $100,000 per year. Ms. Barnhill’s expanded responsibilities include continuation of work to increase hotel operations, including continued emphasis on revenue management, cost control and all areas of marketing, including Internet marketing. Ms. Barnhill also received a matching contribution of $500 under our 401(k) plan.
(2)Matching contributions made under our 401(k) plan to our executive officers.

During fiscal years 2012 and 2011, we did not issue any Shares to our executive officers and did not grant any stock options or any other equity-based awards.  During the second quarter of fiscal year 2006, we accepted the voluntary surrender of all outstanding stock options in order to reduce accounting and overall costs and simplify our reporting and compliance obligations under the rules of the SEC and the NYSE MKT.  We made no payments to the holders of the options for their surrender, and we have no obligation, explicit or implied, for the surrender of the options, including but not limited to the reissuance of options at some time in the Proxy Statement.future.  As a result, none of our executive officers owned any stock options, or had any outstanding unvested Shares, as of January 31, 2012.

For fiscal years 2012 and 2011, each of our then-serving executive officers received a cash bonus of $4,250 and $3,500, respectively.  For fiscal year 2011, Mr. Berg also received a cash bonus of $2,750 for refinancing hotel properties, which is reported in the Summary Compensation Table above in the “Bonus” column.

Indemnification Agreements

We have entered into indemnification agreements with all of our executive officers and Trustees.  The agreements provide for indemnification against all liabilities and expenses reasonably incurred by an officer or Trustee in connection with the defense or disposition of any suit or other proceeding, in which he or she may be involved or with which he or she may be threatened, while in office or thereafter, because of his or her position at the Trust.  There is no indemnification for any matter as to which an officer or Trustee is adjudicated to have acted in bad faith, or with willful misconduct or reckless disregard of his or her duties, or gross negligence, or not to have acted in good faith in the reasonable belief that his or her action was in our best interests.  We may advance payments in connection with indemnification under the agreements.  The level of indemnification is to the full extent of the net equity based on appraised and/or market value of the Trust.


7


Potential Payments Upon Change in Control

We do not have employment agreements with our executive officers.  Upon a change in control, our 1997 Stock Incentive and Option Plan provides for the acceleration of vesting of restricted Shares.  The change in control triggers are described in “Executive Compensation Overview – Compensation Philosophy and Objectives.”  The Plan does not discriminate as to scope or terms in favor of our executive officers, and all terms are generally applicable to all participants in the Plan.  If a change in control had occurred on January 31, 2012, none of our executive officers would have received any payment under the Plan upon a change in control because none had any awards outstanding as of that date.

Fiscal Year 2012 Trustee Compensation

The table below shows individual compensation information for our non-employee Trustees for our fiscal year ended January 31, 2012.  Compensation information for Messrs. Wirth and Berg, who do not receive additional compensation for their service as Trustees, is included in the Summary Compensation Table.

 
Name
 
Fees Earned or Paid
in Cash ($)
  Stock Awards ($)(1)  Total ($) 
Larry Pelegrin $0  $17,280  $17,280 
Steven S. Robson  0   17,280   17,280 
Peter A. Thoma  0   17,280   17,280 
__________
(1)  The dollar amounts shown in the Stock Awards column reflect the aggregate grant date fair value of restricted Shares computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718.  For a discussion of assumptions we made in valuing restricted Shares, see Note 2, “Summary of Significant Accounting Policies – Stock-Based Compensation,” in the notes to our consolidated financial statements contained in our Annual Reports on Form 10-K for the fiscal years ended January 31, 2012 and 2011.

