PROXY
STATEMENT
Proxy
Solicitation
The
accompanying proxy is solicited by the Board of Trustees of InnSuites Hospitality Trust (“IHT” or “the Trust”)
for use at the 2019 Annual Meeting of Shareholders (the “Annual Meeting”) to be held on Wednesday July 24,
2019, and any adjournments or postponements thereof. In addition to the solicitation of proxies by mail, our Trustees, officers
and regular employees may also solicit the return of proxies by regular or electronic mail, telephone or personal contact, for
which they will not receive additional compensation. We will pay all costs of soliciting proxies and will reimburse brokers or
other persons holding our Shares of Beneficial Interest (“Shares”) in their names or in the names of their nominees
for their reasonable expenses in forwarding proxy materials to the beneficial owners of such Shares.
General
Information
Shareholders
of record at the close of business on June 17, 2019 (the record date) will be entitled to vote at the Annual Meeting and at any
adjournments or postponements thereof. As of that date, there were 9,323,838 Shares issued and outstanding. Each outstanding
Share is entitled to one vote on all matters that properly come before the Annual Meeting. A majority of the issued and outstanding
Shares must be represented at the Annual Meeting in person or by proxy in order to constitute a quorum for the transaction of
business.
Shares
represented by properly executed proxy cards will be voted in accordance with the specifications made thereon. If no specification
is made, proxies will be voted “
FOR
”:
|
|
1.
|
The
election of the Trustee nominee named herein (Proposal No. 1);
|
|
|
2.
|
Approval
of the ratification of the appointment of Hall & Company as the independent registered public accounting firm to audit
the Trust for the year ending January 31, 2020 (Proposal No. 2);
|
|
|
3.
|
Approval
of the compensation of our named executive officers on an advisory basis (“Say-on-Pay”) (Proposal No. 3)
|
|
|
4.
|
Advisory
vote as to whether you prefer a vote to advise us on the compensation of our named executive officers every year, every two
years, or every three years (“Say-on-Pay Frequency”) (Proposal No. 4);
|
|
|
5.
|
Approving
granting the Board of Trustees the authority to implement a reverse stock split of up to maximum of 1 share for four (4) shares
(Proposal No. 5)
|
Shares
will be voted in the discretion of the persons voting the Shares represented by proxies if any other business properly comes
before the meeting. The number of Shares printed on your proxy card(s) represents all your Shares under a particular registration.
Receipt of more than one proxy card means that your Shares are registered differently and are in more than one account. To ensure
that all of your Shares are voted at the Annual Meeting, sign and return all proxy cards you receive pursuant to the instructions
thereon.
The
election of the Trustee requires the affirmative vote of the holders of at least a majority of the issued and outstanding Shares
entitled to vote present in person or by proxy at the Annual Meeting. Approval of the Proposal nos. 2, 3, 4 and 5 each requires
the affirmative vote of the holders of a majority of the Shares cast on the proposal.
Abstentions,
but not broker non-votes, will be tabulated in determining the votes present at the Annual Meeting for purposes of determining
a quorum. If your Shares are held in street name and you do not provide voting instructions to the brokerage firm that holds your
shares, the brokerage firm can, in its discretion, vote your uninstructed Shares only on matters on which it is permitted to exercise
authority (“routine” matters). A broker non-vote occurs when a broker, bank or other holder of record holding Shares
for a beneficial owner does not vote on a particular proposal because it does not have discretionary voting power for that particular
item, or chooses not to vote, and has not received instructions from the beneficial owner. Brokers may not exercise their discretion
to vote uninstructed Shares for the election of the Trustee’s because the election of Trustees are not considered routine.
Therefore, if your Shares are to be represented by a broker at the Annual Meeting, you must give specific instructions to your
broker for your Shares to be voted on each of the proposals to be voted on at the Annual Meeting.
Abstentions
will have the same effect as votes against the Trustee nominees, as each abstention will be one less vote for each Trustee nominee.
Broker non-votes will have no effect on the election of the Trustees.
This
proxy statement and the voting form of proxy will be mailed to our shareholders on or about July 8, 2019. We are also mailing
with this proxy statement our Annual Report to Shareholders for the fiscal year ended January 31, 2019 (“fiscal year 2019”).
A
proxy may be revoked at any time before a vote is taken or the authority granted is otherwise exercised. Revocation may be accomplished
by the execution of a later proxy with regard to the same Shares, by giving notice in writing to our Secretary, or by voting your
Shares in person at the Annual Meeting (but your attendance at the Annual Meeting, in and of itself, will not revoke the proxy).
Representatives
of American Stock Transfer and Trust Company, LLC (“American Stock Transfer”), our transfer agent, will tabulate the
votes. A designee from American Stock Transfer will be responsible for reviewing the vote count at the Annual Meeting as election
inspector.
Election
of Trustees
(Proposal
No. 1 on the Proxy Card)
At
the Annual Meeting, two Trustees (James F. Wirth and Leslie “Les” T. Kutasi) will stand for election
as Trustee’s each to serve a three-year term expiring at the 2022 Annual Meeting of Shareholders and until his respective
successor is duly elected and qualified. Mr. Wirth has been a Trustee since January 30, 1998, and Mr. Kutasi has been a Trustee
since December 22, 2013. Mr. Wirth and Mr. Kutasi are standing for re-election at the Annual Meeting as his current term as Trustee
expires at the Annual Meeting.
Unless
a shareholder requests that a proxy be voted against Mr. Wirth and/or Mr. Kutasi, the sole nominees for Trustee, in accordance
with the instructions set forth on the proxy card, Shares represented by proxies solicited hereby will be voted “
FOR
“ the election of both Mr. Wirth and Mr. Kutasi as Trustees. Mr. Wirth and Mr. Kutasi have consented to being named
in this proxy statement and to serve if elected. Should Mr. Wirth or Mr. Kutasi subsequently decline or be unable to accept such
nomination or to serve as a Trustee, an event that the Board of Trustees does not currently expect, the persons voting the Shares
represented by proxies solicited hereby may vote such Shares for a substitute nominee in their discretion.
Our
Board of Trustees currently has five members and is divided into three classes, Effective immediately following the Annual Meeting,
the Board of Trustee will consist of five members and will be divided into three classes as follows:
|
|
●
|
one
Trustee in the class whose term will expire at the 2020 Annual Meeting of Shareholders;
|
|
|
|
|
|
|
●
|
two
Trustee in the class whose terms will expire at the 2021 Annual Meeting of Shareholders; and
|
|
|
|
|
|
|
●
|
two
Trustees in the class whose terms will expire at the 2022 Annual Meeting of Shareholders.
|
Each
of the Trustees serves for three years and until his or her successor is duly elected and qualified. The Board of Trustees has
determined that Messrs. J.R. Chase, Les T. Kutasi, and Steven Robson, who constitute a majority of the Board of Trustees, are
“independent” as defined by the NYSE American listing standards and the rules of the SEC for the purposes of serving
on the Board of Trustees and each committee of which they are members. Messrs. Berg and James F. Wirth are executive officers
and are not independent. Except as described under “Certain Transactions” below, there were no transactions, relationships
or arrangements in fiscal year 2019 that required review by the Board for purposes of determining Trustee independence.
We
request that all of our Trustees attend our Annual Meetings of Shareholders. All Trustees were present at the last Annual Meeting
of Shareholders, four out of five incumbent Trustees attended 100% of the meetings held by the Board of Trustees, the
fifth Trustee missed only one meeting, and all Trustees attended each meeting of the Committees on which the Trustee served
during fiscal year 2019. In addition, the independent Trustees meet at least annually in executive session without the presence
of non-independent Trustees and management.
Vote
Required
The
election of the Trustee requires the affirmative vote of the holders of at least a majority of the issued and outstanding Shares
entitled to vote present in person or by proxy at the Annual Meeting.
Recommendation
the Board of Trustees
Our
Board of Trustees recommends that you vote “FOR” the election of Mr. Wirth and Mr. Kutasi as Trustees.
Approval
of the Ratification of Hall & Company
(Proposal
No. 2 on the Proxy Card)
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
The
Audit Committee has recommended the appointment of Hall & Company, Certified Public Accountants & Consultants, Inc. as
the Company’s independent registered public accounting firm for the fiscal year ending January 31, 2020. Hall and Company,
Inc. has been the Trust’s independent registered public accounting firm since 2015 and audited our financial statements
for the years ending January 31, 2017, 2018 and 2019.
The
shareholders are being requested to ratify the appointment of Hall & Company at the Annual Meeting. The Company anticipates
that a representative of Hall & Company will attend the Annual Meeting. The representative will have an opportunity to make
a statement and to respond to appropriate shareholder questions.
