**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM 10-K**





**ANNUAL
      REPORT**


**PURSUANT
      TO SECTIONS 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**




**ý**
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                EXCHANGE ACT OF 1934****For
                the fiscal year ended January 31, 2007.****o**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                EXCHANGE ACT OF 1934****For
                the transition period from
                                         
                to
                                         .****Commission
                File No. 1-7062**





**InnSuites
                Hospitality Trust**(Exact
                Name of Registrant as Specified in Its Charter)**Ohio**
            
            **34-6647590**(State
                or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
                Employer Identification Number)**InnSuites
                Hotels Centre, 1615 E. Northern Avenue,**
              **Suite 102,
                Phoenix, Arizona**
            
            **85020**(Address
                of Principal Executive Offices)
            
            (ZIP
                Code)Registrant’s
                telephone number, including area code:**(602)
                944-1500**





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





**Title of
                Each Class**
            
            **Name
                of Each Exchange on Which Registered**Shares
                of Beneficial Interest,
              without
                par value
            
            American
                Stock Exchange







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




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





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





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





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





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.





Large
      Accelerated Filer  ̈   Accelerated
      Filer  ̈  Non-Accelerated
      Filer ý





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No ý





Aggregate
      market value of Shares of Beneficial Interest held by non-affiliates of the
      registrant as of July 31, 2006: $4,962,273.





Number
      of
      Shares of Beneficial Interest outstanding as of April 27, 2007:
      9,183,904.














PART I





Item
      1.  BUSINESS





INTRODUCTION
      TO OUR BUSINESS





InnSuites
      Hospitality Trust (the “Trust”) is headquartered in Phoenix, Arizona and is an
      unincorporated Ohio real estate investment trust. The Trust, with its affiliates
      RRF Limited Partnership, a Delaware limited partnership (the “Partnership”), and
      InnSuites Hotels, Inc., a Nevada corporation (“InnSuites Hotels”), owns and
      operates five hotels, provides management services for nine hotels, and provides
      trademark license services for ten hotels. On January 31, 2007, the Trust
      owned a 69.89% sole general partner interest in the Partnership, which owned
      four InnSuites® hotels located in Arizona, New Mexico and southern California.
      The Trust also owned one InnSuites® hotel located in Yuma, Arizona (all five
      InnSuites® hotels are hereinafter referred to as the (“Hotels”). InnSuites
      Hotels, a wholly owned subsidiary of the Trust, provides management services
      for
      the Hotels and four hotels owned by affiliates of James F. Wirth, the Trust’s
      Chairman, President and Chief Executive Officer. InnSuites Hotels also provides
      trademark and licensing services to the Hotels, four hotels owned by affiliates
      of Mr. Wirth and one unrelated hotel property. The Trust has 422
      employees.





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





The
      Trust
      believes that a significant opportunity for revenue growth and profitability
      will arise from the skillful management and repositioning of the Trust’s Hotels
      or managed hotel properties for both increased occupancy and rates. The Trust’s
      primary business objectives are to maximize returns to its shareholders through
      increases in asset value and long-term total returns to shareholders. The Trust
      seeks to achieve these objectives through participation in increased revenues
      from the Hotels as a result of intensive management and marketing of the
      InnSuites® hotels brand in the southwestern region of the United States. At this
      time, however, the Trust does not plan to acquire any additional hotels. See
      “Item 7 - Management’s Discussion and Analysis of Financial Condition and
      Results of Operations - Future Positioning” for a further discussion of the
      Trust’s current strategic plans.





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





Until
      February 1, 2004, the Trust elected to be taxed as a real estate investment
      trust (“REIT”), as that term is defined and used in the Internal Revenue Code of
      1986, and the regulations thereunder (all as amended, the “Code”). Effective
      February 1, 2004, the Trust relinquished its REIT tax status enabling
      greater operating flexibility and is now taxed as a C corporation under the
      Code.





MANAGEMENT
      AND LICENSING CONTRACTS





As
      a
      REIT, through January 31, 2004, the Trust was prohibited from operating its
      properties other than through an independent management company or a taxable
      REIT subsidiary. Following the acquisition of InnSuites Hotels by the Trust
      effective February 1, 2001, InnSuites Hotels operated and managed the
      Hotels with the assistance of Suite Hospitality Management, Inc. (the
“Management Company”), an entity in which Mr. Wirth, until July 1,
      2003, held a 9.8% ownership interest, pursuant to management agreements that
      provided for an annual management fee of 2.5% of gross revenues. On
      December 31, 2003, the Trust agreed to extend the current management
      agreements through January 31, 2008 in exchange for the Management Company
      forgiving $183,248 of accrued but unpaid fees. The Trust incurred management
      fee
      expenses related to these contracts during fiscal year 2005 of $177,742 for
      the
      period from February 1, 2004 through June 8, 2004 (the date the Trust acquired
      the management agreements). The Trust incurred no expense related to these
      contracts for the twelve months
      ended January 31, 2007 and 2006. Due to the adoption of Financial Accounting
      Standards Board (“FASB”) Interpretation No. 46R (“FIN 46R”), which resulted
      in the consolidation of the Management Company with the Trust, these expenses
      have been eliminated in the consolidation for the twelve months ended
      January 31, 2005.




1





Prior
      to
      June 8, 2004, InnSuites Hotels paid InnSuites Licensing Corp. (the
“Licensing Corp.”), an entity owned by Mr. Wirth and his spouse until
      February 2, 2004, an annual licensing fee of 2.0% of gross room revenues
      (1.0% for those hotel properties which also carried a third-party franchise,
      such as Best Western® or Holiday Inn®) for trademark and licensing services
      relating to the use of the InnSuites® name and marks. On December 31, 2003,
      the Trust agreed to extend the trademark and licensing services agreements
      through January 31, 2007 in exchange for the Licensing Corp. forgiving
      $347,473 of accrued but unpaid fees. The Management Company purchased the
      Licensing Corp. from Mr. and Mrs. Wirth on February 2, 2004. The
      Trust incurred licensing fees during fiscal year 2005 of $94,703 for the period
      from February 1, 2004 through June 8, 2004 (the date the Trust acquired the
      license agreements). The Trust incurred no expense related to these contracts
      for the twelve months ended January 31, 2007 and 2006. Due to the adoption
      of
      FIN 46R, which resulted in the consolidation of the Licensing Corp. with the
      Trust, these expenses have been eliminated in the consolidation for the twelve
      months ended January 31, 2005.





In
      connection with the Trust’s relinquishment of its REIT status, the Trust no
      longer required the services of a separate management company. The Trust
      determined it was in its best interest to buy out the management contracts
      and
      licensing agreements and directly manage the Hotels through the Trust’s wholly
      owned subsidiary, InnSuites Hotels. As a result of this buy out, the Management
      Company (which was the Trust’s variable interest entity under FIN 46R) was no
      longer consolidated subsequent to the second quarter of fiscal year 2005.




Effective
      June 8, 2004, InnSuites Hotels acquired the management agreements under
      which the Management Company provided management services to the Hotels. In
      consideration of the acquisition, the stockholder of the Management Company
      received $20,000 and 90,000 Shares of Beneficial Interest of the Trust,
      reflecting a transaction value of approximately $159,500 in the aggregate.
      Following the acquisition, InnSuites Hotels now self-manages the Hotels.
      InnSuites Hotels also manages four hotels owned by affiliates of Mr.
      Wirth.




Under
      the
      management agreements, InnSuites Hotels provides the personnel for the hotels,
      the expenses of which are reimbursed at cost, and manages the hotels’ daily
      operations. All such expenses and reimbursements between InnSuites Hotels and
      the Partnership have been eliminated in consolidation. InnSuites Hotels received
      2.5% of gross revenue from the Hotels owned by the Partnership and the Trust
      in
      exchange for management services during fiscal years 2007 and 2006, and 2.0%
      of
      room revenue during fiscal year 2005. During fiscal year 2007 and the second
      half of fiscal year 2006, InnSuites Hotels also received an accounting fee
      between $1,000 and $2,000 per month under these agreements. All expenses and
      reimbursements relating to these agreements have been eliminated in
      consolidation. These agreements expire on January 31, 2008. InnSuites
      Hotels received between 1% and 2% of room revenue (depending on results) from
      the four hotels owned by affiliates of Mr. Wirth in exchange for management
      services during fiscal years 2006 and 2005, and an additional monthly accounting
      fee of between $1,000 and $2,000 during fiscal year 2006. These agreements
      required these four hotels to pay 2% of room revenue, unless these hotels failed
      to reach 80% of their budgeted profit, at which point the fees were reduced
      to
      1% of room revenue. During fiscal year 2007, the management fees for these
      four
      hotels was set at 2% of room revenue and the monthly accounting fee was set
      at
      $2,000 per month. Effective February 1, 2007, the management fees for these
      four
      hotels is set at 2.5% of room revenue. These agreements have no expiration
      date
      and may be cancelled by either party with 90-days written notice, or 30-days
      written notice in the event the property changes ownership.  InnSuites
      Hotels received 5% of total revenue for managing an unrelated hotel in San
      Diego, California during fiscal year 2007, 2006 and 2005. This agreement was
      cancelled by the hotel owners effective September 20, 2006.