We compensate our non-employee Trustees for their service through grants of restricted Shares.  On February 1, 2011, we issued 12,000 restricted Shares to each Trustee, other than Messrs. Wirth and Berg, as compensation for services rendered during fiscal year 2012.  The aggregate grant date fair value of these Shares is shown in the table above.  These restricted Shares vested in equal monthly amounts during our fiscal year 2012.  As of January 31, 2012, Messrs. Thoma, Pelegrin and Robson did not hold any unvested Shares.  As compensation for our fiscal year 2013, on February 1, 2012, we issued 6,000 additional restricted Shares (with the aggregate grant date fair value of $13,200 per grant) to each Messrs. Thoma, Pelegrin and Robson, which Shares will vest in equal monthly amounts during our fiscal year ending on January 31, 2013.  We have reduced our non-employee Trustee compensation from 12,000 Shares to 6,000 Shares per year as a result of the current economic conditions.  We do not pay our Trustees an annual cash retainer, per meeting fees or additional compensation for serving on a Committee or as a Committee Chair.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

The information required by this Item 12 is incorporated herein by reference to the information set forth under the caption “Certain Information Concerning the Trust—Ownership of Shares”Shares

The following table shows the persons who were known to us to be beneficial owners of more than five percent of our outstanding Shares as of May 15, 2012, together with the number of Shares owned beneficially by each Trustee, nominee and executive officer, and the Trustees and executive officers as a group.  The percentages in the Proxy Statement.table are based on 8,424,365 Shares issued and outstanding as of May 15, 2012.  Unless otherwise specified, each person has sole voting and investment power over the Shares that he or she beneficially owns.
 
Greater-than-Five-Percent Beneficial Owners and
Beneficial Ownership of Trustees, Nominees and Executive Officers
 
Trustees, Nominees and Executive Officers
 
Shares
Beneficially Owned(1)
  
Percentage of
Outstanding Shares
 
James F. Wirth(2)  5,089,632   60.42%
Pamela J. Barnhill(3)  259,934   3.09%
Marc E. Berg  60,225   * 
Steven S. Robson  278,723   3.31%
Peter A. Thoma  123,900   1.47%
Larry Pelegrin(4)  85,870   1.02%
Anthony B. Waters  23,000   * 
Trustees and Executive Officers as a group (seven persons)  5,921,284   70.29%
______________________________
(1)Pursuant to the SEC’s rules, “beneficial ownership” includes Shares that may be acquired within 60 days following May 15, 2012.  However, none of the individuals listed in the table had the right to acquire any Shares within 60 days.
(2)All Shares are owned jointly by Mr. Wirth and his spouse, except for 1,838,476 Shares that are voted separately by Mr. Wirth and 1,239,078 Shares that are voted separately by Mrs. Wirth.  Mr. Wirth has pledged 1,466,153, and Mrs. Wirth has pledged 300,000, of these Shares as security.  Mr. Wirth and his spouse also own all 3,407,938 issued and outstanding Class B limited partnership units in RRF Limited Partnership, the conversion of which is restricted and permitted only at the discretion of our Board of Trustees.  Mr. Wirth’s business address is 1625 E. Northern Avenue, Suite 105, Phoenix, Arizona 85020.
(3)Includes 20,498 Shares held by minor children.
(4)Mr. Pelegrin has shared voting power and shared investment power with respect to all of his Shares.

* Less than one percent (1.0%).

The following table provides information about our equity compensation plans (other than qualified employee benefits plans and plans available to shareholders on a pro rata basis) as of January 31, 2011:2012:

Equity Compensation Plan Information

Plan Category 
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
(a)
 
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
 
Number of Securities
Remaining
Available for Future
Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column (a))
(c)
 
        
Equity compensation plans approved by security holders
0
$
N/A
1,000,000 (1)
Equity compensation plans not approved by security holders
None
None
None
______________
(1)  We have 1,000,000 options available for future grants under our 1997 Stock Incentive and Option Plan.


8


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND TRUSTEE  INDEPENDENCE

Independence of Trustees

The informationBoard of Trustees has determined that a majority of the Trustees, Messrs. Thoma, Robson and Pelegrin, are “independent” as defined by the NYSE MKT listing standards.  Messrs. Berg and Wirth are our executive officers and are not independent.  All members of the Audit Committee, Compensation Committee and the Governance and Nominating Committee are “independent,” as such term is defined by the SEC rules and NYSE MKT listing standards.  Our independent Trustees meet at least annually in executive session without the presence of non-independent Trustees and management.  Except as described under “Certain Transactions” below, there were no transactions, relationships or arrangements in fiscal year 2012 that required review by this Item 13the Board for purposes of determining Trustee independence.

