IHT — Q2 2026 Financial Report Analysis

More heads in beds, cheaper rooms — and a listing problem that dwarfs both

InnSuites Hospitality Trust (NYSE American: IHT) owns two Best Western–branded suite hotels — 270 suites total, in Tucson, Arizona and Albuquerque, New Mexico — and manages them, plus the IBC independent-hotel reservations business, through its subsidiaries. It is a very small company: the filing's cover page puts the market value of shares held by non-affiliates at just $3.4 million as of July 31, 2026.

This 10-Q covers the three and six months ended July 31, 2026 — the Trust's fiscal year runs February 1 to January 31, so this is its fiscal second quarter of "Fiscal Year 2027," a label the filing uses throughout. In plain calendar terms it is the May–July 2026 quarter.

The operating story is modest and mildly positive: the hotels sold more rooms at slightly lower prices, costs were held flat, and the quarterly loss narrowed. The more consequential news sits in the notes — the Trust is out of compliance with an NYSE American listing standard because its balance sheet shows negative equity, and three weeks after quarter-end it converted $3.0 million of debt owed to an affiliate into stock to fix that.

Key metrics

Quarterly figures are the three months ended July 31. Occupancy, ADR and RevPAR are disclosed in this filing only on a six-month basis, so those three rows compare the six months ended July 31, 2026 with the six months ended July 31, 2025.

Two terms that carry most of the weight in a hotel filing: ADR (average daily rate) is total room revenue divided by rooms actually sold — the average price of a night sold. RevPAR (revenue per available room) is room revenue divided by all rooms available, sold or not, so it blends price and how full the hotel was. Operating margin is the share of revenue left after running the business but before interest and tax; at −9.8%, IHT still spent about $1.10 for every $1.00 of revenue it took in this quarter.

The listing deficiency is the real story

On June 24, 2026 — inside the quarter — NYSE American told the Trust it was not in compliance with Section 1003(a)(i) of its Company Guide. The filing states the grounds directly: a reported stockholders' deficit of approximately $(921,921) as of April 30, 2026, combined with losses in two of the three most recent fiscal years. That standard applies to listed companies whose shareholders' equity is below $2 million and that have lost money in two of their last three years. A "stockholders' deficit" simply means total liabilities exceed total assets — on paper, the equity cushion is gone.

The Trust filed its required compliance plan on July 24, 2026, and has until December 24, 2027 to regain compliance. The plan, as described in the filing, lists conversion of the $3,000,000 related-party debt, further capital raising, debt restructuring, cost deferrals, hotel operating initiatives, and "seeking a larger strong financial merger or reverse merger." Failure to make progress against the plan can trigger delisting proceedings, and the ticker carries a ".BC" below-compliance indicator in the meantime.

The first of those actions is already done. On August 19, 2026, the Trust and Rare Earth Financial, LLC — an affiliate — executed a Debt Conversion Agreement retiring $3,000,000 of related-party principal (no accrued interest) in exchange for 1,829,268 new shares at $1.64, the prior day's closing price. Because it happened after quarter-end, none of it appears in the July 31 balance sheet.

Two things follow that the filing does not spell out:

• The arithmetic still looks tight. Total equity was a deficit of $(1,235,912) at July 31, 2026 — worse than the $(997,842) at January 31, 2026 and worse than the $(921,921) figure NYSE American cited for April 30. Adding $3.0 million to the July 31 deficit gets to roughly $1.76 million of positive equity, which is on the right side of zero but still below the $2 million threshold in the standard being cited — and every further quarterly loss eats into it. The conversion is a necessary step, not a finished cure; expect more of the plan's other items to be needed.
• The dilution is substantial. Shares outstanding went from 9,349,544 at July 31 to 11,224,569 as of September 14, 2026 — a roughly 20% increase in the count, leaving pre-existing holders with about 83% of the ownership they had. For context, $3.0 million of converted debt is close to the entire $3.4 million market value of non-affiliate shares. Equity was repaired by issuing a lot of stock in a very small company, to a related party, at market price.