Effective
      June 8, 2004, InnSuites Hotels acquired the license agreements under which
      Licensing Corp. provided licensing services to the Hotels, and the related
      registered and unregistered InnSuites trademarks and tradenames. In
      consideration of the acquisitions, the Management Company (as the sole
      stockholder of Licensing Corp.) received $60,000 and 10,000 Shares of Beneficial
      Interest of the Trust and InnSuites Hotels satisfied Licensing Corp.’s line of
      credit in the amount of $459,000, reflecting a transaction value of
      approximately $534,500 in the aggregate. The Shares of Beneficial Interest
      issued by the Trust for both the management contracts and the licensing
      agreements were valued at $155,000, which amount was recorded as an expense.
      Following the acquisition, the Trust provides licensing services to the Hotels,
      one unrelated hotel in Buena Park, California and four hotels owned by
      affiliates of Mr. Wirth.







2


InnSuites
      Hotels received 1.25% (2.50% for the Hotel which does not carry a third-party
      franchise) of total revenue from the Hotels owned by the Partnership and the
      Trust in exchange for use of the “InnSuites” trademark during fiscal years 2007
      and 2006
      and
      1.0% (2.0% for the hotel which does not carry a third-party franchise) of room
      revenue in fiscal year 2005. The
      revenue and expenses related to these contracts have been eliminated in
      consolidation. These agreements have no expiration date. InnSuites Hotels
      received between 1% and 2% of room revenue (depending on results) from the
      four
      hotels owned by affiliates of Mr. Wirth in exchange for use of the
“InnSuites” trademark during fiscal years 2006 and 2005. These agreements
      required that these hotels pay 2% of room revenue, unless these hotels failed
      to
      reach 80% of their budgeted profit, at which point the fees were reduced to
      1%
      of room revenue.  During
      fiscal year 2007, these fees were fixed at 1.25% of room revenue. Effective
      February 1, 2007, the fees are fixed at 1.25% for two hotels owned by
      affiliates of Mr. Wirth which carry a third party franchise and 2.0% for the
      two
      hotels which do not carry a third-party franchise. These agreements have no
      expiration date and may be cancelled by either party with 12-months written
      notice, or 90-days written notice in the event the property changes ownership.
      InnSuites Hotels received 2% of total revenue from the unrelated hotel in San
      Diego, California in exchange for licensing services during fiscal years 2007,
      2006 and 2005. This agreement was cancelled by the hotel owners effective
      September 20, 2006. InnSuites Hotels received 0.5% of room revenue from the
      unrelated hotel in Buena Park, California in exchange for licensing services
      during fiscal years 2007, 2006 and 2005. This agreement has no expiration date
      and may be cancelled by either party with 30-days written notice.




FRANCHISE
      AGREEMENTS





InnSuites
      Hotels has entered into franchise arrangements with Best Western International
      with respect to four of the Hotels. In exchange for use of the Best Western
      name, trademark and reservation system, the participating Hotels pay fees to
      Best Western International based on reservations received through the use of
      the
      Best Western reservation system and the number of available suites at the
      participating Hotels. The agreements with Best Western have no specific
      expiration terms and are cancelable at the option of either party. Best Western
      requires that the participating Hotels meet certain requirements for room
      quality, and such Hotels are subject to removal from its reservation system
      if
      these requirements are not met. The Hotels with third-party franchise agreements
      received significant reservations through the Best Western reservation system.
      Until February 2005, InnSuites Hotels also had a franchise agreement with
      Holiday Inn relating to its Ontario, California hotel. InnSuites Hotels
      terminated this agreement and the property now holds a franchise agreement
      with
      Best Western. The Trust incurred $310,687, $355,266 and $553,883 in total fees
      related to these agreements for the twelve months ended January 31, 2007,
      2006 and 2005, respectively.





SALE
      OF
      HOTEL PROPERTIES





On
      March 25, 2004, the Trust sold its Tempe, Arizona hotel to Tempe/Phoenix
      Airport Resort LLC (“Tempe Resort”), an affiliate of Mr. Wirth, for its
      appraised value of $6.8 million, which was also its carrying value. The purchase
      price was satisfied by Tempe Resort assuming the Trust’s mortgage note payable
      on the property of $1.7 million and assuming notes payable to Mr. Wirth and
      his affiliates of $5.1 million.




On
      April 1, 2004, the Trust sold its San Diego, California hotel to an
      unrelated third party for $9.7 million, which the Trust received in cash. The
      Trust used $4.8 million of the proceeds to satisfy its mortgage note payable
      on
      the property, $1.4 million to satisfy notes and interest payable to related
      parties, and retained the remaining proceeds to reduce trade payables and to
      fund future operations and capital improvements.




On
      July 27, 2005, the Trust sold its Phoenix, Arizona hotel to Phoenix
      Northern Resort LLC, an affiliate of Mr. Wirth, for its appraised value of
      $5.1 million. The buyer satisfied the purchase price by assuming the Trust’s
      $3.2 million mortgage note payable secured by the property, paying $1.7 million
      in cash prior to the closing, and paying $192,000 in cash at the closing. The
      sale resulted in a gain of $1.8 million, with $1.3 million of the gain
      attributable to holders of Shares of Beneficial Interest.




COMPETITION
      IN THE HOTEL INDUSTRY





The
      hotel
      industry is highly competitive. Each of the Hotels experiences competition
      primarily from other mid-market hotels located in its immediate vicinity, but
      also competes with hotel properties located in other geographic markets. While
      none of the Hotels’ competitors dominate any of the Trust’s geographic markets,
      some of those competitors have greater marketing and financial resources than
      the Trust.





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


3




The
      Trust
      has chosen to focus its hotel investments in the southwest region of the United
      States. The Trust has a concentration of assets in southern Arizona market.
      In
      the markets in which the Trust operates, supply and demand rates have generally
      been balanced.





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





SEASONALITY
      OF THE HOTEL BUSINESS





The
      Hotels’ operations historically have been seasonal. The three southern Arizona
      hotels experience their highest occupancy in the first fiscal quarter and,
      to a
      lesser extent, the fourth fiscal quarter. The second fiscal quarter tends to
      be
      the lowest occupancy period at those three southern Arizona hotels. This
      seasonality pattern can be expected to cause fluctuations in the Trust’s
      quarterly revenues. The two hotels located in California and New Mexico
      historically experience their most profitable periods during the second and
      third fiscal quarters (the summer season), providing some balance to the general
      seasonality of the hotel business.





FINANCIAL
      INFORMATION





See
      “Item 6 - Selected Financial Data” herein for information regarding the
      Trust’s revenues, net income and losses, dividends, total assets, notes and
      advances payable to banks and others and notes and advances payable to related
      parties.





OTHER
      AVAILABLE INFORMATION





We
      also
      make available, free of charge, on our Internet website at
      www.innsuitestrust.com, our annual reports on Form 10-K, quarterly reports
      on Form 10-Q, current reports on Form 8-K and amendments to reports
      filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
      Exchange Act of 1934 as soon as reasonably practicable after we file such
      material with, or furnish it to, the Securities and Exchange Commission (the
      “Commission”). The public may read and copy any materials that we file with the
      Commission at the Commission’s Public Reference Room at 100 F Street,
      NE, Washington, D.C. 20549 and may obtain information on the Public Reference
      Room by calling the Commission at 1-800-SEC-0330. The Commission maintains
      an Internet site that contains reports, proxy and information statements, and
      other information regarding issuers that file electronically with the Commission
      (http://www.sec.gov).




Item 1A. RISK
      FACTORS




The
      material risks and uncertainties that management believes affect us are
      described below. You should consider carefully the risks and uncertainties
      described below together with all of the other information included or
      incorporated by reference in this annual report on Form 10-K. The risks and
      uncertainties described below are not the only ones we face. Additional risks
      and uncertainties that management is not aware of or focused on or that
      management currently deems immaterial may also impair our business operations.
      This annual report on Form 10-K is qualified in its entirety by these risk
      factors.




If
      any of
      the following risks actually occur to any significant extent, our financial
      condition and results of operations could be materially and adversely affected.
      If this were to happen, the value of our Shares of Beneficial Interest could
      decline, perhaps significantly, and you could lose part or all of your
      investment.




***We
      are subject to operating risks common in the hospitality industry.***




Our
      business is subject, directly or through our franchisors, to the following
      risks
      common in the hospitality industry, among others:




·
            changes
                in occupancy and room rates achieved by our hotels and by competitive
                area
                hotels;


·
            desirability
                of a hotel’s geographic location and changes in traffic
                patterns;


4


·
            changes
                in general and local economic and market conditions, which can adversely
                affect the level of business and leisure travel, and therefore the
                demand
                for lodging and related services;


·
            changes
                in the number of hotels operating under specific franchised
                brands;


·
            increases
                in costs due to inflation may not be able to be totally offset by
                increases in room rates;


·
            over-building
                in one or more sectors of the hotel industry and/or in one or more
                geographic regions, could lead to excess supply compared to demand,
                and to
                decreases in hotel occupancy and/or room
                rates;


·
            changes
                in travel patterns and travel costs affected by fuel
                prices;


·
            changes
                in governmental regulations that influence or determine wages, prices
                or
                construction costs;


·
            other
                unpredictable external factors, such as natural disasters, war, terrorist
                attacks, epidemics, airline strikes, transportation and fuel price
                increases and severe weather, may reduce business and leisure
                travel;


·
            the
                need to periodically repair and renovate our hotels at a cost in
                excess of
                our standard 4% reserve;


·
            increases
                in the cost of labor, energy, healthcare, insurance and other operating
                expenses resulting in lower operating
                margins;


·
            the
                financial condition of franchisors and travel related
                companies;


·
            our
                ability to develop and maintain positive relations with current and
                potential franchisors; and


·
            our
                ability to develop our own regional “InnSuites”
                brand.