Neither
the Company’s Articles of Incorporation nor the Company’s Bylaws require that shareholders ratify the appointment
of Hall & Company as the Company’s independent registered public accounting firm. We are, however, requesting ratification
because we believe it is a matter of good corporate governance. If the Company’s shareholders do not ratify the appointment,
the Audit Committee will reconsider whether, or not, to retain Hall and Company, Inc., but may, nonetheless, retain Hall &
Company as the Company’s independent registered public accountants. Even if the appointment is ratified, the Audit Committee
in its discretion may change the appointment at any time if it determines that the change would be in the best interests of the
Company and its shareholders.
Vote
Required
You
may vote in favor or against this proposal or you may abstain from voting. The affirmative vote of a majority of all votes present
or represented by proxy and entitled to vote at the Annual Meeting is required to ratify the appointment of Hall & Company,
Certified Public Accountants & Consultants, Inc. as the Company’s independent registered public accounting firm. If
shareholders of record do not specify the manner in which their shares represented by a validly executed proxy solicited by the
Board of Directors are to be voted on this proposal, such shares will be voted in favor of the ratification of the appointment
of Hall and Company as the Company’s independent registered public accounting firm. Abstentions will have the same effect
as votes cast against the proposal. Generally, brokers and other nominees that do not receive instructions are entitled to vote
on the ratification of the appointment of our independent registered public accounting firm as this is a routine matter.
THE
board of Trustees RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE REAPPOINTMENT OF HALL AND COMPANY, INC.
Board
of Trustees and Executive Officers
Nominees,
Trustees and Executive Officers
The
biographies of our two nominees for Trustee, Mr. Wirth and Mr. Kutasi, each of the Trustees whose terms will continue
after the Annual Meeting, and our current executive officers, are set forth below. The information concerning our Trustee nominees,
continuing Trustees and executive officers set forth below is based in part on information received from the respective Trustee
nominees, continuing 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 the Trustee nominees, continuing Trustees and executive
officers of the Trust and includes the specific experience, qualifications, attributes and skills that led to the conclusion that
the Trustee nominees and Trustees should serve on our Board of Trustees, in light of the Trust’s business and structure.
On
December 6, 2017, the Board of Trustees approved a reduction in the total number of Trustees from seven to five effective immediately
following the Annual Meeting. We believe that a smaller board is more effective for a company of our size and will operate more
efficiently. If elected, the terms of Mr. Wirth and Mr. Kutasi as Trustees will expire at the 2022 Annual Meeting of shareholders.
|
Nominee
Whose Terms, if elected, Expire in 2022
|
|
Age
as of Record Date
|
|
Principal
Occupations During Past Five Years
And
Directorships Held
|
|
Trustee
Since
|
|
James
F. Wirth
|
|
73
|
|
Chairman
and Chief Executive Officer of the Trust since January 30, 1998. Also servers currently
(since June 15, 2018) as President of the Trust, and previously served as President
from January 30 1998 until February 1, 2012. Manager and primary owner (together with
family members) of Rare Earth Financial, L.L.C. and affiliated entities, owners and operators
of hotels, since 1980. Mr. Wirth holds an MBA from the Tepper School of Business at Carnegie
Mellon University.
Mr.
Wirth has significant real estate and hotel industry experience and has 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.
Mr. Wirth has served on our Board for more than 20 years.
|
|
January
30, 1998
|
|
Leslie
(Les) T. Kutasi(1)(2)(3)(4)
|
|
68
|
|
Founder
and President of Trend-Tex International, a multi-line textile sales and marketing Trust,
since 2000. In 1996, Mr. Kutasi founded Pacesetter Fabrics, LLC, a start-up textile importer
and converter, and served as its Chief Executive Officer until 2000. Prior to that, he
served as President of California Textile Sales from 1990 to 1996. Mr. Kutasi has been
a member of Young Presidents Organization Inc. (YPO Arizona) since 2006.
Mr.
Kutasi has more than 35 years of residential real estate and investment experience that is valuable to our Board.
|
|
January
31, 2013
|
|
Trustees
Whose Term, Will Expire in 2021
|
|
Age
as of Record Date
|
|
Principal
Occupations During Past Five Years
And
Directorships Held
|
|
Trustee
Since
|
|
Marc
E. Berg
|
|
66
|
|
Executive
Vice President, Secretary and Treasurer of the Trust since February 10, 1999. Vice President
- Acquisitions and Dispositions of the Trust from December 16, 1998 to February 10, 1999.
Vice Chairman of the Board of the Trust since January 2019.
Prior
to InnSuites, Mr. Berg was a wealth manager at Valley National Bank where his portfolio consisted of over half a billion
dollars in equities, bonds and fixed income securities. Mr. Berg also worked at Young, Smith and Peacock, an investment
banking firm, in public finance.
Mr.
Berg has been qualified as a US Trustee, a Registered Investment Advisor with the SEC and holds both an MBA (Finance)
degree from the WP Carey Business School at Arizona State University as well as a Masters in International Management
from the Thunderbird Graduate School of International Management. His undergraduate degree was a BSBA from American University
in Washington, D.C.
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 over 20 years.
|
|
January
30, 1998
|
|
|
|
|
|
|
|
|
|
Jessie
Ronnie Chase (1)(2)(3)(6)
|
|
69
|
|
President
and owner of Park Avenue Investments, a real estate investment firm, since 2000. From
1993 - 2003, Mr. Chase provided investor and management expertise to InnSuites Hotels,
a subsidiary of the Trust.
With
over 35 years of real estate investment and hospitality experience, including experience managing a variety of real estate
assets, Mr. Chase brings to our Board with wide-ranging and in-depth experience in hotel management companies, technology
and operations.
|
|
December
22, 2015
|
|
Trustee
Whose Term Will Expire in 2020
|
|
Age
as of Record Date
|
|
Principal
Occupations During Past Five Years
And
Directorships Held
|
|
Trustee
Since
|
|
Steven
S. Robson
(1)(2)(3)(5)
|
|
62
|
|
Owner
of Scott Homes, residential real estate developers.
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
20 years.
|
|
June
16, 1998
|
1
Member of 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.
Other
Executive Officers
|
Craig
S. Miller, CPA, MBA, MAFM
|
|
Mr.
Miller serves as the Trust’s Principal Accounting Officer, Director of Finance
and Controller.
For
more than five years prior to joining the Trust in May 2018, Mr. Miller was Managing Member of Southwest CFO services
LLC providing interim and fractional CFO services, as well as financial and operational consulting to a variety of businesses.
He is 65 years old, and has over 35 years of experience in finance, accounting, enterprise resource planning and tax.
Mr. Miller holds a bachelor’s degree in commerce from Santa Clara University, and Master’s degrees in both
Business Administration and Accounting and Financial Management from Keller Graduate School of Management. He has served
as a mentor to Arizona State University’s Entrepreneurship and Innovation Program since 2011.
|
Trustee
Nominations and Qualifications
The
Governance and Nominating Committee expects to identify nominees to serve as our Trustees primarily by accepting and considering
the suggestions and nominee recommendations made by members of the Board of Trustees and our management and shareholders. Nominees
for Trustees 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 experience as one of many factors in identifying nominees
for Trustee, but does not have a policy of assessing diversity with respect to any particular qualities or attributes. The Trustees
are fully aware of the fact of the only two female Trustees have left their positions of Trustees to the Trust, and the
Trustees expect to discuss this in the further at future Trustee meetings. 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 likelihood 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 Mr. Chase, Chair of the Governance and Nominating Committee, InnSuites Hospitality Trust,
1730 E. Northern Avenue, Suite 122, 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.”
Leadership
Structure of the Board of Trustees
Mr.
Wirth, our Chief Executive Officer, currently serves as Chairman of the Board. Our Second Amended and Restated Declaration of
Trust, as amended, provides that the Trustees shall annually elect a Chairman who shall be the principal officer of the Trust.
Mr. Wirth has served as Chairman of our Board of Trustees and our Chief Executive Officer since January 30, 1998. Our Board of
Trustees has determined that the Trust has been well-served by this structure of combined Chairman and Chief Executive Officer
positions and that this structure facilitates strong and clear leadership, with a single person setting the tone of the organization
and having the ultimate responsibility for all of the Trust’s operating and strategic functions, thus providing unified
leadership and direction for the Board of Trustees and the Trust’s executive management. Our Chairman also has a significant
investment in our Shares, which we believe provides him with a strong incentive to advance shareholder interests. Mr. Wirth was
also elected as President of the Trust on June 15, 2018.
The
Trust does not have a lead independent Trustee, but receives strong leadership from all of its members. Our Board Committees consist
of only independent members, and our independent Trustees meet at least annually in executive session without the presence of
non-independent Trustees and management. In addition, our Trustees take active and substantial roles in the activities of our
Board of Trustees at the full Board meetings. Our Trustees are able to propose items for Board meeting agendas, and the Board’s
meetings include time for discussion of items not on the formal agenda. Our Board believes that this open structure, as compared
to a system in which there is a designated lead independent trustee, facilitates a greater sense of responsibility among our Trustees
and facilitates active and effective oversight by the independent Trustees of the Trust’s operations and strategic initiatives,
including any risks.