One genuine benefit beyond the equity line: the $3.0 million related-party note was the bulk of the roughly $3,263,000 of minimum debt payments the filing shows coming due in Fiscal Year 2028. Converting it to stock removes that maturity without spending cash.

Takeaway: The quarter's operating improvement is real but small — about $58,000 of operating-loss reduction on $1.8 million of revenue. What determines the next fifteen months is the equity rebuild: even after the $3.0 million debt-for-equity swap, pro-forma equity of roughly $1.76 million sits under the $2 million standard IHT was cited against, so continued losses alone could re-open the deficiency before the December 2027 deadline.

Occupancy carried revenue; rate did not

Room revenue, 97% of the total, rose 3.0% in the quarter and 1% over the six months. The MD&A is explicit about the mechanism: over the six months, combined occupancy rose to 83.42% from 80.96% while ADR fell about 2% to $95.49 from $96.95, so "the increase in room revenue was driven by higher occupancy, partially offset by lower average daily rates." RevPAR rose 1.5% — the hotels are filling more rooms but discounting to do it, which is a weaker kind of growth than rate-led gains because each extra occupied room brings its own housekeeping, supplies and reservation-fee cost.

The two properties diverge:

Albuquerque is running at 93.7% occupancy — close to practically full — and its 1.95% rate cut left RevPAR flat at $91.48 versus $91.55. There is essentially no more occupancy to gain there; from here, revenue growth at that property has to come from price. Tucson has the room to improve and did: 3.02 points of occupancy gain turned into a 3.06% RevPAR increase despite a 1% lower ADR.

Seasonality explains why a quarter that looks weak in isolation is not alarming. The filing notes Tucson's highest occupancy comes in the fiscal first quarter (winter high season) and that the fiscal second quarter is its lowest — summer in southern Arizona — while Albuquerque's strongest periods are the second and third fiscal quarters. The net effect: the Trust posted a $180,209 operating loss in this quarter but was close to breakeven across the six months, with an operating loss of only $7,300 on $4.03 million of revenue.

The non-room lines are small but moved: food and beverage revenue rose 3% to $26,298 while food and beverage costs fell 55% to $13,171, turning that line profitable on the quarter. "Other" revenue fell 28% to $37,150 from $51,728, which offset roughly a third of the room-revenue gain.

Costs: a real reduction, concentrated in overhead

Total operating expenses fell 1.0% to $2,016,860 even with more rooms occupied. The largest single swing was general and administrative expense down $48,000, or 9%, to $483,091, which the MD&A attributes to lower corporate staffing and support costs. Repairs and maintenance fell 16% to $91,097, and the filing ties that to the completion of the Best Western–mandated property improvement plans at both hotels.

Pushing the other way, sales and marketing rose 25% to $132,915 — a deliberate choice, with the MD&A crediting "increased sales and marketing efforts" for part of the revenue gain. Room expense rose 3% to $668,611, tracking occupancy, and utilities rose 7% to $107,388.

The six-month picture is less flattering than the quarter: over the half, expenses rose slightly (+$17,000), with G&A up 3% and sales and marketing up 15%, offset by lower repairs and maintenance and lower property taxes and insurance. In other words, the 9% G&A reduction is a second-quarter development, not yet a demonstrated half-year trend.

A quirk worth understanding: why the shareholder loss fell faster than the total loss

IHT does not own all of its hotels outright — it holds an indirect 51.69% interest in the Tucson property through a partnership and a direct 21.90% interest in Albuquerque. The portion of results belonging to outside partners is the non-controlling interest, and it is stripped out to get the loss actually borne by IHT shareholders.