Changes
      in any of these conditions could adversely impact hotel room demand and pricing
      and result in reduced occupancy and revenue which could adversely affect our
      results of operations and financial condition. We have a limited ability to
      pass
      through increased operating costs in the form of higher room rates, so that
      such
      increased costs could result in lower operating margins.




***The
      hotel industry is highly competitive*** .





Each
      of
      the Hotels experiences competition primarily from other mid-market hotels in
      its
      immediate vicinity, but also competes with other hotel properties in its
      geographic market. Some of the competitors of the Hotels have substantially
      greater marketing and financial resources than us. A number of additional hotel
      rooms have been added, are under development or have been announced in a number
      of our markets, and additional hotel rooms may be developed in the future.
      Such
      additional hotel rooms have had, and may continue to have, an adverse effect
      on
      the revenues of the Hotels in such markets.




We
      may be
      competing for investment opportunities with entities that have substantially
      greater financial resources than us. These entities may generally be able to
      accept more risk than we prudently can manage. Competition may generally reduce
      the number of suitable investment opportunities offered to us and increase
      the
      bargaining power of property owners seeking to sell hotel
      properties.




***We
      have concentrated our marketing resources on the InnSuites Hotels®
brand*** .





All
      of
      the Hotels are marketed as InnSuites Hotels®, a southwestern U.S. regional brand
      owned by the Trust. Accordingly, we are subject to risks inherent in
      concentrating our investments in the InnSuites Hotels brand, such as a reduction
      in business following adverse publicity related to the brand, which could have
      an adverse effect on our results of operations. In addition, many of our Hotels
      are co-branded as Best Western® hotels. This brand is owned by its members and
      faces the same risks on an international scale.




***We
      have engaged in, and may continue to engage in, transactions involving Mr.
      Wirth. These transactions pose conflict of interest issues for
      us.***





A
      number
      of our prior transactions have involved dealings with Mr. Wirth, our founder,
      largest shareholder and Chief Executive Officer. We may also engage in similar
      transactions with Mr. Wirth in the future. Because of the direct and indirect
      ownership interests of Mr. Wirth in, and his positions with, the Trust and
      its
      affiliates, there were, and will continue to be, inherent conflicts of interest
      in connection with our acquisition or disposition of hotels from or to Mr.
      Wirth
      or other transactions, such as loans from Rare Earth Financial L.L.C., an
      affiliate of Mr. Wirth, or the condo-hotel conversions, in which Mr. Wirth
      has a
      significant interest. Accordingly, our management may have considered, and
      may
      in the future consider, their own interests above the interests of our other
      shareholders while negotiating these transactions.




Except
      as
      specifically provided in our governing documents or in certain provisions of
      Ohio law, nothing prohibits our officers and trustees from engaging in business
      activities for their own account. As a general principle of law, however,
      officers and trustees owe fiduciary duties to the shareholders of each company
      they represent. Those duties require them to deal with each company fairly.
      Additionally, all decisions involving the potential for conflict must be
      approved by a majority of trustees who do not have an interest in the
      transaction. We cannot guarantee, however, that the independent trustees will
      resolve all decisions involving conflict in favor of the Trust.




5




Certain
      affiliates of the Trust, including Mr. Wirth, may have unrealized gain in their
      investments in certain hotels acquired by us on January 31, 1998. A subsequent
      sale of these hotels by us may cause adverse tax consequences to such persons.
      Therefore, the interests of the Trust and certain of its affiliates, including
      Mr. Wirth, could be in opposition in connection with the disposition of any
      of
      these hotels. However, decisions with respect to the disposition of any of
      these
      hotels must be approved by a majority of the independent trustees.




***We
      have significant debt obligations*** .





At
      January 31, 2007, our outstanding debt and capital lease obligations consisted
      of approximately $20.9 million
      in principal amount outstanding. There can be no assurance that we will be
      able
      to meet our present or future debt service obligations and, to the extent that
      we cannot, we risk the loss of some or all of our assets to foreclosure. Adverse
      economic conditions could cause the terms on which borrowings are available
      to
      become unfavorable to us. In such circumstances, if we are in need of capital
      to
      repay indebtedness in accordance with its terms or otherwise, we could be
      required to liquidate one or more investments in the Hotels at times that may
      not permit realization of the maximum return on our investments.




***We
      rely on key personnel*** .




Our
      future success is substantially dependent on the active participation of our
      executive officers, Mr. Wirth, Mr. Waters and Mr. Berg. In addition, Mr. Bauer,
      Controller, and Mr. Green, Director of Operations, hold key positions with
      the
      Trust. The loss of the services of any of these individuals could have a
      material adverse effect on us.




***Under
      certain circumstances, our franchisors may terminate our franchise contracts.***





The
      continuation of our franchise contracts for the Hotels is subject to the
      maintenance of specified operating standards and other terms and conditions,
      and
      our Best Western franchise agreements are renewable annually. Our failure to
      maintain those operating standards or adhere to the other terms and conditions
      of the franchise contracts could result in the loss or cancellation of such
      franchise contracts. It is possible that a franchisor could condition the
      continuation of a franchise contract upon the completion of substantial capital
      improvements, which the Board of Trustees may determine to be too expensive
      or
      otherwise unwarranted in light of general economic conditions or the operating
      results or prospects of the affected Hotel. Failure to complete improvements,
      when required, in a manner satisfactory to the franchisor could result in the
      cancellation of one or more franchise contracts. In any case, if a franchise
      contract is terminated, we may seek to obtain a suitable replacement franchise,
      or to operate the affected Hotel independent of a franchise contract. In
      addition, we may desire to operate additional hotels under franchise contracts,
      and such franchisors may require that significant capital expenditures be made
      at such hotels as a condition of granting a franchise contract. The loss or
      lack
      of a franchise contract could have a material adverse effect upon the operations
      or the underlying value of the Hotel covered by such contract because of the
      loss of associated name recognition, marketing support and centralized
      reservation systems provided by the franchisor. The loss of a number of the
      franchise contracts for the Hotels could have a material adverse effect on
      our
      results of operations.




***Due
      to the geographic concentration of the hotels in our system, our results of
      operations and financial condition are subject to fluctuations in regional
      economic conditions.***




All
      of
      our Hotels are located in the southwestern United States. Therefore, our results
      of operations and financial condition may be significantly affected by the
      economy of this region. Other adverse events affecting the southwestern United
      States, such as economic recessions or natural disasters, could cause a loss
      of
      revenues for our hotels in this region, which may be greater as a result of
      our
      concentration of assets in these areas.






6


***Our
        expenses may remain constant even if revenues
        decline.***
  The
        expenses of owning property have some flexibility but are not necessarily
        materially reduced when circumstances such as market factors and competition
        cause a reduction in income from a hotel. Accordingly, a decrease in our
        revenues could result in a disproportionately higher decrease in our earnings
        because our expenses are unlikely to decrease
        proportionately or as rapidly. In such instances, our financial condition
        and
        results of operations could be adversely affected, not only by changes in
        occupancy rates, but also by:




·
            fixed
                labor costs;


·
            interest
                rate levels;


·
            the
                availability of financing;


·
            increases
                in real property tax rates;


·
            the
                cost of compliance with government regulations, including zoning
                and tax
                laws; and


·
            changes
                in government regulations, including those governing usage, zoning
                and
                taxes.





***Our
      inability to sell real estate if and when desired may adversely affect our
      financial condition.***





Real
      estate assets generally cannot be sold quickly. In general, we may not be able
      to vary our portfolio of hotels or other real estate promptly in response to
      economic or other conditions. This inability to respond promptly to changes
      in
      the performance of our assets could adversely affect our financial condition.
      In
      addition, sales of appreciated real property could generate material adverse
      tax
      consequences, which may make it disadvantageous for us to sell certain of our
      Hotels.




***We
      are exploring strategic alternatives for the Trust, including the possible
      sale
      of some or all of the Hotels; however we cannot provide assurance that any
      transactions will be successfully completed, that our financial results will
      not
      be adversely effected by the potential loss of management and/or trademark
      licensing revenue or that the pursuit of these strategic alternatives will
      have
      a positive effect on our share price.***




The
      Board
      of Trustees is evaluating potential strategic alternatives, including the sale
      of some or all of the Hotels. This process may or may not result in an agreement
      to sell some or all of the Hotels. In addition, the Trust’s ability to complete
      a sale of any of the Hotels, if the Board of Trustees decides to pursue such
      a
      strategy, will depend on numerous factors, some of which are outside the Trust’s
      control. If any or all of the Hotels were sold, our future management and/or
      licensing fees could be reduced if the purchaser did not continue to retain
      us
      to provide those services. Such a reduction could have an adverse effect on
      our
      financial results.




There
      are
      various uncertainties and risks relating to the exploration of strategic
      alternatives, including:




·
            diversion
                of management resources;




·
            the
                process may be time consuming and expensive and may result in the
                loss of
                business opportunities;




·
            the
                Trust may not be able to successfully achieve the benefits of any
                strategic alternatives; and




·
            perceived
                uncertainties as to the Trust’s future direction may result in increased
                difficulties in recruiting and retaining employees, particularly
                senior
                management.




Even
      if a
      transaction is completed, there can be no assurance that it will have a positive
      effect on the price of the Trust’s Shares of Beneficial Interest. The market
      price of the Trust’s Shares of Beneficial Interest could be highly volatile
      during the period while the Board of Trustees explores strategic alternatives
      and may continue to be more volatile if the Trust announces the sale of one
      of
      its Hotels.