The
Board’s Role in Risk Oversight
Our
management devotes significant attention to risk management, and our Board of Trustees is engaged in the oversight of this activity,
both at the full Board and at the Board Committee level. The Board’s role in risk oversight does not affect the Board’s
leadership structure. However, our Board’s leadership structure supports such risk oversight by combining the Chairman position
with the Chief Executive Officer position (the person with primary corporate responsibility for risk management).
Our
Board’s role in the Trust’s risk oversight process includes receiving reports from members of senior management on
areas of material risk to the Trust, including operational, financial, legal and regulatory and strategic risks. The Board of
Trustees requires management to report to the full Board (or an appropriate Committee) on a variety of matters at regular meetings
of the Board and on an as-needed basis, including the performance and operations of the Trust and other matters relating to risk
management. The Audit Committee also receives regular reports from the Trust’s independent registered public accounting
firm on internal control and financial reporting matters. In addition, pursuant to its charter, the Audit Committee is tasked
with reviewing with the Trust’s counsel major litigation risks as well as compliance with applicable laws and regulations,
discussing with management its procedures for monitoring compliance with the Trust’s code of conduct, and discussing significant
financial risk exposures and the steps management has taken to monitor, control and report such exposures. These reviews are conducted
in conjunction with the Board’s risk oversight function and enable the Board to review and assess any material risks facing
the Trust.
Our
Board also works to oversee risk through its consideration and authorization of significant matters, such as major strategic,
operational, and financial initiatives and its oversight of management’s implementation of those initiatives. The Board
periodically reviews with management its strategies, techniques, policies, and procedures designed to manage these risks. Under
the overall supervision of our Board, management has implemented a variety of processes, procedures, and controls to address these
risks.
Communications
with the Board of Trustees
Shareholders
and other interested parties who wish to communicate with the Board of Trustees or any individual member thereof may do so by
writing to the Secretary, InnSuites Hospitality Trust, 1730 E. Northern Avenue, Suite 122, Phoenix, Arizona 85020. The mailing
envelope and letter must contain a clear notation indicating that the enclosed letter is an “Interested Party-Board of Trustees
Communication.” The Secretary will review all such correspondence and regularly forward to the Board of Trustees a log and
summary of all such correspondence and copies of all correspondence that, in the opinion of the Secretary, deals with the functions
of the Board of Trustees or Committees thereof or that he otherwise determines requires their attention. Trustees may at any time
review a log of all correspondence received by us that is addressed to members of the Board of Trustees and request copies of
any such correspondence. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the
attention of our accounting department and handled in accordance with procedures established by the Audit Committee for such matters.
Code
of Ethics for Senior Financial Officers
We
have a Code of Ethics that applies to our Chief Executive Officer and Chief Financial 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 American disclosure
requirements regarding any amendment to, or waiver of, the Code of Ethics relating to our Chief Executive Officer and Chief Financial
Officer and persons performing similar functions, by posting such information on our website unless the NYSE American 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 Exchange Act 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 Proxy Statement any late filings or failures to file.
Based
solely on our review of the copies of such forms (and amendments thereto) furnished to us, 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, 2019.
Board
Committees
Four
of the incumbent Trustees attended 100% of the aggregate number of meetings held by the Board of Trustees and the Committees on
which the Trustees served during fiscal year 2019, and the fifth incumbent trustee missed only one meeting. The Board of Trustees
met four times during the fiscal year ended January 31, 2019. The independent Trustees meet at least annually in executive session
without the presence of non-independent Trustees and management.
Audit
Committee
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 2019.
All
members of the Audit Committee are “independent,” as such term is defined by the SEC’s rules and the NYSE American’s
listing standards. The Board of Trustees has determined that Mr. Kutasi, a member and the chairman of our Audit Committee, qualifies
as an “audit committee financial expert” under applicable SEC rules. We have posted our Amended and Restated Audit
Committee Charter on our Internet website at www.innsuitestrust.com. Information on our website is not part of this proxy statement.
ADVISORY
APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
(Proposal
No. 3 on the Proxy Card)
As
required by Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are seeking an
advisory, non-binding shareholder vote with respect to the compensation of our named executive officers listed in the Summary
Compensation Table in the “Compensation of Trustees and Executive Officers” section of this Proxy Statement (sometimes
referred to as the “NEOs”) for fiscal year 2019, as disclosed in this Proxy Statement pursuant to Item 402
of Regulation S-K. This vote is not intended to address any specific item of compensation, but rather the overall compensation
of our NEOs and the philosophy, policies and practices described in this Proxy Statement. This vote is commonly known as a “say-on-pay”
advisory vote.
Compensation
for our NEOs 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, but has consisted of cash bonuses for fiscal year 2019 and a number of prior years. This
decision was a result of discussions between the Compensation Committee and our NEOs regarding the sufficiency of our NEOs’
current Share ownership and the restrictions upon transfer of Shares held by our NEOs due to their affiliate status.
We
believe that NEO compensation for the fiscal year ended January 31, 2019 was effective in retaining and motivating our NEOs to
work toward our annual and long-term goals, and well within the range of normal practices for companies of our size and in our
industry. Accordingly, we ask for our shareholders to indicate their support for the compensation paid to our NEOs by voting “FOR”
the following non-binding resolution at the Annual Meeting:
RESOLVED,
that the shareholders approve the compensation of the named executive officers for fiscal year 2019 listed in the Summary Compensation
Table in the Compensation of Trustees and Executive Officers section of the Proxy Statement, as disclosed pursuant to Item 402
of Regulation S-K, including the compensation tables and narrative discussion.
Because
your vote is advisory, the result will not be binding on the Board of Trustees or the Compensation Committee. Nonetheless, the
Board and the Compensation Committee value the opinions of our shareholders and will consider the outcome of the vote, along with
other relevant factors, when making future compensation decisions for our NEOs.
Our
Board of Trustees recommends that you vote “FOR” the approval of the compensation of our named executive officers.
FREQUENCY
OF SHAREHOLDER ADVISORY VOTES ON APPROVAL OF
OUR
NAMED EXECUTIVE OFFICERS’ COMPENSATION
(Proposal
No. 4 on the Proxy Card)
In
addition to seeking shareholder approval, on an advisory basis, of the compensation of our named executive officers (see Proposal
No. 3 above), we are seeking an advisory, non-binding vote regarding the frequency of future advisory say-on-pay votes
as required by Section 14A of the Exchange Act, known as a “say-on-frequency” advisory vote. Shareholders will be
able to vote that we hold the say-on-pay advisory vote at a frequency of every year, every two years, or every three years.
The
Board of Trustees recommends that the say-on-pay advisory vote should occur annually as we value highly regular and frequent input
from our shareholders on important issues such as executive compensation. The Board’s decision was based further on the
premise that this recommendation could be modified in future years if it becomes apparent that an annual vote is unduly burdensome
or not meaningful, or for reasons which have yet to become evident, is not in accordance with the best corporate governance practices.
The
frequency (one year, two years or three years) that receives the highest number of votes cast by the shareholders will be deemed
the frequency for the advisory say-on-pay vote preferred by the shareholders. Because your vote is advisory, the results will
not be binding upon the Board of Trustees. Although not binding, the Board values the opinions of our shareholders and will review
and consider the outcome of the vote, along with other relevant factors, in evaluating the frequency of future advisory votes
on executive compensation.
Our
Board of Trustees recommends that you vote “FOR” the option of “ONE YEAR” as your preference for the frequency
of holding future advisory votes on the compensation of our named executive officers.
Compensation
of Trustees and Executive Officers
The
following overview relates to the compensation of our executive officers listed in the Summary Compensation Table set forth below
during fiscal year 2019. Our executive officers are James F. Wirth, Chairman of the Board and Chief Executive Officer and President,
Marc E. Berg, Executive Vice President, Secretary, Treasurer and Trustee, and Craig S. Miller, Principal Accounting Officer, Director
of Finance and Controller (referred to below as our “executive officers”).
Overview
of the Compensation Committee
The
Compensation Committee of the Board of Trustees currently consists 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 executive officers. Taking into consideration the factors set forth below, the Committee then
approves their compensation levels, including any 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.
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.