Certain Transactions

Management and Licensing Agreements

Under its management agreements, InnSuites Hotels, our wholly-owned subsidiary, provides personnel for three hotels owned by affiliates of Mr. Wirth, our Chairman and Chief Executive Officer, the expenses of which are reimbursed at cost, and manages the hotels’ daily operations.  Beginning February 1, 2012, the hotels will directly pay their employees.  In fiscal year 2012, InnSuites Hotels received 2.5% of room revenue (aggregate fees of $183,035) from these hotels in exchange for management services and an additional annual accounting fee of $27,000, payable at a rate of $1,000 per month with an additional payment of $15,000 due at year-end for annual accounting closing activities.  In fiscal year 2011, InnSuites Hotels received 2.5% of room revenue (aggregate fees of $238,922) from these hotels (reduced to three from four hotels as of July 28, 2010) in exchange for management services and an additional annual accounting fee of $27,000.  These agreements have no expiration date and may be cancelled by either party with 90-days written notice or 30-days written notice in the event the property changes ownership.

In exchange for use of the “InnSuites” trademark during fiscal years 2012 and 2011, InnSuites Hotels received from the hotels owned by Mr. Wirth’s affiliates aggregate licensing fees of $31,468 and $36,384, respectively, and aggregate advertising fees of $7,867 and $9,076, respectively.  These fees were based on a per-room calculation, with fees equal to $10 per month per room for the first 100 rooms, and $2 per month per room for the amount above 100 rooms.  These agreements have no expiration date and may be cancelled by either party with 12-months written notice or 90-days written notice in the event the property changes ownership.

In addition, in fiscal years 2012 and 2011, InnSuites Hotels received aggregate reservation fees of $26,923 and $23,654 from the hotels owned by Mr. Wirth’s affiliates, respectively.  These fees were based on a set dollar amount per reservation for reservations taken at the InnSuites Hotels reservations center for the hotels owned by Mr. Wirth’s affiliates.

The fee structure for the agreements discussed above is incorporated hereinexpected to remain the same in fiscal year 2013.

Restructuring Agreements

Albuquerque Suite Hospitality Restructuring Agreement

On July 22, 2010, the Board of Trustees unanimously approved, with Mr. Wirth abstaining, for RRF Limited Partnership, our subsidiary (the “Partnership”), to enter into an agreement with Rare Earth Financial, LLC (“Rare Earth”), an affiliate of Mr. Wirth, to sell additional units in Albuquerque Suite Hospitality, LLC (the “Albuquerque entity”), which owns and operates the Albuquerque, New Mexico hotel property.  Under the agreement, Rare Earth agreed to either purchase or bring in other investors to purchase at least 51% of the membership interests in the Albuquerque entity and the parties agreed to restructure the operating agreement of the Albuquerque entity.  A total of 400 units were available for sale for $10,000 per unit, with a two-unit minimum subscription.  On October 29, 2010, the parties revised the operating agreement.

Under the new operating agreement, Rare Earth became the administrative member of the Albuquerque entity, in charge of the day-to-day management of the company.  Additionally, the membership interests in the Albuquerque entity were allocated to three classes with differing cumulative priority distribution rights.  Class A units are owned by referenceunrelated third parties and have first priority for distributions, Class B units are owned by the Trust and/or the Partnership and have second priority for distributions, and Class C units are owned by Rare Earth or other affiliates of Mr. Wirth and have the lowest priority for distributions from the Albuquerque entity.  Priority distributions are cumulative for five years. Rare Earth also earned a formation fee equal to $320,000, payable in either cash or units in the Albuquerque entity, which was intended for 32 Class C units in the Albuquerque entity after the sale of at least 160 units.  If certain triggering events related to the information set forthAlbuquerque entity occur prior to the payment of all accumulated distributions to its members, such accumulated distributions will be paid out of any proceeds of the event before general distributions to the members.  In the event that the proceeds generated from a triggering event are insufficient to pay the total amount of all such accumulated distributions owed to the members, all Class A members will participate pro rata in the funds available for distribution to them until paid in full, then Class B, and then Class C.  After all investors have received their initial capital plus a 7% per annum simple return, any additional profits will be allocated 50% to Rare Earth, with the remaining 50% allocated proportionately to all unit classes.  Priority distributions to all Classes are projected to be $280,000 each year for fiscal years 2013 through 2016.  The Albuquerque entity is required to use its best efforts to pay the cumulative priority distributions.  The Trust does not guarantee and is not otherwise obligated to pay the priority distributions.  InnSuites Hotels will continue to provide management, licensing and reservation services to the property.