***We
      may not have sufficient resources to pursue our current
      strategies*** .





We
      may
      pursue a growth strategy, which includes acquiring, repositioning and improving
      hotel properties, and may also pursue a strategy of converting some of our
      Hotels into condo-hotel units. We also plan to pursue a strategy of increased
      licensing of the InnSuites Hotels® brand. There is a risk that, due to market
      and other conditions beyond our control, we will not have access to sufficient
      equity or debt capital to pursue these strategies. Since the term and amount
      of
      our credit arrangements are limited, our ability to continue to pursue these
      strategies may depend on our ability to obtain additional private or public
      equity or debt financing. There can be no assurance that such financing is
      or
      will be available on acceptable terms when necessary.




7


***We
      are subject to governmental regulations affecting the hospitality industry;
      the
      costs of complying with governmental regulations, or our failure to comply
      with
      such regulations, could affect our financial condition and results of
      operations.***




We
      are
      subject to numerous federal, state and local government laws and regulations
      affecting the hospitality industry, including usage, building and zoning
      requirements. A violation of any of those laws and regulations or increased
      government regulation could require us to make unplanned expenditures and result
      in higher operating costs. In addition, our success in expanding our hotel
      operations or engaging in condo-hotel conversions depends upon our ability
      to
      obtain necessary building permits and zoning variances from local authorities.
      Compliance with these laws is time intensive and costly and may reduce our
      revenues and operating income.




Under
      the
      Americans with Disabilities Act of 1990 (the “ADA”), all public accommodations
      are required to meet certain federal requirements related to access and use
      by
      disabled persons. In addition to ADA work to date, we may be required to remove
      access barriers or make unplanned, substantial modifications to our hotels
      to
      comply with the ADA or to comply with other changes in governmental rules and
      regulations, which could reduce the number of total available rooms, increase
      operating costs and have a negative impact on our results of operations. Any
      failure to comply with ADA requirements or other governmental regulations could
      result in the U.S. government imposing fines or in private litigants
      winning damage awards against us.




Our
      Hotels, like all real property, are subject to governmental regulations designed
      to protect the environment.  However, if we fail to comply with such laws
      and regulations, we may become subject to significant liabilities, fines and/or
      penalties, which could adversely affect our financial condition and results
      of
      operations.




We
      are
      also subject to laws governing our relationship with employees, including
      minimum or living wage requirements, overtime, working conditions and work
      permit requirements. An increase in the state or federal minimum wage rate,
      employee benefit costs or other costs associated with employees could increase
      expenses and result in lower operating margins. Although none of our employees
      are currently represented by labor unions, labor union organizing activities
      may
      take place at our existing hotels or at any new hotel property we open. A
      lengthy strike or other work stoppage at one of our hotels, or the threat of
      such activity, could have an adverse effect on our business and results of
      operations.




***If
      we fail to comply with privacy regulations, we could be subject to fines or
      other restrictions on our business.***




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




***Increasing
      use of internet reservation channels may decrease loyalty to our brands or
      otherwise adversely affect us.***




As
      is the
      case with many other hotel operators, a growing percentage of our hotel rooms
      are booked through internet travel intermediaries. If such bookings continue
      to
      increase, these intermediaries may be able to obtain higher commissions, reduced
      room rates or other significant contract concessions from our franchisors or
      us.
      Moreover, some of these internet travel intermediaries are attempting to
      commoditize hotel rooms, by increasing the importance of price and general
      indicators of quality at the expense of brand identification. These
      intermediaries hope that consumers will eventually develop brand loyalties
      to
      their reservations systems rather than to our lodging brands. If this happens
      our business and profitability may be significantly harmed.




***Our
      business is seasonal in nature, and we are likely to experience fluctuations
      in
      our results of operations and financial condition.***




Our
      business is seasonal in nature, with the first and fourth fiscal quarters
      generally accounting for a greater portion of annual revenues than the second
      and third fiscal quarters. Therefore, our results for any quarter may not be
      indicative of the results that may be achieved for the full fiscal year. The
      seasonal nature of our business increases our vulnerability to risks such as
      labor force shortages and cash flow problems. Further, if an adverse event
      such
      as an actual or threatened terrorist attack, international conflict, regional
      economic downturn or poor weather conditions should occur during the first
      or
      fourth fiscal quarters, the adverse impact to our revenues could likely be
      greater as a result of our southern Arizona seasonal business.




8


***Our
      properties are subject to risks relating to natural disasters, terrorist
      activity and war and any such event could materially adversely affect our
      operating results.***




Our
      financial and operating performance may be adversely affected by natural
      disasters particularly in locations where we own significant properties. Some
      types of losses, such as those from earthquake, wild fires, terrorism or
      environmental hazards, may be either uninsurable or too expensive to justify
      insuring against. Should an uninsured loss or a loss in excess of insured limits
      occur, we could lose all or a portion of the capital we have invested in a
      property, as well as the anticipated future revenue from the property. In that
      event, we might nevertheless remain obligated for any financial obligations
      related to the property. Inflation, changes in building codes and ordinances,
      environmental considerations and other factors also might make it impractical
      to
      rely on insurance proceeds to replace property after that property has been
      damaged or destroyed. Under those circumstances, the insurance proceeds received
      by us might not be adequate to restore our economic position with respect to
      such property.




Similarly,
      war (including the potential for war) and terrorist activity (including threats
      of terrorist activity), epidemics (such as SARs and bird flu), travel-related
      accidents, as well as geopolitical uncertainty and international conflict,
      which
      impact domestic and international travel, may cause our results to differ
      materially from anticipated results. Terrorism incidents such as the events
      of
      September 11, 2001 and wars such as the ongoing Iraq war significantly
      impact travel and tourism and consequently the demand for hotel
      rooms.




***Hospitality
      companies have been the target of class actions and other lawsuits alleging
      violations of federal and state law.***




Our
      operating income and profits may be reduced by legal or governmental proceedings
      brought by or on behalf of our employees or customers. In recent years, a number
      of hospitality companies have been subject to lawsuits, including class action
      lawsuits, alleging violations of federal and state law regarding workplace
      and
      employment matters, discrimination and similar matters. A number of these
      lawsuits have resulted in the payment of substantial damages by the defendants.
      We cannot assure you that we will not incur substantial damages and expenses
      resulting from lawsuits of this type, which could have a material adverse effect
      on our business.




Item
      1B. UNRESOLVED
      STAFF COMMENTS





Not
      applicable.





Item
      2.  PROPERTIES





The
      Trust
      maintains its administrative offices at the InnSuites Hotels Centre in Phoenix,
      Arizona. On January 31, 2007, the Partnership owned four Hotels and the
      Trust owned one Hotel. All of the Hotels are operated as InnSuites® Hotels,
      while four are also marketed as Best Western® Hotels. All of the Hotels operate
      in the following locations:





**PROPERTY**
            
            **NUMBER**
              **OF**
              **SUITES**
            
            **YEAR
                OF**
              **CONSTRUCTION/**
              **ADDITION**
            
            **MOST
                RECENT**
              **RENOVATION
                (1)**InnSuites
                Hotel and Suites Airport Albuquerque Best Western
            
            101
            
            1975/1985
            
            2004InnSuites
                Hotel and Suites Tucson, Catalina Foothills Best Western
            
            159
            
            1981/1983
            
            2005InnSuites
                Hotels and Suites Yuma Best Western
            
            166
            
            1982/1984
            
            2006InnSuites
                Hotel and Suites Ontario Airport Best Western
            
            150
            
            1990
            
            2005InnSuites
                Hotels and Suites Tucson St. Mary’s
            
            267
            
            1960/1971
            
            2006Total
                suites
            
            843





(1) The
      Trust defines a renovation as the remodeling of more than 10% of a property’s
      available suites.


9





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





See
      Note 7 to the Trust’s Consolidated Financial Statements - “Mortgage Notes
      Payable” herein for a discussion of mortgages encumbering the
      Hotels.





Item
      3.  LEGAL
      PROCEEDINGS





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





Item
      4.  SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS





None.





PART II





Item
                5.
            MARKET
                FOR THE TRUST’S SHARES, RELATED SHAREHOLDER MATTERS AND TRUST PURCHASES OF
                SHARES





The
      Trust’s Shares of Beneficial Interest are traded on the American Stock Exchange
      under the symbol “IHT.” On April 27, 2007, the Trust had 9,183,904 shares
      outstanding and 503 holders of record.





The
      following table sets forth, for the periods indicated, the high and low sales
      prices of the Trust’s Shares of Beneficial Interest, as quoted by the American
      Stock Exchange, as well as dividends declared thereon:





**Fiscal
                Year 2007**
            
            **High**
            
            **Low**
            
            **Dividends**First
                Quarter
            
            1.75
            
            1.30
            
            —Second
                Quarter
            
            1.75
            
            1.45
            
            —Third
                Quarter
            
            1.54
            
            1.10
            
            —Fourth
                Quarter
            
            1.75
            
            1.00
            
            .01





**Fiscal
                Year 2006**
            
            **High**
            
            **Low**
            
            **Dividends**First
                Quarter
            
            1.52
            
            1.11
            
            —Second
                Quarter
            
            1.75
            
            1.23
            
            —Third
                Quarter
            
            1.50
            
            1.24
            
            —Fourth
                Quarter
            
            1.50
            
            1.20
            
            .01







The
      Trust
      intends to maintain a conservative dividend policy to facilitate the reduction
      of debt and internal growth. In fiscal years 2007 and 2006, the Trust paid
      dividends of $0.01 per share in the fourth quarter of each year.