Compensation
for our executive officers has two main components, salary and bonus, as well as a benefits component. A base salary is a fixed
compensation component subject to annual adjustment and review, if appropriate, that is designed to attract, retain, and motivate
our executive officers and to align their compensation with market practices. As discussed below, for fiscal year 2019, the bonus
component consisted of performance-based cash bonuses, additional discretionary cash bonuses to Mr. Berg for his efforts related
to refinances of certain properties, and grants of performance-based stock options that were intended to incentivize the growth
of our IBC Hotels segment. Our executive officers did not actually receive any shares pursuant to their stock option grants,
as we determined that the cost of the stock options would have been too high to the Trust due to required accounting charges
and worked with our executive officers to rescind the grants, with all of our executive officers voluntarily surrendering their
stock options to the Trust, without any consideration, in fiscal year 2019.
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.
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 and Discretionary Cash Bonuses
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 determines what it believes are appropriate compensation level distinctions among the executive officers, including
between the Chief Executive Officer and the Chief Financial Officer and among the other executive officers. Although the Compensation
Committee considers our financial performance, there is no specific relationship between achieving or failing to achieve budgeted
estimates, the performance of our Shares or our 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.
Fiscal
Year 2019
As
Mr. Wirth holds a significant ownership stake in the Trust, the Compensation Committee did not increase his salary or provide
him with additional incentives. Based upon a review of Mr. Wirth’s performance and upon the recommendation of the Compensation
Committee, for fiscal years 2018 and 2019, Mr. Wirth’s annual base salary remained set at $153,000. The Compensation Committee
did 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 did consider Mr. Wirth’s substantial Share ownership when setting his base
salary. During fiscal year 2018 Mr. Wirth voluntarily reduced his salary to $124,166 by reducing the number of hours worked per
year.
Cash
and Equity Bonuses
Fiscal
2019 Bonuses
Fiscal
2019– Full Year Cash and Equity Bonus Program
On
January 29, 2018, the Compensation Committee also adopted an incentive bonus program for the Executives for the full fiscal year
ended January 31, 2019 (the “2019 Fiscal Year Bonus Program”). Under the 2019 Fiscal Year Bonus Program, an Executive
will be entitled to receive a bonus consisting of cash and Shares of Beneficial Interest of the Trust, up to the maximum amounts
set forth below, upon the achievement by the Executive of performance-based on objectives which was based exceeding budgeted revenues
and net income in both the hotel operations and technology division.
|
Executive
|
|
Cash
|
|
|
Equity
|
|
Marc E. Berg
|
|
$
|
5,000
|
|
|
None
|
The
bonuses discussed above are discretionary.
The
amounts paid in the fiscal year ending January 31, 2019 are shown below.
|
Executive
|
|
Cash
|
|
|
Pamela
J. Barnhill
|
|
$
|
-0-
|
|
|
Marc
E. Berg
|
|
$
|
2,000
|
|
|
Adam
B. Remis
|
|
$
|
4,000
|
|
Fiscal
2019 – IBC Bonuses
On
September 4, 2018, the Board approved to pay a $15,000 bonus to the daughter of the CEO, and who is the former Chief Operating
Officer, in connection with the sale of IBC. The CEO’s daughter is now employed by the Company that acquired IBC. In addition,
the Board approved to pay a $10,000 bonus to the Executive Vice President of the Trust in connection with the sale of IBC. These
bonuses will be paid upon receipt of the monthly payments to be received in connection with the note receivable described above
starting in September 2019 at $1,000 per month.
The
Trust also paid the former CFO a $5,000 compensation bonus related to the sale of IBC.
Performance-Based
Cash Bonuses
Fiscal
2019 - Performance-Based Cash Bonuses
Our
executive officers are eligible to receive cash bonuses under the General Manager Bonus Plan equal to 15% of the 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 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 $11,000, and a risk management bonus of $1,000.
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
|
|
$
|
11,000
|
|
In
fiscal years 2018 and 2019, each of our executive officers received an annual cash bonus equal to 15% 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 2019 were as follows:
|
Period
|
|
GM
Aggregate
Cash Bonus
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
3,800
|
|
|
Second
Quarter
|
|
$
|
8,000
|
|
|
Third
Quarter
|
|
$
|
6,000
|
|
|
Fourth
Quarter
|
|
$
|
1,250
|
|
|
Year
End
|
|
$
|
16,250
|
|
Accordingly,
each of our executive officers received a cash bonus of $5,180 for fiscal year 2019.
Benefits
and Other Compensation
We
maintain broad-based benefits that are provided to all employees, including health and dental insurance, life insurance and a
401(k) plan. We also have a mandatory matching contribution for our 401(k) plan. We do not have a pension plan. Our executive
officers are eligible to participate in all of our employee benefit plans, in each case on the same basis as our other employees.
Fiscal
Year 2018 Summary Compensation Table
The
table below shows individual compensation information paid to our executive officers for our fiscal years ended January 31, 2019
and 2018:
|
Name
and
|
|
Fiscal
|
|
|
Salary
|
|
|
Discretionary
Bonus
|
|
|
Non-Equity
Incentive Plan Compensation (5)
|
|
|
All
Other Compensation
|
|
|
Total
|
|
|
Principal
Position(1)
|
|
Year
|
|
|
($)
|
|
|
($)
(4) (5)
|
|
|
($)
(6)
|
|
|
($)
(1) (2) (3)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
F. Wirth,
|
|
|
2018
|
|
|
|
124,165
|
|
|
|
|
|
|
|
5,435
|
|
|
|
|
|
|
|
129,600
|
|
|
Chief
Executive Officer
|
|
|
2019
|
|
|
|
153,000
|
|
|
|
|
|
|
|
5,745
|
|
|
|
500
|
|
|
|
159,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adam
B. Remis,
|
|
|
2018
|
|
|
|
147,500
|
|
|
|
33,320
|
|
|
|
5,720
|
|
|
|
500
|
|
|
|
187,040
|
|
|
Chief
Financial Officer (former)
|
|
|
2019
|
|
|
|
85,681
|
|
|
|
4,000
|
|
|
|
2,875
|
|
|
|
500
|
|
|
|
93,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
V.
George Moore
|
|
|
2018
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Chief
Financial Officer (former)
|
|
|
2019
|
|
|
|
48,462
|
|
|
|
|
|
|
|
1,700
|
|
|
|
500
|
|
|
|
50,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig
S. Miller
|
|
|
2018
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Controller
& Principal Accounting Officer
|
|
|
2019
|
|
|
|
69,389
|
|
|
|
|
|
|
|
1,150
|
|
|
|
800
|
|
|
|
71,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc
E. Berg,
|
|
|
2018
|
|
|
|
82,437
|
|
|
|
10,620
|
|
|
|
5,435
|
|
|
|
1,200
|
|
|
|
99,692
|
|
|
Executive
Vice President
|
|
|
2019
|
|
|
|
65,073
|
|
|
|
23,500
|
|
|
|
5,745
|
|
|
|
7,200
|
|
|
|
101,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela
J. Barnhill,
|
|
|
2018
|
|
|
|
150,000
|
|
|
|
5,080
|
|
|
|
5,720
|
|
|
|
9,131
|
|
|
|
169,931
|
|
|
President
& COO ( former)
|
|
|
2019
|
|
|
|
70,526
|
|
|
|
2,875
|
|
|
|
570
|
|
|
|
500
|
|
|
|
74,471
|
|
(1)
Matching contributions made under our 401(k) plan to our executive officers with a maximum of $500 per calendar year are included
in all other compensation.
(2)
Ms. Barnhill and Mr. Wirth were the account name holder for the Trust’s corporate purchase cards as described in the “Certain
Transactions – Guarantees” section below. The corporate purchase cards provide American Express Membership Rewards
to Ms. Barnhill and Mr. Wirth. The use of these corporate purchase cards was discontinued for the fiscal year ended January 31,
2019. For the fiscal year ended January 31, 2018 Ms. Barnhill received 703,909 American Express Membership Rewards, with an estimated
value of $7,039 which amounts are included in all other compensation. No amounts are included for the fiscal year ended January
31, 2019.
(3)
In addition to the employer 401(k) match provided to all eligible Trust employees, Mr. Berg through his Berg Investment Advisors
company was compensated $6,000 for additional consultative services rendered by Mr. Marc Berg, the Trust’s Executive Vice
President. Mr. Berg and Mr. Miller receive a monthly travel expense reimbursement of $100. Mr. Remis, Mr. Moore and Ms. Barnhill
received a monthly travel expense reimbursement of $100 for the months they were employed. For the fiscal year ending January
31, 2019 Mr. Berg, Mr. Miller, Mr. Remis, Mr. Moore and Ms Barnhill received $1,200, $800, $500, $500, and $500, respectively.
For the fiscal year ending January 31, 2018 Ms. Barnhill and Mr. Berg, received $1,200 in expense reimbursement and Mr. Remis
received $500.
(4)
For the fiscal year ending January 31, 2019 Mr. Berg received a discretionary bonus approved by the Compensation Committee team
of $30,000, related to his efforts resulting in the sale of the Yuma property, of which $21,000 was paid, and $9,000 was accrued
during the fiscal year ended January 31, 2019. The balance of $9,000 was will be paid during the fiscal year ending January 31,
2020.