On July 29, 2010, the Partnership sold approximately 11% of its sole membership interest in the Albuquerque entity for $400,000 to Rare Earth.  The price paid reflects the net assets of the Albuquerque entity calculated using the third-party appraisal value for the hotel property and the carrying cost of all other assets and liabilities.  Subsequently, Rare Earth received an additional 32 units, or approximately 8%, worth $320,000 as a formation fee resulting in Rare Earth having a total ownership interest of approximately 19% as of January 31, 2011.  During the fiscal year ended January 31, 2011, the Partnership sold an additional approximately 47% of its membership interests for $1,754,000 to unrelated third parties and approximately 1% for $20,000 to Mr. Lawrence Pelegrin, who is a member of the Board of Trustees.  On January 24, 2012 the Trust purchased 40 units at $10,000 per unit from Rare Earth, and on January 31, 2012 the Trust purchased Partnership’s 114 units at $10,000 per unit by reducing the Trust’s receivable from the Partnership.  As of January 31, 2012, the Partnership does not hold any ownership interest in the Albuquerque entity, the Trust holds a 42.25 % ownership interest, Mr. Wirth and his affiliates hold an 8.00% interest, and other parties hold a 49.75% interest.  The Albuquerque entity has minimum preference payments to unrelated unit holders of $139,300, to the Trust of $118,300 and to Rare Earth of $22,400 per year payable quarterly for calendar years 2013 and 2014.  During calendar year 2012, the Albuquerque entity has remaining minimum preference payments to unrelated unit holders of $134,774, to the Trust of $7,875, to the Partnership of $84,520 and to Rare Earth of $48,728.

Tucson Hospitality Properties Restructuring Agreement

On February 17, 2011, the Trust and Partnership entered into a restructuring agreement with Rare Earth, an affiliate of Mr. Wirth, to allow for the sale of minority interest units in Tucson Hospitality Properties, LP (the “Tucson entity”), which operates the Tucson Foothills hotel property and was then wholly-owned by the Partnership.  Under the agreement, Rare Earth agreed to either purchase or bring in other investors to purchase up to 250 units, which represents approximately 41% of the outstanding partnership units in the Tucson entity, on a post-transaction basis, and the parties agreed to restructure the limited partnership agreement of the Tucson entity. The Board of Trustees approved this restructuring on January 31, 2011.

Under the restructured limited partnership agreement, Rare Earth became a general partner of the Tucson entity along with the Partnership.  The partnership interests in the Tucson entity were allocated to three classes with differing cumulative priority distribution rights.  Class A units are owned by unrelated third parties and have first priority for distributions, Class B units are owned by the Trust and/or the Partnership and have second priority for distributions, and Class C units are owned by Rare Earth or other affiliates of Mr. Wirth and have the lowest priority for distributions from the Tucson entity.  Priority distributions are cumulative for five years.  Rare Earth also received a formation fee of $320,000, conditioned upon and arising from the sale of the first 160 units in the Tucson entity.  If certain triggering events related to the Tucson entity occur prior to the payment of all accumulated distributions to its members, such accumulated distributions will be paid out of any proceeds of the event before general distribution of the proceeds to the members.  In the event that funds generated from a triggering event are insufficient to pay the total amount of all such accumulated distributions owed to the members, all Class A members will participate pro rata in the funds available for distribution to them until paid in full, then Class B, and then Class C.  After all investors have received their initial capital plus a 7% per annum simple return, any additional profits will be allocated 50% to Rare Earth, with the remaining 50% allocated proportionately to all unit classes.  Priority distributions to all Classes are projected to be $428,400 each year for fiscal years 2013 through 2017.  The Tucson entity is required to use its best efforts to pay the priority distributions.  The Trust does not guarantee and is not otherwise obligated to pay the cumulative priority distributions. InnSuites Hotels will continue to provide management, licensing and reservation services to the property.