On
      January 2, 2001, the Board of Trustees approved a share repurchase program
      under Rule 10b-18 of the Securities Exchange Act of 1934, as amended, for
      the purchase of up to 250,000 limited partnership units in the Partnership
      and/or Shares of Beneficial Interest in open market or privately negotiated
      transactions. Additionally, on September 10, 2002, the Board of Trustees
      approved the purchase of up to 350,000 additional limited partnership units
      in
      the Partnership and/or Shares of Beneficial Interest in open market or privately
      negotiated transactions. On August 18, 2005, the Board of Trustees approved
      the purchase of up to 350,000 additional limited partnership units in the
      Partnership and/or Shares of Beneficial Interest in open market or privately
      negotiated transactions. Acquired Shares of Beneficial Interest will be held
      in
      treasury and will be available for future acquisitions and financings and/or
      for
      awards granted under the InnSuites Hospitality Trust 1997 Stock Incentive and
      Option Plan. During the three months ended January 31, 2007, the Trust
      acquired 80,300 Shares of Beneficial Interest in open market transactions at
      an
      average price of $1.30 per share. The Trust intends to continue repurchasing
      Shares of Beneficial Interest in compliance with applicable legal and American
      Stock Exchange requirements. The Trust remains authorized to repurchase an
      additional 66,153 limited partnership units and/or Shares of Beneficial Interest
      pursuant to the share repurchase program, which has no expiration
      date.


10





**Issuer
                Purchases of Equity Securities****Period**
            
            **Total
                Number**
              **of
                Shares**
              **Purchased**
            
            **Average
                Price**
              **Paid
                per**
              **Share**
            
            **Total
                Number of Shares**
              **Purchased
                as Part of**
              **Publicly
                Announced**
              **Plans**
            
            **Maximum
                Number of**
              **Shares
                that May Be Yet**
              **Purchased
                Under the**
              **Plans**November 1
                - November 30, 2006
            
            21,700
            
            $
            1.20
            
            21,700
            
            124,753December
                1 - December 31, 2006
            
            25,900
            
            $
            1.20
            
            25,900
            
            98,853January
                1 - January 31, 2007
            
            32,700
            
            $
            1.44
            
            32,700
            
            66,153





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





Item
      6.  SELECTED
      FINANCIAL DATA





The
      following selected financial data of the Trust as of and for the five fiscal
      years ended January 31, 2007, has been derived from the audited
      consolidated financial statements of the Trust. The consolidated financial
      statements of the Trust as of and for the fiscal year ended January 31,
      2007 was audited by Moss Adams, LLP, independent public accountants (successor
      to Epstein, Weber & Conover, P.L.C.) The consolidated financial statements
      of the Trust as of and for the fiscal years ended January 31, 2006 and 2005
      were audited by Epstein, Weber & Conover, P.L.C., independent public
      accountants. The consolidated financial statements of the Trust as of and for
      the two fiscal years ended January 31, 2004 and 2003 were audited by
      McGladrey & Pullen, LLP, independent public accountants.




**Year
                Ended January 31,****2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003**Total
                revenue
            
            $
            21,790,634
            
            $
            21,248,839
            
            $
            22,875,187
            
            $
            24,211,328
            
            $
            26,940,473Net
                income (loss) from continuing operations
            
            $
            (46,430
            )
            $
            541,578
            
            $
            240,442
            
            $
            (2,594,317
            )
            $
            (3,445,948
            )Income
                (loss) per share - basic
            
            $
            (0.01
            )
            $
            0.06
            
            $
            0.10
            
            $
            (1.27
            )
            $
            (1.67
            )Income
                (loss) per share - diluted
            
            $
            (0.01
            )
            $
            0.02
            
            $
            0.10
            
            $
            (1.27
            )
            $
            (1.67
            )Cash
                dividends paid and declared per share
            
            $
            0.01
            
            $
            0.01
            
            $
            0.01
            
            $
            0.02
            
            $
            0.01Total
                assets
            
            $
            31,379,017
            
            $
            31,952,358
            
            $
            36,455,521
            
            $
            47,961,594
            
            $
            61,494,579Notes
                and advances payable to banks and others
            
            $
            19,851,327
            
            $
            20,736,859
            
            $
            24,755,858
            
            $
            31,974,992
            
            $
            38,922,408Notes
                and advances payable to related parties
            
            $
            1,085,717
            
            $
            514,706
            
            $
            93,512
            
            $
            6,852,241
            
            $
            9,901,153





See
      “Item 1 - Business” herein for a discussion of the change in the nature of
      the business of the Trust over the course of the years presented above. As
      a
      result, the information presented above is not comparative from year to
      year.





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





OVERVIEW





The
      Trust
      is engaged in the ownership and operation of hotel properties. At
      January 31, 2007, the InnSuites system included five moderate and
      full-service hotels with 843 hotel suites. Four of our Hotels are branded
      through franchise agreements with Best Western. All five Hotels are trademarked
      as InnSuites Hotels. We are also involved in various operations incidental
      to
      the operation of hotels, such as the operation of restaurants and
      meeting/banquet room rentals.





Our
      operations consist of one reportable segment, hotel ownership, which derives
      its
      revenue from the operation of the Hotels. In addition, we receive management
      fees, trademark license fees and reservation fees.





Our
      results are significantly affected by occupancy and room rates at the Hotels,
      our ability to manage costs, and changes in the number of available suites
      caused by acquisition and disposition activities. Results are also significantly
      impacted by overall economic conditions and conditions in the travel industry.
      Unfavorable changes in these factors could negatively
      impact hotel room demand and pricing which would reduce our profit margins
      on
      rented suites. Additionally, our ability to manage costs could be adversely
      impacted by significant increases in operating expenses, resulting in lower
      operating margins.


11




Improved
      economic conditions, both generally and specifically in the travel industry,
      had
      a positive impact on the operations of the Trust in fiscal year 2007. We
      anticipate the positive trend in the travel industry to continue in 2008. Better
      overall economic conditions are expected to result in increased business and
      leisure travel and support higher room rates, and therefore higher operating
      margins. We expect the major challenge for fiscal year 2008 to be strong
      competition for group business in the markets in which we operate that may
      affect the Trust’s ability to increase room rates while maintaining market
      share. We believe that we have positioned the hotels to remain competitive
      through selective refurbishment and carrying a relatively large number of
      two-room suites at each location.





Effective
      February 1, 2004, the Trust relinquished its REIT status. As of that date,
      any distributions to its shareholders are not deductible for purposes of
      computing the Trust’s taxable income and the Trust will be subject to income
      tax, including any applicable alternative minimum tax, on its taxable income
      at
      regular corporate rates, without offset for distributions of such income to
      its
      shareholders. As of January 31, 2007, the Trust has $11.4 million
      in federal net loss carryforwards available to offset future federal tax
      liability and $1.5 million in state net loss carryforwards.




GENERAL





The
      following discussion should be read in conjunction with the Trust’s consolidated
      financial statements and notes thereto.





The
      accounting policies that we believe are most critical and involve the most
      subjective judgments include our estimates and assumptions of future revenue
      and
      expenditures used to project hotel cash flows. Future cash flows are used in
      the
      valuation calculation of our hotel properties to determine the recoverability
      (or impairment) of the carrying amounts in the event management is required
      to
      test the asset for recoverability of its carrying value under Statement of
      Financial Accounting Standards (“SFAS”) No. 144. If the carrying amount of
      an asset exceeds the estimated future cash flows over its estimated remaining
      life, the Trust recognizes an impairment expense to reduce the asset’s carrying
      value to its fair value. Fair value is determined by either the most current
      third-party property appraisal, if available, or the present value of future
      undiscounted cash flows over the remaining life of the asset. Our evaluation
      of
      future cash flows is based on our historical experience and other factors,
      including certain economic conditions and committed future bookings. See “-
      Critical Accounting Policies and Estimates” below.





At
      January 31, 2007 and 2006, the Trust owned a 69.89% and 69.14%,
      respectively, interest in four of the Hotels through its sole general partner’s
      interest in the Partnership and owned a 99.9% interest in one Hotel. The Trust
      purchased 6,667, 51,300 and 532,077 Partnership units during the years ended
      January 31, 2007, 2006 and 2005, respectively.





Prior
      to
      May 1, 2004, the Partnership leased its hotel properties to InnSuites
      Hotels. The corresponding rent expense for InnSuites Hotels and rent revenue
      for
      the Partnership, as well as the resulting rent receivable and payable, eliminate
      in consolidation. On May 1, 2004, the percentage lease agreements between
      the Partnership and InnSuites Hotels were terminated.





The
      expenses of the Trust consist primarily of property taxes, insurance, corporate
      overhead, interest on mortgage debt, professional fees, depreciation of the
      Hotels and hotel operating expenses. Under the terms of its Partnership
      Agreement, the Partnership is required to reimburse the Trust for all such
      expenses . Accordingly,
      management believes that a review of the historical performance of the
      operations of the Hotels, particularly with respect to occupancy, which is
      calculated as rooms sold divided by total rooms available, average daily rate
      (“ADR”), calculated as total room revenue divided by number of rooms sold, and
      revenue per available room (“REVPAR”), calculated as total room revenue divided
      by number of rooms available, is appropriate for understanding revenue from
      the
      Hotels. Occupancy increased 1.82% to 71.54% from 69.72% in the prior year.
      ADR
      increased by $2.40 to $72.95 in fiscal year 2007 from $70.55 in fiscal year
      2006. These increases resulted in an increase in REVPAR of $3.00 to $52.19
      in
      fiscal year 2007 from $49.19 in fiscal year 2006.