(5)
During fiscal year ending January 31, 2018, Mr. Wirth, Mr. Berg, Ms. Barnhill, and Mr. Remis received discretionary executive
bonuses of $2,875, $5,375 $2,875 and $6,875, respectively.
(6)
During fiscal year ending January 31, 2019 Mr. Wirth, Mr. Berg, Mr. Miller, Mr. Moore and Ms. Barnhill received Non-Equity Incentive
Plan Compensation consisting of Fiscal 2019 – Performance Based Cash Bonuses of $2,780, $2,870, $1,150, $1,700 and $570,
respectively. During fiscal year ending January 31, 2018 Mr. Wirth, Mr. Berg, Ms. Barnhill and Mr. Remis received Non-Equity Incentive
Plan Compensation consisting of Fiscal 2018 – Performance Based Cash Bonuses of $5,435 each.
During
fiscal year 2019 and 2018, we did not grant any stock options or any other equity-based awards. None of our executive officers
owned any stock options, or had any outstanding unvested Shares, as of January 31, 2018 and 2019. Consistent with ASC 718-10-55-10,
compensation cost associated with issuance of these options has not been recognized as shareholder approval is not perfunctory.
For stock option grants during fiscal year 2018 and additional information about our stock option plan, see Note 24 to our Consolidated
Financial Statements - “Stock Options.”
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, with willful misconduct or reckless disregard of his or her duties, with
gross negligence, or not 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.
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. However, if a change in control had occurred on January 31, 2017,
none of our executive officers would have received any payment under the Plan upon a change in control because none had any awards
outstanding under our 1997 Stock Incentive and Option Plan as of that date.
Fiscal
Year 2018 Trustee Compensation
The
table below shows individual compensation information for our non-employee Trustees for our fiscal year ended January 31, 2019
and 2018. 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 above:
|
Name
|
|
Fees
Earned or Paid
in Cash ($)
|
|
|
Stock
Awards
($)(1)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leslie
T. Kutasi
|
|
$
|
0
|
|
|
$
|
10,800
|
|
|
$
|
10,800
|
|
|
Steven
S. Robson
|
|
$
|
0
|
|
|
$
|
10,800
|
|
|
$
|
10,800
|
|
|
JR
Chase
|
|
$
|
0
|
|
|
$
|
10,800
|
|
|
$
|
10,800
|
|
|
(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, 2019 and 2018. The Stock Awards were based on a stock price of $1.80 which
was the closing price of the Trust’s Shares of Beneficial Interest as of February 1, 2018. The Board of Trustees met
on February 1, 2018 and approved the payment.
|
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.
REVERSE
STOCK SPLIT
(Proposal
5 on the Proxy Card)
Purposes
of the Proposal
A
Purpose of a
Reverse Stock Split may be to increase
the market price of the Shares. The Board of Trustees intends to effect a Reverse Stock Split if it believes that a decrease
in the number of Shares outstanding is likely to improve the trading price of the Shares. If a Reserve Stock Split proposal
is authorized by the shareholders of the Trust, the Board of Trustees will have the discretion to implement the Reverse Stock
Split once during the period ending on December 31, 2021, up to a maximum ratio of 1-for-4, or effect no Reverse Stock
Split at all. The Board of Trustees has submitted a maximum ratio in order to give it latitude to achieve its intended objective.
There can be no assurance, however, that the market price of the Shares will rise in proportion to the reduction in the number
of outstanding Shares resulting from the Reverse Stock Split.
The
Board of Trustees believes that shareholder approval of a maximum ratio (as opposed to approval of a specified ratio) in which
the Reverse Stock Split may be effected provides the Board of Trustees with maximum flexibility to achieve the purposes of the
Reverse Stock Split. If the shareholders approve this Reverse Stock Split Proposal, the Reverse Stock Split will be effected,
if at all, only upon a determination by the Board of Trustees that the Reverse Stock Split (in a ratio determined by the Board
of Trustees within the limits set forth herein) is in the best interests of the Trust and its shareholders at that time.
In
connection with any determination to effect a Reverse Stock Split, the Board of Trustees will also select the Reverse Stock Split
ratio that, in its discretion, results in the greatest marketability of the Shares based on prevailing market conditions. No further
action on the part of the shareholders will be required to either effect or abandon the Reverse Stock Split. If no Reverse Stock
Split is effected by December 31, 2021, the Board of Trustees’ authority to effect the Reverse Stock Split will terminate.
Effects
of the Proposal
Potential
Effects of the Reverse Stock Split
There
can be no assurance that the total market capitalization of our Shares after the Reverse Stock Split will be equal to or greater
than the total market capitalization before the Reverse Stock Split. Further, there can be no assurance that the market price
per Share after the Reverse Stock Split will rise or remain constant in proportion to the reduction in the number of Shares outstanding
before the Reverse Stock Split.
Accordingly,
although the Reverse Stock split will not (by itself) impact the Trust’s assets or prospects and the market price of our
Shares will be based on our performance and other factors, the total market capitalization of the Shares after the Reverse Stock
Split may be lower than the total market capitalization before the Reverse Stock Split, and, in the future, the market price of
our Shares following the Reverse Stock Split may fall below the market price prior to the Reverse Stock Split. In many cases,
the total market capitalization of a company following a reverse stock split is lower than the total market capitalization before
the reverse stock split.
A
decline in the market price for our Shares after the Reverse Stock Split may result in a greater percentage decline than would
occur in the absence of the Reverse Stock Split, and the liquidity of our Shares could be adversely affected by the reduced number
of Shares outstanding following the Reverse Stock Split.
Effect
on Authorized and Outstanding Shares
The
Declaration of the Trust currently authorizes the Trust to issue an unlimited number of Shares. Therefore, the total number of
authorized Shares will not change as a result of the Reverse Stock Split.
As
of June 17, 2019, there were approximately 9,323,838 Shares issued and outstanding. This number excludes approximately
9,229,923 Shares held by the Trust as treasury shares that are considered issued but not outstanding.
Pursuant
to the Reverse Stock Split, assuming the maximum ratio of 1-for-4 is employed, each four Shares outstanding or held as treasury
shares immediately prior to the effectiveness of the Reverse Stock Split will become one Share after the Reverse Stock Split.
The actual number of Shares will depend on the Reverse Stock Split ratio selected by the Board of Trustees.
Although
the number of authorized shares of common stock will not change as a result of the Reverse Stock Split, the number of Shares outstanding
and held as treasury shares will be reduced to a number that will be approximately equal to (i) the number of Shares outstanding
and held as treasury shares immediately prior to the effectiveness of the Reverse Stock Split, divided by (ii) the Reverse Stock
Split ratio that is employed.
With
the exception of the number of Shares outstanding or held as treasury shares, the rights and preferences of the Shares prior and
subsequent to the Reverse Stock Split will remain the same. Following the effective date of the Reverse Stock Split, it is not
anticipated that our financial condition, the percentage ownership of management, the number of shareholders, or any aspect of
our business would materially change as a result of the Reverse Stock Split.
The
Reverse Stock Split will be implemented simultaneously for all Shares (outstanding or held as treasury shares) and the ratio will
be the same for all Shares. The Reverse Stock Split will affect all shareholders uniformly and will not affect any shareholder’s
percentage ownership interests in the Trust, except to the extent that the Reverse Stock Split results in any shareholder owning
a fractional share. See “Fractional Shares” below. Shares issued pursuant to the Reverse Stock Split will remain fully
paid and non-assessable.
We
are subject to periodic reporting and other requirements of the Securities Exchange Act of 1934, as amended. The proposed Reverse
Stock Split will not affect the registration of the Shares under the securities laws.
The
table below depicts the effects of the Reverse Stock Split, at assumed exchange ratios, upon the number of Shares outstanding
and held as treasury shares:
|
|
|
Shares
|
|
|
Treasury
|
|
|
|
|
Outstanding
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
As
of June 17, 2019
|
|
|
9,323,838
|
|
|
|
9,229,923
|
|
|
1-for-2
Split
|
|
|
4,661,919
|
|
|
|
4,614,962
|
|
|
1-for-3
Split
|
|
|
3,107,946
|
|
|
|
3,076,641
|
|
|
1-for-4
Split
|
|
|
2,330,960
|
|
|
|
2,307,481
|
|
Outstanding
Convertible Securities
On
the effective date of the Reverse Stock Split, if approved by the Board of Trustees, all outstanding future or contingent rights
to acquire Shares, such as stock options or limited partnership units in RRF Limited Partnership (the Trust’s operating
partnership), will be adjusted to reflect the Reverse Stock Split. As of June 17, 2019, the Trust had no options, 211,708 Class
A limited partnership units and 2,974,038 Class B limited partnership units outstanding. The number of Shares to be received pursuant
to, and other terms of, outstanding future or contingent rights will be adjusted proportionately to reflect the Reverse Stock
Split.