At January 31, 2012, the Partnership had sold 245.5 units to unrelated parties at $10,000 per unit totaling $2,447,000.  As of January 31, 2012, the Partnership holds a 56.17% ownership interest in the Tucson entity, the Trust holds a 1.79 % ownership interest, Mr. Wirth and his affiliates hold a 1.96% interest, and other parties hold a 40.11% interest.  The Tucson entity has minimum preference payments to unrelated unit holders of $171,850, to the Trust of $7,700, to the Partnership of $240,450 and to Rare Earth of $8,400 per year payable quarterly for calendar years 2013 and 2014.  During calendar year 2012, the Tucson entity has remaining minimum preference payments to unrelated unit holders of $77,038, to the Trust of $130, to the Partnership of $231,559 and to Rare Earth of $1,100.

Ontario Hospitality Properties Restructuring Agreement

At the February 1, 2012 Board of Trustees meeting, the Board authorized the Trust’s management to enter into a contract to sell less than 50% of the Partnership’s ownership interest in Ontario Hospitality Properties, LP (the “Ontario entity”), which operates the Ontario, California property and was then wholly-owned by the Partnership.  On February 29, 2012, the Trust and Partnership entered into a restructuring agreement with Rare Earth, an affiliate of Mr. Wirth, to allow for the sale of minority interest units in the Ontario entity.  Under the agreement, Rare Earth agreed to either purchase or bring in other investors to purchase up to 250 units of the Ontario entity for $10,000 per unit, which represents approximately 49.02% of the outstanding partnership units in the Ontario entity, and the parties agreed to restructure the limited partnership agreement of the Ontario entity.

Under the restructured limited partnership agreement, Rare Earth became a general partner of the Ontario entity along with the Partnership.  Additionally, the partnership interests in the Ontario entity were allocated to three classes with differing cumulative priority distribution rights.  Class A units will be owned by unrelated third parties and will have first priority for distributions, Class B units will be owned by the Trust and/or the Partnership and will have second priority for distributions, and Class C units will be owned by Rare Earth or other affiliates of Mr. Wirth and will have the lowest priority for distributions from the Ontario entity.  Rare Earth is also entitled to a formation fee equal to $320,000 or an alternate fee of 8% of total capital raised, payable in either cash or units in the Ontario entity.  After all investors have received their initial capital plus a 7% per annum simple return, any additional profits will be allocated 50% to Rare Earth, with the remaining 50% allocated proportionately to all unit classes.  The first funds related to this syndication were received on March 5, 2012 and, as of April 6, 2012, the Partnership has received $900,000 in connection with the Ontario syndication.  InnSuites Hotels will continue to provide management, licensing and reservation services to the property. Priority distributions to all Classes are projected to be approximately $192,000 for the remainder of fiscal year 2013, approximately $82,250 for fiscal year 2014, $89,250 for fiscal years 2015 through 2017 and $22,312 for fiscal year 2018.

Guarantees

On November 23, 2010, the Trust established a revolving bank line of credit, with a credit limit of $500,000.  Mr. Wirth is a guarantor on this line of credit.  The line of credit bears interest at the prime rate plus 2.75% per annum with a 6.0% rate floor and has no financial covenants. The Trust received a thirty day extension to this line of credit agreement, extending the maturity date to June 23, 2012. Management is actively working with the lender to extend this line of credit for one year and to increase the credit limit.  If the Trust maintains bank balances of at least $250,000 with the lender, the line of credit bears interest at the prime rate plus 1.0% with a 6.0% rate floor.  The line is secured by a junior security interest in the Yuma, Arizona property and our trade receivables.  As of January 31, 2012 and 2011, the Trust had drawn no funds under the captions “Certainline of credit.  The largest outstanding balance on the line of credit during fiscal year 2012 was $169,972.