12


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





**For
                the Year Ended January 31,****2007**
            
            **2006**
            
            **2005**Occupancy
            
            71.54
            %
            69.72
            %
            68.55
            %Average
                Daily Rate (ADR)
            
            $
            72.95
            
            $
            70.55
            
            $
            70.83Revenue
                Per Available Room (REVPAR)
            
            $
            52.19
            
            $
            49.19
            
            $
            48.55





No
      assurance can be given that the trends reflected in this data will continue
      or
      that occupancy, ADR and REVPAR will not decrease as a result of changes in
      national or local economic or hospitality industry conditions.





The
      Trust
      enters into transactions with certain related parties from time to time. For
      information relating to such related party transactions see the
      following:





•  For
      a
      discussion of management and licensing agreements with certain related parties,
      see “Item 1 - Business - Management and Licensing
      Contracts.”





•  For
      a
      discussion of the sales of the Trust’s Phoenix and Tempe, Arizona hotels to a
      related party during fiscal years 2005 and 2006, see “Item 1 - Business - Sale
      of Hotel Properties” and Note 21 to the Trust’s Consolidated Financial
      Statements - “Sale of Hotel Properties.”





•  For
      a
      discussion of guarantees of the Trust’s mortgage notes payable by certain
      related parties, see Note 7 to the
      Trust’s Consolidated Financial Statements - “Mortgage Notes
      Payable.”





•  For
      a
      discussion of notes and advances payable by the Trust to certain related
      parties, see Note 9 to the Trust’s Consolidated Financial Statements -
“Notes and Advances Payable to Related Parties.”





•  For
      a
      discussion of the Trust’s employment agreement with Mr. Wirth, see
      Note 14 to the Trust’s Consolidated Financial Statements - “Advisory
      Agreement/Employment Agreements.”





***Results
      of operations of the Trust for the year ended January 31, 2007 compared to
      the year ended January 31, 2006.***





*Overview*





A
      summary
      of operating results for the fiscal years ended January 31, 2007 and 2006
      is:





**2007**
            
            **2006**
            
            **Change**
            
            **%
                Change**Revenue
            
            $
            21,790,634
            
            $
            21,248,839
            
            $
            541,795
            
            2.6
            %Operating
                Income
            
            $
            1,515,068
            
            $
            349,349
            
            $
            1,165,719
            
            >100.0
            %Net
                Income (Loss)
            
            $
            (46,430
            )
            $
            541,578
            
            $
            (588,008
            )
            >(100.0
            )%Income
                Per Share - Basic
            
            $
            (0.01
            )
            $
            0.06
            
            $
            (0.07
            )
            >(100.0
            )%Income
                Per Share - Diluted
            
            $
            (0.01
            )
            $
            0.02
            
            $
            (0.03
            )
            >(100.0
            )%





The
      Trust’s overall results in 2007 were positively affected by the disposition of
      certain of its underperforming properties and the improved operating results
      of
      the remaining hotel properties due to the continued strengthening of the travel
      industry.





13


For
      the
      twelve months ended January 31, 2007, the Trust had total revenue of
      $21.8 million compared to $21.2 million for the twelve months ended
      January 31, 2006, an increase of approximately $542,000. This increase in
      total revenue is primarily due to increased occupancy and room rates. Total
      expenses of $22.1 million for the twelve months ended January 31, 2007
      reflect a decrease of approximately $717,000 compared to total expenses of
      $22.8
      million for the twelve months ended January 31, 2006. The decrease is
      primarily due to reduced general and administrative expense attributable to
      reduced bad debt expense on the Hotels as a result of improved receivable
      collections in fiscal year 2007 and reduced
      professional fees as a result of costs incurred during fiscal year 2006 relating
      to the filing of amendments of certain of the Trust’s filings with the
      Securities and Exchange Commission.





For
      the
      twelve months ended January 31, 2007, the Trust disposed of the furniture,
      fixtures and equipment previously used in the operation of the San Diego,
      California property for a gain of $139,000. During fiscal year 2006, the Trust
      had a net gain on disposition of hotels of $1.8 million resulting primarily
      from
      the sale of the Phoenix, Arizona property during the second quarter of that
      year.





General
      and administrative expenses include overhead charges for management, accounting,
      shareholder and legal services for the Trust. In comparing general and
      administrative expenses for the twelve months ended January 31, 2007 and
      2006, these expenses decreased $653,000, or 16.5%, to $3.3 million in
      fiscal year 2007, from $3.9 million in fiscal year 2006. This decrease was
      primarily due to reduced bad debt expense on the Hotels as a result of improved
      receivable collections in fiscal year 2007 and reduced professional fees as
      a
      result of costs incurred during fiscal year 2006 relating to the filing of
      amendments of certain of the Trust’s filings with the Securities and Exchange
      Commission.





Total
      operating expenses for the twelve months ended January 31, 2007 were
      $20.3 million, a decrease of approximately $624,000, or 3.0%, from
      $20.9 million in the twelve months ended January 31, 2006. The
      decrease was primarily due to reduced general and administrative expenses as
      discussed above.





Total
      interest expense for the twelve months ended January 31, 2007 was
      $1.8 million, a decrease of $93,000, or 4.9%, from $1.9 million in the
      twelve months ended January 31, 2006. Interest on mortgage notes payable
      for the twelve months ended January 31, 2007 was $1.7 million, a
      decrease of $143,000, or 7.7%, from $1.8 million in the twelve months ended
      January 31, 2006. The decrease is primarily due to interest incurred on the
      mortgage note payable secured by the Phoenix, Arizona property during the period
      of fiscal year 2006 before its disposition. Interest on notes payable to related
      parties increased $33,000, or over 100%, to $50,000 from $17,000 during the
      years ended January 31, 2007 and 2006, respectively. The increase is
      primarily due to increased borrowings on the Trust’s line of credit with Rare
      Earth Financial, L.L.C., an affiliate of Mr. Wirth.





Real
      estate and personal property taxes, insurance and ground rent decreased
      $119,000, or 9.4%, to $1.1 million in the twelve months ended
      January 31, 2007. Real estate and personal property taxes and property
      insurance decreased due to expenses relating to the Phoenix, Arizona property
      during the period of fiscal year 2006 before its disposition and decreased
      insurance expense on the Tucson St. Mary’s property.





Hotel
      property depreciation for the twelve months ended January 31, 2006 compared
      to 2005 decreased approximately $86,000, or 4.0%, to $2.0 million from
      $2.1 million, respectively. The decrease was primarily due to the
      disposition of the furniture, fixtures and equipment previously used at the
      San
      Diego, California location, which were not sold as part of the sale of the
      San
      Diego property in fiscal year 2005 but were sold for $160,000 in fiscal year
      2007, and the furniture, fixtures and equipment purchased with the Albuquerque,
      New Mexico hotel reaching the end of its useful life during the last half of
      fiscal year 2006.





The
      Trust
      had other income of $60,000 for the twelve months ended January 31, 2006
      relating to insurance proceeds received by the Ontario, California hotel. 
There was no such income during the twelve months ended January 31,
      2007.





The
      Trust
      had a loss before minority interest and income taxes of $159,000 for the twelve
      months ended January 31, 2007, compared to income of $349,000 in the prior
      year. After deducting the loss allocated to the minority interest of $429,000
      and taxes of $316,000, the Trust had net loss attributable to Shares of
      Beneficial Interest of approximately ($46,000) for fiscal year 2007. This
      represented a decrease of approximately $588,000 in net income (loss)
      attributable to Shares of Beneficial Interest comparing the twelve months ended
      January 31, 2007 and 2006. Basic net loss per share was ($0.01) for the
      twelve months ended January 31, 2007, compared to basic net income per
      share of $0.06 for 2006.





14


***Results
      of operations of the Trust for the year ended January 31, 2006 compared to
      the year ended January 31, 2005.***





*Overview*





A
      summary
      of operating results for the fiscal years ended January 31, 2006 and 2005
      is:





**2006**
            
            **2005**
            
            **Change**
            
            **%
                Change**Revenue
            
            $
            21,248,839
            
            $
            22,875,187
            
            $
            (1,626,348
            )
            (7.1
            )%Operating
                Income (Loss)
            
            $
            349,349
            
            $
            (221,647
            )
            $
            570,996
            
            >100.0
            %Net
                Income
            
            $
            541,578
            
            $
            240,442
            
            $
            301,136
            
            >100.0
            %Income
                Per Share - Basic
            
            $
            0.06
            
            $
            0.10
            
            $
            (0.04
            )
            (40.0
            )%Income
                Per Share - Diluted
            
            $
            0.02
            
            $
            0.10
            
            $
            (0.08
            )
            (80.0
            )%





The
      Trust’s overall results in 2006 were positively affected by the disposition of
      certain of its underperforming properties in the two prior fiscal years and
      the
      improved operating results of the remaining hotel properties due to the
      continued strengthening of the travel industry.