Accounting
Matters
On
the effective date of the Reverse Stock Split, the net income or loss per Share and net book value of our Shares will be increased
because there will be fewer Shares outstanding.
Potential
Odd Lots
If
approved, the Reverse Stock Split will result in some shareholders holding less than 100 Shares, and, as a consequence, such shareholders
may incur greater costs associated with selling such Shares. Brokerage commissions and other costs of transactions in odd lots
may be higher, particularly on a per Share basis, than the cost of transactions in even multiples of 100 Shares.
Potential
Anti-Takeover Effect
The
Reverse Stock Split proposal is not being proposed in response to any effort of which the Trust is aware to accumulate Shares
or obtain control of the Trust, nor is it part of a plan by management to recommend a series of similar amendments to the Board
of Trustees and shareholders. The Reverse Stock Split may facilitate a future “Reverse Merger” whereby a larger private
company may desire to go public by way of a merger with the Trust, whereby the larger entity shareholders take control of the
larger merged company.
Manner
of Effecting the Reverse Stock Split and Exchange of Stock Certificates
In
the event of approval of the Reverse Stock Split by the shareholders, the Reverse Stock Split will be implemented by filing a
certificate of amendment to our Declaration of Trust.
As
soon as practicable after the effective date of the Reverse Stock Split, the Trust, or its transfer agent, will send a letter
of transmittal to each holder of record of our outstanding Shares on the effective date of the Reverse Stock Split. The letter
of transmittal will contain instructions for the surrender of certificates representing the Shares. Upon proper completion and
execution of the letter of transmittal and return thereof, together with certificates representing the holder’s Shares,
the holder of record will be entitled to receive a certificate representing the number of new Shares into which such holder’s
existing Shares have been reclassified as a result of the Reverse Stock Split. SHAREHOLDERS SHOULD NOT SUBMIT ANY CERTIFICATES
UNTIL REQUESTED TO DO SO.
No
new certificate will be issued to a holder of record until such holder has surrendered all outstanding certificates together with
the properly completed and executed letter of transmittal. Until so surrendered, each outstanding certificate representing existing
Shares will be deemed for all corporate purposes after the effective date to evidence ownership of new Shares in the appropriately
reduced number. No fees or other commissions will be charged to shareholders to effect the exchange of existing Shares for new
Shares.
Fractional
Shares
As
a result of a Reverse Stock Split, the reclassification of a shareholder’s existing Shares into new Shares as described
above may result in the creation of fractional Shares. The Board of Trustees will either:
1.
Provide for the payment of cash in lieu of fractional shares as follows:
In
that event, no certificates will be issued for fractional Shares that result from the Reverse Stock Split. Shareholders who would
be entitled to receive fractional Shares after the Reverse Stock Split will be entitled to a cash payment in lieu of the fractional
Shares. In order to receive the cash payment, shareholders must surrender any certificates representing fractional Shares to the
Trust, or our transfer agent, which will then issue a new certificate representing the whole number of Shares to which the holder
is entitled as a result of the Reverse Stock Split plus a cash payment in place of the fractional Shares at a price equal to the
fraction to which the shareholder would otherwise be entitled multiplied by the average of the closing prices of the Shares for
the last ten (10) trading days prior to the effective date of the Reverse Stock Split (or if such price is not available, the
average of the last bid and ask prices of the Shares on such days or other price determined by the Board of Trustees). The ownership
of a fractional interest will not give the holder any voting, dividend or other rights except to receive payment as described;
or
2.
Provide for any fractional Share which results from the Reverse Stock Split to be rounded up to the next whole Share. In other
words, the Trust may issue a small added fractional share to round new shares up , at no cost to the shareholder(s).
Amendment
to Declaration of Trust
If
the shareholders and the Board of Trustees approve a Reverse Stock Split, we intend to file a certificate of amendment
to our Declaration of Trust to implement a Reverse Stock Split. In order to implement the Reverse Stock Split, we will
amend the Declaration of Trust to include the following language as modified to reflect the Reverse Stock Split ratio (up to a
maximum ratio of 1-for-4) selected by the Board of Trustees:
“Each
[NUMBER TO BE DETERMINED BASED ON RATIO] Shares issued as of the date and time immediately preceding [INSERT DATE UPON WHICH CERTIFICATE
OF AMENDMENT IS FILED], the effective date of a reverse stock split (the “Split Effective Date”), shall be automatically
changed and reclassified, as of the Split Effective Date and without further action, into one (1) fully paid and nonassessable
Share; provided, however, that there shall be no fractional interest resulting from such change and reclassification. In the case
of any holder of fewer than [NUMBER TO BE DETERMINED BASED ON RATIO] Shares or any number of Shares which, when divided by [NUMBER
TO BE DETERMINED BASED ON RATIO], does not result in a whole number (a “Fractional Share Holder”), the fractional
Share interest held by such Fractional Share Holder as a result of such change and reclassification shall be [redeemed for a cash
payment by the Trust in lieu of issuance OR rounded up to the next whole Share]. Each holder of record of a certificate or certificates
which immediately prior to the Split Effective Date represents outstanding Shares (the “Old Certificates,” whether
one or more) shall be entitled to receive upon surrender of such Old Certificates to the Trust’s transfer agent for cancellation,
a certificate or certificates (the “New Certificates,” whether one or more) representing the number of whole Shares
into and for which the Shares formerly represented by such Old Certificates so surrendered are exchangeable [plus a cash payment
in place of the fractional Shares at a price equal to the fraction to which the holder would otherwise be entitled multiplied
by the average of the closing prices of the Shares for the last ten (10) trading days immediately prior to the Split Effective
Date (or if such price is not available, the average of the last bid and ask prices of the Shares on such days or other price
determined by the Board of Trustees) OR rounded up to the next whole Share]. From and after the Split Effective Date, Old Certificates
shall represent only the right to receive New Certificates pursuant to the provisions hereof.”
Certain
Federal Income Tax Consequences
If
a Reverse Stock Split is approved by the Board of Trustees, we
believe that the federal income tax consequences of the Reverse Stock Split to holders of existing Shares will be as follows:
(a)
No gain or loss will be recognized by a shareholder on the surrender of their existing Shares or upon receipt of a certificate
representing the new number of Shares (except to the extent of any cash received in lieu of a fractional Share).
(b)
If cash is paid by the Trust for fractional Shares, gain or loss equal to the difference, if any, between the amount of cash received
for fractional Shares and the shareholder’s basis in the fractional Shares will be recognized by the shareholder.
(c)
Generally, the aggregate tax basis of the Shares after the Reverse Stock Split will equal the aggregate tax basis of the Shares
exchanged therefor.
(d)
The holding period of the Shares after the Reverse Stock Split will include the holding period of the holder’s existing
Shares if such existing Shares were held as capital assets on the date of the exchange.
(e)
The conversion of the existing Shares into the new Shares after the Reverse Stock Split will produce no gain or loss to the Trust.
Our
belief as outlined above is not binding upon the Internal Revenue Service or the courts, and there can be no assurance that the
Internal Revenue Service or the courts will accept the positions expressed above. This summary does not purport to be complete
and does not address the tax consequences to holders that are subject to special tax rules, such as banks, insurance companies,
regulated investment companies, personal holding companies, foreign entities, non-resident foreign individuals, broker-dealers
and tax-exempt entities. The state and local tax consequences of the Reverse Stock Split may vary significantly as to each shareholder,
depending upon the state in which the shareholder resides. The foregoing summary is included for general information only. Accordingly,
shareholders are urged to consult their own tax advisors with respect to the federal, state and local tax consequences of the
Reverse Stock Split.
Vote
Required
Approval
of a Reverse Stock Split will require the affirmative vote of a majority of the issued and outstanding Shares entitled
to vote present in person or by proxy at the Annual Meeting.
No
Appraisal Rights
No
appraisal rights are available under Ohio law or under the Declaration of Trust to any shareholder who dissents from this Reverse
Stock Split Proposal.
The
Board of Trustees recommendations that you vote “FOR” Proposal 5. The Board of Trustees would have the authority
to implement a reverse stock split at a ratio, to be established by the Board of Trustees in its sole discretion, not to exceed
1-for-4, which specific ratio shall be included in an amendment to the Declaration of Trust to implement such reverse stock split.