Mr. Wirth has also guaranteed 100% of our Tucson St. Mary’s mortgage note payable of $5,409,156 as of January 31, 2012 and $5,585,098 as of January 31, 2011.  The note is due in variable monthly installments ($29,776 as of January 31, 2012 and 2011), including interest at prime rate (3.25% per year as of January 31, 2012 and 2011), through January 28, 2015, plus a balloon payment of $4,874,612 in January 2015.  The note is secured by our Tucson St. Mary’s property with a carrying value of $7.8 million as of January 31, 2012.

Compensation Information

For information regarding compensation of our executive officers, see Item 11 of this Amendment.

Review, Approval or Ratification of Transactions” “Election with Related Parties

We have established procedures for reviewing transactions between us and our Trustees and executive officers, their immediate family members and entities with which they have a position or relationship.  These procedures help us evaluate whether any related person transaction could impair the independence of Trustees” and “Board Committees”a Trustee or presents a conflict of interest on the part of a Trustee or executive officer.  First, the related party transaction is presented to our executive management, including our Chief Financial Officer.  Our Chief Financial Officer then discusses the transaction with our outside counsel or our independent registered public accountants, if appropriate.  Lastly, the members of the Board of Trustees who do not have an interest in the Proxy Statement.transaction review the transaction and, if they approve, pass a resolution authorizing the transaction.

Item 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 is incorporated by reference to the information set forth under the caption “Certain Information Concerning the Trust—Audit Fees & Services” in the Proxy Statement.Services

Our consolidated financial statements as of and for the fiscal years ended January 31, 2012 and January 31, 2011 were audited by Moss Adams LLP (“Moss Adams”).

35Audit Fees

The aggregate fees billed for professional services rendered by Moss Adams for the audit of our annual financial statements for the fiscal years ended January 31, 2012 and 2011 and review of our interim financial statements included in our quarterly reports on Form 10-Q filed during the fiscal years ended January 31, 2012 and 2011 were $164,077 and $146,425, respectively.

Audit-Related Fees

The aggregate fees billed for audit-related services rendered by Moss Adams, such as assistance with and review of quarterly press releases containing earnings information, for the fiscal years ended January 31, 2012 and 2011 were $0 and $18,500, respectively.

Tax Fees

The aggregate fees billed for tax compliance, tax advice and tax planning services rendered by Moss Adams for the fiscal years ended January 31, 2012 and 2011 were $41,900 and $41,343, respectively.

All Other Fees

Moss Adams did not render other services, and there were no other fees to Moss Adams, for fiscal years ended January 31, 2012 and 2011.

Our Audit Committee has considered and determined that the provision of these services is compatible with Moss Adams maintaining its independence from us.

Policy on Pre-Approval of Audit and Permitted Non-Audit Services

The Audit Committee pre-approves all fees for services performed by Moss Adams.  Unless a type of service Moss Adams provided received general pre-approval, it will require specific pre-approval by the Audit Committee.  Any proposed services exceeding pre-approved cost levels will require specific pre-approval by the Audit Committee.  The term of any pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period.  Since May 6, 2003, the effective date of the SEC’s rules requiring Audit Committee pre-approval of audit and non-audit services performed by our independent auditors, all of the services provided by our independent auditors were approved in accordance with the policies and procedures described above.


PART IV

Item 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) and (2)                                                                                      Financial Statements and Schedules

 Financial Statements/Schedules of InnSuites Hospitality Trust 
   
    
 