For
      the
      twelve months ended January 31, 2006, the Trust had total revenue of
      $21.2 million compared to $22.9 million for the twelve months ended
      January 31, 2005, a decrease of approximately $1.6 million. This decrease
      in total revenue is primarily due to the sale of the Tempe and Phoenix, Arizona
      and San Diego, California properties during the last two fiscal years and
      decreased occupancy at the Ontario, California location due to a conversion
      of
      the property to a new brand affiliation. Total expenses of $22.8 million
      for the twelve months ended January 31, 2006 reflect a decrease of
      approximately $2.5 million compared to total expenses of $25.3 million for
      the twelve months ended January 31, 2005. The decrease is primarily due to
      the sales of the Tempe and Phoenix, Arizona and San Diego, California properties
      during the last two fiscal years, reduced depreciation due to a large portion
      of
      Trust assets reaching the end of their estimated lives, and expenses in the
      prior year related to the purchase of the management and licensing
      contracts.





For
      the
      twelve months ended January 31, 2006, the Trust had a net gain on disposition
      of
      hotels of $1.8 million, a decrease of $3.3 million, or 63.9%, from $5.1 million
      in fiscal year 2005. The fiscal year 2006 gain is primarily a result of the
      sale
      of the Phoenix, Arizona property during the second quarter. The fiscal year
      2005
      gain is primarily a result of the sale of the San Diego, California property
      during the first quarter.





General
      and administrative expenses include overhead charges for management, accounting,
      shareholder and legal services for the Trust. In comparing general and
      administrative expenses for the twelve months ended January 31, 2006 and
      2005, these expenses decreased $497,000, or 11.2%, to $3.9 million in
      fiscal year 2006, from $4.4 million in fiscal year 2005. This decrease was
      primarily due to expenses of approximately $274,000 in fiscal year 2005 related
      to the purchase of the management and licensing contracts and the disposition
      of
      certain Trust properties, which resulted in a $340,000 decrease in
      expenses.





Total
      operating expenses for the twelve months ended January 31, 2006 were
      $20.9 million, a decrease of approximately $2.2 million, or 9.5%, from
      $23.1 million in the twelve months ended January 31, 2005. The
      decrease was primarily due to the sales of the Tempe and Phoenix, Arizona and
      San Diego, California properties during the last two fiscal years, reduced
      depreciation due to a large portion of Trust assets reaching the end of their
      estimated lives, and expenses in the prior year related to the purchase of
      the
      management and licensing contracts.





Total
      interest expense for the twelve months ended January 31, 2006 was
      $1.9 million, a decrease of $350,000, or 15.5%, from $2.3 million in the
      twelve months ended January 31, 2005. Interest on mortgage notes payable
      for the twelve months ended January 31, 2006 was $1.8 million, a
      decrease of $243,000, or 11.6%, from $2.1 million in the twelve months ended
      January 31, 2005. The decrease is primarily due to the satisfaction of the
      mortgage note payable secured by the Phoenix, Arizona property in connection
      with the disposition of that property. Interest on notes payable to related
      parties decreased 86.6%, or $109,000, to $17,000 from $125,000 during the years
      ended January 31, 2006 and 2005, respectively. The decrease is primarily
      due to interest incurred on notes totaling $6.2 million due to affiliates of
      Mr. Wirth which were outstanding during the first quarter of fiscal year
      2005. These notes were paid off at the end of the first quarter of fiscal year
      2005 in connection with the sales of the Tempe, Arizona and San Diego,
      California properties.





Real
      estate and personal property taxes, insurance and ground rent decreased $71,000,
      or 5.3%, to $1.3 million in the twelve months ended January 31, 2006.
      Real estate and personal property taxes and property insurance decreased due
      to
      the sale of the Phoenix, Arizona property during the second quarter of fiscal
      year 2006, which resulted in a decrease of $64,000.


15







Hotel
      property depreciation for the twelve months ended January 31, 2006 compared
      to 2005 decreased approximately $637,000, or 23.1%, to $2.1 million from
      $2.8 million, respectively. The decrease was primarily due to the sale of
      the Phoenix, Arizona property, which accounted for a $239,000 decrease, and
      a
      large portion of the Trust’s furniture and equipment reaching the end of its
      useful life at the beginning of fiscal year 2006.





The
      Trust
      had other income of $60,000 for the twelve months ended January 31, 2006
      relating to insurance proceeds received by the Ontario, California hotel. 
There was no such income during the twelve months ended January 31,
      2005.





The
      Trust
      had income before minority interest, income taxes and cumulative effect of
      adoption of accounting principle of $349,000 for the twelve months ended
      January 31, 2006, compared to $2.6 million in the prior year. After
      deducting the loss allocated to the minority interest of $267,000 and taxes
      of
      $75,000, the Trust had net income attributable to Shares of Beneficial Interest
      of approximately $541,000 for fiscal year 2006. This represented an increase
      of
      approximately $301,000 in net income attributable to Shares of Beneficial
      Interest comparing the twelve months ended January 31, 2006 and 2005. Basic
      net income per share was $0.06 for the twelve months ended January 31,
      2006, compared to $0.10 for 2005.





LIQUIDITY
      AND CAPITAL RESOURCES





Overview





The
      Trust’s principal source of cash to meet its cash requirements, including
      distributions to its shareholders, is its share of the Partnership’s cash flow
      and its direct ownership of the Yuma, Arizona property. The Partnership’s
      principal source of revenue is hotel operations for the four hotel properties
      it
      owns. The Trust’s liquidity, including its ability to make distributions to its
      shareholders, will depend upon the ability of itself and the Partnership to
      generate sufficient cash flow from hotel operations.





Hotel
      operations are significantly affected by occupancy and room rates at the Hotels,
      which have improved over the prior three fiscal years, our ability to manage
      costs, and changes in the number of available suites caused by acquisition
      and
      disposition activities. Results are also significantly impacted by overall
      economic conditions and conditions in the travel industry. Unfavorable changes
      in these factors could negatively impact hotel room demand and pricing which
      would reduce our profit margins on rented suites.





We
      anticipate that better overall economic conditions will result in increased
      business and leisure travel and support higher room rates, and therefore higher
      operating margins. Challenges in fiscal year 2008 are expected to include
      continued competition for group business in the markets in which we operate
      and
      the Trust’s ability to increase room rates while maintaining market share.





Net
      cash
      provided by operating activities totaled $2.0 million, $878,000, and $660,000
      for the years ended January 31, 2007, 2006 and 2005, respectively. The
      increases during the three-year period were primarily due to increased operating
      income due to better hotel performance.





Net
      cash
      (used in) provided by investing activities totaled $(1.2) million, $(65,000),
      and $8.0 million for the years ended January 31, 2007, 2006 and 2005,
      respectively. The decrease in 2007 as compared to 2006 was a result of the
      proceeds from the disposition of the Phoenix, AZ hotel in fiscal year 2006.
      The
      decrease in 2006 as compared to 2005 was due to fewer dispositions during fiscal
      year 2006.





Net
      cash
      used in financing activities totaled $(607,000), $(780,000), and $(8.6) million
      for the years ended January 31, 2007, 2006 and 2005, respectively. The
      decrease in 2006 as compared to 2005 was primarily due to the San Diego mortgage
      payoff in fiscal year 2005.





The
      Trust
      received $160,000 in proceeds from the sale of the furniture, fixtures and
      equipment at the San Diego, California property. The Trust did not sell these
      items as part of the sale of the hotel during fiscal year 2005.


16


The
      Trust
      received $1.2 million in proceeds from the sales of hotel properties in fiscal
      year 2006. The Trust used these proceeds to fund operations and capital
      improvements.





The
      Trust
      received $9.4 million in proceeds for the sales of hotel properties in fiscal
      year 2005. The Trust used $4.8 million of these proceeds to satisfy a mortgage
      note payable, $1.4 million to satisfy related party notes and interest payable,
      and retained the remaining proceeds to reduce trade payables and to fund future
      operations and capital improvements.





As
      of
      January 31, 2007, the Trust has no commitments for capital expenditures
      beyond a 4% reserve for refurbishment and replacements that is set aside
      annually, as described below.





The
      Trust
      is obligated under loan agreements relating to four of its hotels to deposit
      4%
      of the individual hotel’s room revenue into an escrow account to be used for
      capital expenditures. These accounts are restricted by the mortgage lenders.
      As
      of January 31, 2007, $128,284 was held in these accounts and is reported on
      the Trust’s Consolidated Balance Sheet as “Restricted Cash.” The accounts are
      required to be used for capital improvements to the Hotels and refurbishment
      and
      replacement of furniture, fixtures and equipment. During the twelve months
      ended
      January 31, 2007 and 2006, the Hotels spent approximately $1.5 million
      and $1.2 million, respectively, for capital expenditures. The Trust
      considers the majority of these improvements to be revenue producing. Therefore,
      these amounts have been capitalized and are being depreciated over their
      estimated useful lives. The Trust plans to spend approximately $730,000 for
      capital expenditures in fiscal year 2008. The Hotels also spent approximately
      $1.5 and $1.4 million during fiscal years 2007 and 2006, respectively, on
      repairs and maintenance and these amounts have been charged to expense as
      incurred.





The
      Trust
      has minimum debt payments of $1.1 million and $2.8 million due during
      fiscal years 2008 and 2009, respectively. On February 23, 2007, Tucson St.
      Mary’s Suite Hospitality, an entity owned by the Partnership, established a $2
      million non-revolving line of credit. The unpaid principal balance bears
      interest at the prime rate, as published in the Wall Street Journal, plus 0.75%
      (currently 9.00%) and is secured by a second mortgage on the Tucson St. Mary’s
      Hotel. The line of credit matures on February 23, 2008. As of April 30, 2007,
      $1.5 million was drawn on the line of credit and used to pay down debt and
      to
      pay for renovations to that Hotel. The Trust believes it can satisfy its
      remaining obligations during fiscal years 2008 and 2009 using revenue generated
      by the Hotels’ operations.