Certain
Transactions
Sale
of IBC Hotels LLC
On
August 15, 2018 the Trust entered into a final sale agreement for its subsidiary IBC Hotels LLC (“IBC”)
with an effective sale date as of August 1, 2018 to a third party buyer (“Buyer”). The Buyer
hired Pamela Barnhill, the Trust’s former Chief Operating Officer, who is a family member of the Trust’s
CEO. The sale price was $3,000,000 to be paid to the Trust as follows:
|
|
1.
|
$250,000
at closing, which was received on August 14, 2018;
|
|
|
2.
|
A
secured promissory note in the principal amount of $2,750,000 with interest to be accrued at 3.75% per annum. Interest shall
accrue for the first 10 months (starting August 2018), thereafter for month 11 and 12 principal and interest payments of 50%
($25,632 per month), with the remaining amount to be amortized over 59 months (payments of $52,054 per month) with
maturity in June 2024.
|
Note
is secured by (1) pledge of the Buyer’s interest, and (2) a security interest in all assets of IBC, provided the Trust
shall agree to subordinate such equity interest to commercially reasonable debt financing upon request.
Sale
of Yuma Hotel
On
July 31, 2018, the Trust entered into a purchase and sale agreement to sell its Innsuites Yuma Hotel and Suites Best Western
(Yuma), together with certain furniture, fixtures, equipment, operating supplies and other ancillary items pertaining to the daily
operations to a third party. The sale was completed on October 24, 2018. The sales price, as revised, was approximately $16.05
million, of which the net proceeds received by the Trust were approximately $9.93 million. Please see our filing on Form
8-K with the SEC on October 30,2 018 and August 1, 2018 related to the sale of the Yuma Hotel property.
Management
and Licensing Agreements
The
Trust directly manages the Hotels through the Trust’s wholly-owned subsidiary, InnSuites Hotels. Under the management agreements,
InnSuites Hotels manages the daily operations of the Trust’s Albuquerque and Tucson Hotels and the Tempe hotel owned by
affiliates of Mr. Wirth. All Trust managed Hotel expenses, revenues and reimbursements among the Trust, InnSuites Hotels and the
Partnership have been eliminated in consolidation. The management fees for the Trust’s Hotels and the Tempe hotel are 5%
of room revenue and a monthly accounting fee of $2,000 per hotel. These agreements have no expiration date and may be cancelled
by either party with 90-days written notice in the event the property changes ownership. In fiscal years 2019 and 2018, InnSuites
Hotels received aggregate fees of $178,000 and $166,000 respectively, for management of the Tempe hotel owned by affiliates of
Mr. Wirth. The Trust charges management fees to related parties.
The
Trust also provides the use of the InnSuites© trademark to the Hotels and the Tempe hotel.
Restructuring
Agreements
Albuquerque
Suite Hospitality Restructuring Agreement
During
the fiscal year ended January 31, 2018, there were 193 Class A units of the Albuquerque entity sold, of which 142 came from the
Trust at $10,000 per unit. As of January 31, 2018, the Trust held a 22.83% ownership interest, or 137 Class B units, in the Albuquerque
entity, Mr. Wirth and his affiliates held a 0.17% interest, or 1 Class C unit, and other parties held a 77.00% interest, or 462
Class A units. During the fiscal year ended January 31, 2018, the Albuquerque entity has made discretionary Priority Return payments
to unrelated unit holders of approximately $209,000, and to the Trust of approximately $177,000.
During
the fiscal year ended January 31, 2019, there were 15.00 Class A units sold for $150,000 ($10,000/unit), all of which 14.50 came
from the Trust’s Class B units, and no C units of the Albuquerque entity sold. As of October 31, 2018, the Trust held a
20.33% ownership interest, or 122 Class B units, in the Albuquerque entity, Mr. Wirth and his affiliates held a 0.17% interest,
or 1 Class C unit, and other third parties held a 79.50% interest, or 477 Class A units as of October 31, 2018. As of February
1, 2017, the Trust no longer accrues for these distributions as the preference period generally has expired. During the nine months
period ended October 31, 2018 the Trust paid distributions in the amount of approximately $308,000, of which approximately $69,000
was to IHT, which were eliminated during the consolidation process for reporting purposes, and approximately $239,000 was to the
third party the non-controlling interest holders, respectively.
Tucson
Hospitality Properties Restructuring Agreement
During
the nine months ended October 31, 2018, there were no Class A, B or C units of the Tucson entity sold. As of October 31, 2018,
the Partnership held a 51.01% ownership interest, or 404 Class B units, in the Tucson entity, Mr. Wirth and his affiliates held
a 0.63% interest, or 5 Class C units, and other parties held a 48.36% interest, or 383 Class A units. During the nine months period
ended October 31, 2018 the Trust paid distributions in the amount of approximately $139,000, of which approximately $71,000 was
to RRF Limited Partnership, which were eliminated during the consolidation process for reporting purposes, and approximately $68,000
was to the third party the non-controlling interest holders, respectively.
Ontario
Hospitality Properties Restructuring Agreement
On
June 2, 2017, the final transaction provided for in the Purchase and Sale Agreement (“Agreement”) dated May 9, 2017
between Ontario Hospitality Properties LLLP (“Ontario”), a subsidiary of InnSuites Hospitality Trust (the “Trust”)
and Minkum Investment Group, LLC or Assignee (“Buyer”) were consummated. Pursuant to the Agreement, the Buyer acquired
the Best Western InnSuites Ontario Hotel and Suites property for a cash purchase price of $17.5 million with a basis of approximately
$6 million which will result in a recognition of a significant profit after transactional costs. This increased our equity as
part of our NYSE Equity Enhancement Plan. Right, title and interest to the Best Western InnSuites Ontario Hotel and Suites hotel
property was transferred on June 2, 2017. Please see our filing on Form 8-K filed with the SEC on June 7, 2018 for information
related to the sale of our Ontario Hotel property.
Yuma
Hospitality Properties Restructuring Agreement
As
reported in a Current Report on Form 8-K dated August 1, 2018, Yuma Hospitality Properties LLLP (“Yuma”), a subsidiary
of InnSuites Hospitality Trust (the “Trust”), entered into a Purchase and Sale Agreement (the “PSA”) to
sell its InnSuites Yuma Hotel and Suites Best Western property together with certain furniture, fixtures, equipment, operating
supplies and other ancillary items pertaining to the daily operations. The buyer is Palm Springs Inn, LLC or Assignee (“Buyer”)
an unrelated third party for $16.250 million The transaction closed with a revised price of $16.05 million dollars.
Financing
Arrangements and Guarantees
On
December 1, 2014, the Trust entered into a $1,000,000 net maximum Demand/Revolving Line of Credit/Promissory Note with Rare Earth
Financial, LLC, an entity which is wholly owned by Mr. Wirth and his family members. The Demand/Revolving Line of Credit/Promissory
Note bears interest at 7.0% per annum, is interest only quarterly and matures on June 19, 2020. No prepayment penalty exists on
the Demand/Revolving Line of Credit/Promissory Note. The balance fluctuates significantly through the period with the highest
payable balance being approximately $632,000 during the fiscal year ended January 31, 2019. The Demand/Revolving Line of Credit/Promissory
Note has a net maximum borrowing capacity of $1,000,000. Related party interest expense or income for the Demand/Revolving Line
of Credit/Promissory Note for the fiscal years ended January 31, 2019 was approximately $102,000 of interest income, and for the
fiscal year ended January 31, 2018 was approximately $4,000 of expense.
The
above Demand/Revolving Line of Credit/Promissory Notes are presented together as one line item on the balance sheet and totaled
a receivable of approximately $632,000 and $811,000 at January 31, 2019 and 2018, respectively, all of which is considered a current
receivable.
On
June 20, 2017, the Trust and the Partnership together entered into an unsecured loan of $270,000 with Guy C. Hayden III (“Hayden
Loan”). The Hayden loan is due on June 20, 2019 or on demand, whichever occurs first. The Hayden loan accrues interest at
7% and interest only payments shall be made monthly and are due on the first of the following month. The Trust and Partnership
may pay all of part of these notes without any repayment penalties. The Hayden Loan is being renewed as of July 1, 2019, at 4.5%,
similar terms.
On
December 5, 2017, the Trust and the Partnership together entered into eight unsecured loans for a total of $425,000 with varying
principal amounts ranging from $25,000 to $100,000 with H. W. Hayes Trust (“Hayes Loans”). The Trust and the Partnership
together also entered into two unsecured on-demand $25,000 loans, and an unsecured on-demand $50,000 loan for a total of $100,000
with Lita M. Sweitzer (“Sweitzer Loans”). The total principal amount of the Hayes Loans and the Sweitzer Loans is
$525,000. The Hayes Loans and the Sweitzer Loans are due on June 20, 2019 or on demand, whichever occurs first. The Hayes Loans
requires from a 0-120 day notification of the demand to repay the loans prior to June 20, 2019. Both the Hayes Loans and the Sweitzer
Loans accrue interest at 7.0% per year on the unpaid balance and interest only payments shall be made monthly and are due on the
first of the following month. The Trust and Partnership may pay all or part of these notes without any repayment penalties. These
notes are being being renewed as of July 1, 2019, at 4.5%, similar terms.