1.
Report of Independent Registered Public Accounting Firm –  January 31, 2011 and 2010
13
 
2.
Consolidated Balance Sheets –  January 31, 2011 and 2010
14
 
3.
Consolidated Statements of Operations –  Years Ended January 31, 2011 and 2010
15
 
4.
Consolidated Statements of Shareholders’ Equity –  Years Ended January 31, 2011 and 2010
16
 
5.
Consolidated Statements of Cash Flows –  Years Ended January 31, 2011 and 2010
17
 
6.
Notes to Consolidated Financial Statements –  Years Ended January 31, 2011 and 2010
18
 
7.
Schedule III – Real Estate and Accumulated Depreciation
30
 
8.
Schedule IV – Mortgage Loans on Real Estate
33



36



(a)(3)Exhibit List

Exhibit No.Exhibit
3.1Second Amended and Restated Declaration of Trust of InnSuites Hospitality Trust dated June 16, 1998, as further amended on July 12, 1999 (incorporated by reference to Exhibit 3.1 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended January 31, 2005 filed with the Securities and Exchange Commission on May 16, 2005).
10.1First Amended and Restated Agreement of Limited Partnership of RRF Limited Partnership dated January 31, 1998 (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-2, filed with the Securities and Exchange Commission on September 8, 1998).
10.2*Form of Indemnification Agreement between InnSuites Hospitality Trust and each Trustee and executive officer (incorporated by reference to Exhibit 10.3 of the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended January 31, 2006 filed with the Securities and Exchange Commission on May 12, 2006).
10.3*InnSuites Hospitality Trust 1997 Stock Incentive and Option Plan (incorporated by reference to Exhibit 4(a) of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on September 19, 2000).
10.4*Line of Credit Agreement, dated August 1, 2010, by and between RRF Limited Partnership and Rare Earth Financial, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2010 filed with the Securities and Exchange Commission on September 3, 2010).
10.5*Albuquerque Suite Hospitality, LLC Restructuring Agreement, dated August 30, 2010, by and among RRF Limited Partnership, Rare Earth Financial, LLC, InnSuites Hospitality Trust, James F. Wirth, and Albuquerque Suite Hospitality, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2010 filed with the Securities and Exchange Commission on September 3, 2010).
10.6Revolving Bank Line of Credit Promissory Note, dated November 23, 2010, executed by InnSuites Hospitality Trust, Yuma Hospitality Properties Limited Partnership and RRF Limited Partnership, as Borrowers, in favor of RepublicBankAZ, N.A., as Lender (incorporated by reference to Exhibit 10.1 of Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2010 filed with the Securities and Exchange Commission on December 9, 2010).
10.7Revolving Bank Line of Credit Business Loan Agreement, dated November 23, 2010, by and among InnSuites Hospitality Trust, Yuma Hospitality Properties Limited Partnership and RRF Limited Partnership, as Borrowers, and RepublicBankAZ, N.A., as Lender (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2010 filed with the Securities and Exchange Commission on December 9, 2010).
10.8*Tucson Hospitality Properties LP Restructuring Agreement, dated February 17, 2011, by and among Rare Earth Financial, LLC, RRF Limited Partnership, InnSuites Hospitality Trust, Tucson Hospitality Properties LP, and James F. Wirth.
21Subsidiaries of the Registrant.
31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1Certification of Chief Executive Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2Certification of Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.


*           Management contract or compensatory plan or arrangement.See the Exhibit Index, which is incorporated herein by reference.




 
37
9
 


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of Securities Exchange Act of 1934, as amended, the Trust has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 INNSUITES HOSPITALITY TRUST
  
  
Dated:  April 29, 2011May 30, 2012By:/s/  James F. Wirth
  
James F. Wirth, Chairman and
President and Chief Executive Officer
(Principal Executive Officer)
   
   
Dated:  April 29, 2011May 30, 2012By:/s/  Anthony B. Waters
  
Anthony B. Waters, Chief Financial Officer
(Principal Financial and Accounting Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Trust and in the capacities and on the dates indicated.
10

EXHIBIT INDEX

Dated: April 29, 2011Exhibit No.By:/s/  James F. WirthExhibit
3.1Second Amended and Restated Declaration of Trust of InnSuites Hospitality Trust dated June 16, 1998, as further amended on July 12, 1999 (incorporated by reference to Exhibit 3.1 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended January 31, 2005 filed with the Securities and Exchange Commission on May 16, 2005).
  