In this quarter the non-controlling interest absorbed a loss of $66,414, against just $9,839 a year earlier. That is why the loss attributable to IHT shareholders fell 41% while the consolidated loss fell only 26%. The six-month figures run the other way: the non-controlling interest recorded income of $26,558 (versus $150,223 last year), so the shareholder loss of $248,630 exceeds the consolidated loss of $222,072. Read the consolidated line for how the hotels performed; read the attributable line for what reached shareholders. They can point in different directions quarter to quarter, and here they do.

Balance sheet and cash: thin

Cash fell to about $247,000 against roughly $599,000 of minimum debt payments due in the remainder of Fiscal Year 2027. Operating cash flow swung to a $147,000 outflow for the six months from a $127,000 inflow a year earlier — a $274,000 deterioration that came not from worse trading (the net loss improved by $140,000) but from working capital: a $315,000 net use of cash from higher receivables and lower payables, versus a $105,000 source last year. Cash used for hotel improvements dropped sharply, to $145,000 from $415,000, as the refurbishment programs wrapped up, and the filing says spending will stay low for the rest of the year.

The $1,233,527 Employee Retention Credit receivable has not moved at all in six months. This is pandemic-era payroll-tax relief the Trust has booked as an asset but not yet collected; the filing says roughly $2.7 million is expected in total, of which about $1.5 million had been received as of January 31, 2026, with the rest targeted for collection during the current fiscal year. It is nearly nine months of the Trust's current cash balance sitting in a receivable whose timing is outside management's control — collecting it would materially ease liquidity, though because it is already recorded as an asset it would not by itself add to equity.

Financing has leaned on the affiliate: $354,912 of new related-party borrowings in the six months (down from $564,525), no bank borrowings at all, and no cash dividends paid versus about $88,000 last year. The Trust says it has moved to a single annual dividend and intends to pay the Fiscal Year 2028 dividend around February 15, 2027.

Management concluded in Note 19 that the conditions do not raise substantial doubt about the Trust's ability to continue as a going concern, pointing to hotel cash flows, management fees, cost reductions, borrowing capacity and the option to refinance or sell hotel assets.

Outlook

Management's own guidance is deliberately unambitious: for the balance of Fiscal Year 2027 it expects "stable hotel occupancy and modest improvements in hotel rates," stable domestic travel, continued cost control, and "stable to moderately improving revenues and operating margins," with limited new hotel supply in its markets. There are no revenue or earnings targets.

Our read on trajectory:

• Operationally, this is close to a breakeven business at best. Six-month revenue of $4.03 million against $4.04 million of operating expenses leaves nothing for the $246,552 of interest, which is what produces the loss. Depreciation of $380,005 is non-cash, so cash generation is less bleak than the net loss implies — the filing notes income before depreciation of about $131,000 for the half — but the margin for error is very small. Rate-led growth would help far more than further occupancy gains, and with Albuquerque already near 94% full, price is the only real lever there.
• The equity question is unresolved. The $3.0 million conversion moves the balance sheet from negative to modestly positive, but on pro-forma arithmetic it lands under the standard the Trust was cited against, and the deficit widened by $238,000 over the first half through ordinary operations. Watch the third-quarter 10-Q for whether further compliance-plan actions — additional capital, restructuring, or the "reverse merger" the Trust keeps raising — have been executed, and whether NYSE American has accepted the plan.
• The stated strategy is an exit, not a growth plan. The MD&A says the intention is to realize "full current value" for the two hotels, which management believes is well above book value, "over the next 36 months," and to seek a larger private reverse-merger partner that would value access to the NYSE American listing. Investors should read the operating results as the maintenance of an asset being prepared for sale or a corporate transaction, rather than as a business being scaled. The two non-hotel holdings — the UniGen clean-energy investment carried at $445,833, and the IBC reservations business represented by a $1,925,000 note receivable due 2030 plus a five-year option to buy IBC at cost — are options on that thesis, not current earnings contributors.

Source: InnSuites Hospitality Trust Form 10-Q for the quarterly period ended July 31, 2026, filed with the SEC on September 16, 2026 (accession no. 0001493152-26-042806). All figures are as reported and unaudited.