On
June 29, 2017, Tucson Hospitality Properties, LLLP, a subsidiary of InnSuites Hospitality Trust, entered into a $5.0 million Business
Loan Agreement (“Tucson Loan”) as a first mortgage credit facility with KS State Bank to refinance the existing first
mortgage credit facility with an approximate payoff balance of $3.045 million which will allow Tucson Hospitality Properties,
LLLP to be reimbursed for prior and future hotel improvements. The Tucson Loan has a maturity date of June 19, 2042. The Tucson
Loan has an initial interest rate of 4.69% for the first five years and thereafter a variable rate equal to the US Treasury +
2.0% with a floor of 4.69% and no prepayment penalty. This credit facility is guaranteed by InnSuites Hospitality Trust, RRF Limited
Partnership, Rare Earth Financial, LLC, James F. Wirth and Gail J. Wirth and the Wirth Family Trust dated July 14, 2016. As of
May 31, 2019 the Tucson Loan was approximately $4,785,000.
On
July 10, 2017, the Partnership entered into multiple Assignment of Partners Interest Agreements (the “RRF Agreements”)
to purchase a total of 433,900 Partnership units convertible 1-for-1 into Shares of the Trust at a purchase price of $2.00 per
Partnership unit, for the aggregate cost of $867,800 to the Trust. Pursuant to the RRF Agreements, James F. Wirth, the Chairman,
Chief Executive Officerand President of the Trust, sold 250,000 Partnership units and Mr. Wirth’s daughter, Pamela Barnhill,
sold 45,975 Partnership units. Three other of Mr. Wirth’s family members who are each not affiliated with the Trust, each
sold 45,975 Partnership units.
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 Partnership units 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 Partnership units 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 Partnership units 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 Trusts’ equity compensation plans/programs.
For the years ended
January 31, 2019 and 2018, the Trust repurchased 217,609 and 150,973 Shares of Beneficial Interest at an average price of $1.71
and $1.99 per share, respectively. The average price paid includes fees and brokerage commissions. The Trust intends to continue
repurchasing Shares of Beneficial Interest in compliance with applicable legal and NYSE AMERICAN requirements. As of January 31,
2019 the Trust remains authorized to repurchase an additional 444,508 Shares of Beneficial Interest and/or Partnership units pursuant
to the publicly announced share repurchase program, which has no expiration date. Repurchased Shares of Beneficial Interest are
accounted for as treasury stock in the Trust’s Consolidated Statements of Shareholders’ Equity.
During the Fiscal
year ended January 31, 2019, the Trust also repurchased 215,768 Shares of Beneficial Interest in private transactions for an average
price of $1.70 per share by issuing note payables for each transaction with an annual interest rate of 7%. During fiscal year
ended January 31, 2019, the Trust’s related Company RRF Limited Partnership also repurchased 24,104 Shares of Beneficial
Interest in private transactions for an average price of $1.21 per share by issuing note payables for each transaction with an
annual interest rate of 7.
Compensation
Information
For
information regarding compensation of our executive officers, see “Compensation of Trustees and Executive Officers”
in this proxy statement.
Review,
Approval or Ratification of Transactions with Related Parties
On
December 10, 2013, the Board of Trustees adopted a Related Party Transactions Policy, which established procedures for reviewing
transactions between us and our Trustees and executive officers, their immediate family members, entities with which they have
a position or relationship, and persons known to us to be the beneficial owner of more than 5% of our Shares of Beneficial Interest.
These procedures help us evaluate whether any related person transaction could impair the independence of 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, as needed. Lastly, the Audit Committee and the members of the Board of Trustees who do not have an interest in
the transaction review the transaction and, if they approve, pass a resolution authorizing the transaction. In determining whether
to approve a Related Party Transaction, the Audit Committee and the members of the Board of Trustees consider whether the terms
of the related party transaction are fair to the Trust on the same basis as would apply if the transaction did not involve a related
party; whether there are business reasons for the Trust to enter into the related party transaction; whether the related party
transaction would impair the independence of the outside Trustee and whether the related party transaction would present an improper
conflict of interest for any Trustee or executive officer of the Trust, taking into account the size of the transaction, the overall
financial position of the trustee, executive officer or related party, the direct or indirect nature of the Trustee’s, executive
officer’s or other related party interest in the transaction and the ongoing nature of any proposed relationship, and any
other factors the Audit Committee and members of the Board of Trustees deem relevant. Our Related Party Transactions Policy is
available in the Corporate Governance portion of our website at www.innsuitestrust.com.
Certain
Information Concerning the Trust
The
following table shows the persons who were known to us to be beneficial owners of more than five percent of our outstanding Shares
of Beneficial Interest, together with the number of Shares of Beneficial Interest owned beneficially by each Trustee, nominee
for Trustee and executive officer, and the Trustees, nominee for Trustee and executive officers as a group. The percentages in
the table are based on 9,323,838 Shares of Beneficial Interest issued and outstanding as of January 31, 2019. Unless
otherwise specified, each person has sole voting and investment power of the Shares of Beneficial Interest that he or she beneficially
owns.
|
Trustees
and
Executive
Officers
|
|
Shares
Beneficially
Owned (1)
|
|
|
Percentage
of
Outstanding
Shares
|
|
|
James F. Wirth
(2)
|
|
|
5,876,683
|
|
|
|
61.27
|
%
|
|
Marc E. Berg
|
|
|
42,750
|
|
|
|
*
|
|
|
Craig S. Miller
|
|
|
-
|
|
|
|
*
|
|
|
JR Chase
|
|
|
24,657
|
|
|
|
*
|
|
|
Leslie T. Kutasi
|
|
|
42,000
|
|
|
|
*
|
|
|
Steven S. Robson
|
|
|
127,200
|
|
|
|
1.33
|
%
|
|
Trustees and Executive
Officers as a group (eight persons)
|
|
|
6,113,290
|
|
|
|
63.74
|
%
|
|
*
|
Less
than one percent (1.0%).
|
|
(1)
|
Pursuant
to the SEC’s rules, “beneficial ownership” includes Shares that may be acquired within 60 days following
May 1, 2019. However, none of the individuals listed in the table had the right to acquire any Shares within the 60-day
period.
|
|
(2)
|
All
Shares are owned jointly by Mr. Wirth and his spouse and/or by Rare Earth Financial,
LLC, except for1,530,341 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, his spouse and children own directly and indirectly all 2,974,038 issued and outstanding Class B limited partnership
units in the Partnership, the conversion of which is restricted and permitted only at the discretion of our Board of Trustees.
Mr. Wirth’s business address is 1730 E. Northern Avenue, Suite 122, Phoenix, Arizona 85020.
|
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, 2018:
Equity
Compensation Plan Information
|
Plan
Category
|
|
Number
of
Securities to be
Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
|
|
|
Weighted
Average Exercise
Price of Outstanding
Options, Warrants
and Rights
|
|
|
Number
of
Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding
Securities Reflected
in Column
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans approved by security holders
|
|
|
0
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans
not approved by security holders
|
|
|
None
|
|
|
|
|
|
|
|
None
|
|
|
|
None
|
|
Selection
of Independent Auditors
Our consolidated financial statements as of and for the fiscal years ended January 31, 2018 and 2017 were
audited by Hall & Company Certified Public Accountants & Consultants, Inc.
Appointment
of Hall & Company
The
following table presents aggregate fees for the fiscal years ended January 31, 2019, and 2018, for professional services rendered
by Hall & Company:
|
|
|
2019
|
|
|
2018
|
|
|
Audit Fees
(1)
|
|
$
|
88,500
|
|
|
$
|
80,000
|
|
|
Tax Fees
|
|
|
-
|
|
|
|
-
|
|
|
Other
Fees
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
$
|
88,500
|
|
|
$
|
80,000
|
|
|
|
(1)
|
“Audit
Fees” represent fees for professional services provided in connection with the audit of our annual financial statements,
review of financial statements included in our quarterly reports and related services normally provide in connection with
statutory and regulatory filings and engagements.
|
|
|
|
|
|
|
(2)
|
No
tax fees were incurred by Hall & Company as the Trust self-prepares its own tax returns.
|
The
Board of Trustees has considered whether the provision of non-audit services is compatible with maintaining the principal accountant’s
independence. There were no fees billed by or paid to our independent registered public accounting firm during the fiscal years
ended January 31, 2019 and 2018 for tax compliance, tax advice or tax planning services or for financial information systems design
and implementation services. The Trust has decided to retain Hall & Company to perform the tax return preparation, for tax
year 2019, for all entities within the Trust.
Policy
on Pre-Approval of Audit and Permitted Non-Audit Services
The
Audit Committee pre-approves all fees for services performed by our independent auditors, currently Hall & Company, Inc. Unless
a type of service our independent auditors 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 these policies and procedures.