10.1First Amended and Restated Agreement of Limited Partnership of RRF Limited Partnership dated January 31, 1998 (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-2, filed with the Securities and Exchange Commission on September 8, 1998).
10.2*Form of Indemnification Agreement between InnSuites Hospitality Trust and each Trustee and executive officer (incorporated by reference to Exhibit 10.3 of the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended January 31, 2006 filed with the Securities and Exchange Commission on May 12, 2006).
10.3*
InnSuites Hospitality Trust 1997 Stock Incentive and Option Plan (incorporated by reference to Exhibit 4(a) of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on September 19, 2000).
10.4*
Line of Credit Agreement, dated August 1, 2010, by and between RRF Limited Partnership and Rare Earth Financial, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2010 filed with the Securities and Exchange Commission on September 3, 2010).
10.5*
Albuquerque Suite Hospitality, LLC Restructuring Agreement, dated August 30, 2010, by and among RRF Limited Partnership, Rare Earth Financial, LLC, InnSuites Hospitality Trust, James F. Wirth, Chairmanand Albuquerque Suite Hospitality, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2010 filed with the Securities and Exchange Commission on September 3, 2010).
President
10.6
Revolving Bank Line of Credit Promissory Note, dated November 23, 2010, executed by InnSuites Hospitality Trust, Yuma Hospitality Properties Limited Partnership and Chief Executive OfficerRRF Limited Partnership, as Borrowers, in favor of RepublicBankAZ, N.A., as Lender (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2010 filed with the Securities and Exchange Commission on December 9, 2010).
(Principal Executive Officer)
10.7
Revolving Bank Line of Credit Business Loan Agreement, dated November 23, 2010, by and among InnSuites Hospitality Trust, Yuma Hospitality Properties Limited Partnership and RRF Limited Partnership, as Borrowers, and RepublicBankAZ, N.A., as Lender (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2010 filed with the Securities and Exchange Commission on December 9, 2010).
 10.8
Change in Terms Agreement for Bank Line of Credit, dated May 12, 2011, executed by InnSuites Hospitality Trust, Yuma Hospitality Properties Limited Partnership and RRF Limited Partnership, as Borrowers, and James F. Wirth, as Guarantor, in favor of RepublicBankAZ N.A., as Lender (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2011 filed with the Securities and Exchange Commission on June 3, 2011).
10.9*
Tucson Hospitality Properties LP Restructuring Agreement, dated February 17, 2011, by and among Rare Earth Financial, LLC, RRF Limited Partnership, InnSuites Hospitality Trust, Tucson Hospitality Properties LP, and James F. Wirth (incorporated by reference to Exhibit 10.1 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended January 31, 2011 filed with the Securities and Exchange Commission on April 29, 2011).
 10.10*
 Ontario Hospitality Properties LP Restructuring Agreement, dated February 29, 2012, by and among Rare Earth Financial, LLC, RRF Limited Partnership, InnSuites Hospitality Trust, Ontario Hospitality Properties LP, and James F. Wirth.+
 10.11Change in Terms Agreement for Bank Line of Credit, dated May 25, 2012, executed by InnSuites Hospitality Trust, Yuma Hospitality Properties Limited Partnership and RRF Limited Partnership, as Borrowers, and James F. Wirth, as Guarantor, in favor of RepublicBankAZ, N.A., as Lender.
21
Subsidiaries of the Registrant.+
   
31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
Dated: April 29, 201131.2By:/s/  Anthony B. WatersCertification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
 
Anthony B. Waters,
Certification of Chief FinancialExecutive Officer
(Principal Financial Officer) required by Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2 
Dated: April 29, 2011By:/s/  Robert R. Mazakis
Robert R. Mazakis, Controller
(Principal Accounting Officer)
Certification of Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.
   
101 
Dated: April 29, 2011By:/s/  Marc E. Berg
Marc E. Berg, TrusteeXBRL Exhibits: **+
   
101.INS 
Dated: April 29, 2011By:/s/  Steven S. Robson
Steven S. Robson, TrusteeXBRL Instance Document**+
   
101.SCH 
Dated: April 29, 2011By:/s/  Peter A. Thoma
Peter A. Thoma, TrusteeXBRL Schema Document**+
   
101.CALXBRL Calculation Linkbase Document**+
   
Dated: April 29, 2011101.LABBy:/s/  Larry PelegrinXBRL Labels Linkbase Document**+
  Larry Pelegrin, Trustee
101.PREXBRL Presentation Linkbase Document**+
101.DEFXBRL Definition Linkbase Document**+


________________________ 
*           Management contract or compensatory plan or arrangement.


**         In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to the Original Form 10-K shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
 


+           Filed with the Original Form 10-K.