Management
      believes that cash on hand, future cash receipts from operations, and borrowings
      from affiliates in fiscal year 2008 will be sufficient to meet the Trust’s
      obligations as they become due for the next twelve months.





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





The
      Trust
      will acquire or develop additional hotels only as suitable opportunities arise,
      and the Trust will not undertake acquisition or redevelopment of properties
      unless adequate sources of financing are available. Funds for future
      acquisitions or development of hotels are expected to be derived, in whole
      or in
      part, from borrowings or from the proceeds of additional issuances of Shares
      of
      Beneficial Interest or other securities. However, there can be no assurance
      that
      the Trust will successfully acquire or develop additional hotels or that
      proceeds from borrowings or issuances of Shares of Beneficial Interest will
      be
      available or in amounts and on terms sufficient to allow such
      transactions.





FUTURE
      POSITIONING





The
      Board
      of Trustees is exploring potential strategic alternatives, including the
      possibility of selling some or all of the Hotels. In addition, the Trust has
      been informed by Mr. Wirth that one of the four hotels owned by his affiliates
      for which the Trust provides management and trademark licensing services has
      been listed for sale with a real estate broker and that the three remaining
      hotels owned by his affiliates may also be listed for sale. If any or all of
      these properties were sold, the Trust’s future management and/or licensing fees
      could be reduced if the purchaser did not continue to retain InnSuites Hotels
      to
      provide those services. In the past, when the Trust has sold hotel properties
      to
      unrelated third parties, the Trust has continued to provide management and/or
      trademark licensing services after a sale, although there can be no assurance
      that the Trust will be able to successfully do so in the future.




Management
      believes that the market value of each of the Trust’s Hotels exceeds that
      Hotel’s net book value and outstanding debt, and the Trust intends to sell a
      Hotel only if the sale price were to exceed the Hotel’s net book value and outstanding
      debt. Such a sale would result in a profit to the extent the sale price exceeded
      the net book value and cash flow to the extent the sale price exceeded the
      outstanding debt. The cash generated from any Hotel sales will be used initially
      to reduce the Trust’s outstanding debt.




17




The
      Trust
      will list its Yuma, Arizona Hotel for sale with a real estate broker in May
      2007. The Trust can provide no assurances that it will be able to sell the
      Yuma,
      Arizona Hotel or any of its other Hotels or that, if the Trust did sell a Hotel,
      that it would be able to sell the Hotel at the advertised listing price. In
      addition, in connection with any real estate sales the Trust will incur real
      estate commissions and other closing costs.




Management
      continues to explore the condo-hotel concept as an opportunity for the Trust.




SHARE
      REPURCHASE PROGRAM





On
      January 2, 2001, the Board of Trustees approved a share repurchase program
      under Rule 10b-18 of the Securities Exchange Act of 1934, as amended, for
      the purchase of up to 250,000 limited partnership units in the Partnership
      and/or Shares of Beneficial Interest in open market or privately negotiated
      transactions. Additionally, on September 10, 2002, the Board of Trustees
      approved the purchase of up to 350,000 additional limited partnership units
      in
      the Partnership and/or Shares of Beneficial Interest in open market or privately
      negotiated transactions. On August 18, 2005, the Board of Trustees approved
      the purchase of up to 350,000 additional limited partnership units in the
      Partnership and/or Shares of Beneficial Interest in open market or privately
      negotiated transactions. Acquired Shares of Beneficial Interest will be held
      in
      treasury and will be available for future acquisitions and financings and/or
      for
      awards granted under the InnSuites Hospitality Trust 1997 Stock Incentive and
      Option Plan. During fiscal year 2007, the Trust acquired 134,865 Shares of
      Beneficial Interest in open market transactions at an average price of $1.35
      per
      share and 6,427 Shares of Beneficial Interest in privately-negotiated
      transactions at an average price of $1.38. The Trust intends to continue
      repurchasing Shares of Beneficial Interest in compliance with applicable legal
      and American Stock Exchange requirements.




OFF-BALANCE
      SHEET FINANCINGS AND LIABILITIES





Other
      than lease commitments, legal contingencies incurred in the normal course of
      business and employment contracts for key employees, the Trust does not have
      any
      off-balance sheet financing arrangements or liabilities. The Trust does not
      have
      any majority-owned subsidiaries that are not included in the consolidated
      financial statements. See “Item 7 - Management’s Discussion and Analysis of
      Financial Condition and Results of Operations - Accounting Matters” below for a
      discussion of accounting interpretations with respect to variable interest
      entities and the impact of such interpretations on the Trust.





CONTRACTUAL
      OBLIGATIONS





The
      following summarizes our contractual obligations at January 31, 2007, and
      the effect such obligations are expected to have on our liquidity and cash
      flow
      in future periods:





**PAYMENTS
                DUE BY PERIOD****CONTRACTUAL
                OBLIGATIONS**
            
            **TOTAL**
            
            **LESS**
              **THAN**
              **1
                YEAR**
            
            **1-3**
              **YEARS**
            
            **3-5**
              **YEARS**
            
            **THEREAFTER**Mortgage
                notes payable, notes payable to banks, other notes payable and notes
                and
                advances payable to related parties
            
            $
            20,937,044
            
            $
            1,067,036
            
            $
            7,741,722
            
            $
            1,842,886
            
            $
            10,285,400Operating
                leases
            
            6,795,212
            
            198,133
            
            396,266
            
            396,266
            
            5,984,547TOTAL
            
            $
            27,912,256
            
            $
            1,265,169
            
            $
            8,137,988
            
            $
            2,239,152
            
            $
            16,269,947





18


The
      Trust
      expects to incur interest expense in relation to the notes included in the
      above
      table as summarized below:




**TOTAL**
            
            **LESS**
              **THAN**
              **1
                YEAR**
            
            **1-3**
              **YEARS**
            
            **3-5**
              **YEARS**
            
            **THEREAFTER**$
            6,482,183
            
            $
            1,754,436
            
            $
            2,789,863
            
            $
            1,227,532
            
            $
            710,352





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




CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES





The
      Trust
      believes that the policies it follows for the valuation of its hotel properties,
      which constitute the majority of Trust assets, are its most critical policies.
      The Trust applies SFAS No. 144 “Accounting for the Impairment or Disposal
      of Long-Lived Assets,” to determine when it is necessary to test an asset for
      recoverability. On an events and circumstances basis, the Trust reviews the
      carrying value of its hotel properties both held for use and held for sale.
      The
      Trust will record an impairment loss and reduce the carrying value of a property
      when anticipated undiscounted future cash flows and/or a current appraisal
      of
      the property do not support its carrying value. In cases where the Trust does
      not expect to recover the carrying cost of hotel properties held for use, it
      will reduce the carrying value to the fair value of the hotel, as determined
      by
      a current appraisal. In cases where the Trust does not expect to recover the
      carrying cost of hotel properties held for sale, it will reduce the carrying
      value to the sales price less costs to sell. The Trust did not recognize
      impairment expense in fiscal years 2007, 2006 or 2005. As of January 31,
      2007, the Trust management does not believe that the carrying values of any
      of
      its hotel properties are impaired.




ACCOUNTING
      MATTERS





In
      December 2004, SFAS No. 123 (revised 2004), “Share Based Payment,” was
      issued. This Statement is a revision of SFAS 123, Accounting for Stock
      Based Compensation, and supersedes APB Opinion No. 25, “Accounting for
      Stock Issued to Employees.” This Statement establishes standards for accounting
      for transactions in which an entity exchanges its equity securities for goods
      and services. The Trust adopted this Statement during fiscal year 2006. The
      Trust adopted SFAS 123R using the modified prospective method. The adoption
      of
      this Statement had no effect on the Trust’s results of operations in fiscal year
      2006.




In
      December 2004, the FASB issued SFAS No. 153, “Exchanges of
      Non-monetary Assets, an amendment of APB Opinion No. 29,” which is
      effective for fiscal years beginning after June 15, 2005. SFAS No. 153
      replaces APB Opinion No. 29’s exceptions to recording these transfers at
      fair value. SFAS No. 153 is not expected to have a material impact on the
      Trust’s financial statements or results of operations.




In
      February 2004, the Trust adopted FIN 46R, which amended FIN 46,
“Consolidation of Variable Interest Entities,” an interpretation of Accounting
      Research Bulletin No. 51, “Consolidated Financial Statements.” FIN 46R
      requires an existing unconsolidated variable interest entity to be consolidated
      by its primary beneficiary if the entity does not effectively disperse risk
      among all parties involved or if other parties do not have significant capital
      to finance activities without subordinated financial support from the primary
      beneficiary. The primary beneficiary is the party that absorbs a majority of
      the
      entity’s expected losses, receives a majority of its expected residual returns,
      or both, as a result of holding variable interests, which are the ownership,
      contractual or other pecuniary interests in an entity.




As
      of
      February 1, 2004, the Trust recorded a charge for the cumulative effect of
      a change in accounting principle resulting from its recognition of the $854,000
      net stockholder’s deficit of the Management Company, which was the Trust’s
      variable interest entity under FIN 46R. The $854,000 charge represented the
      net
      effect of the Trust reporting $160,000 in net assets (consisting primarily
      of
      receivables) and $1,014,000 in net liabilities (consisting primarily of debt)
      upon consolidating the financial results of the Management Company.




All
      revenue and expense items for the Management Company and Licensing Corp.
      relating to services provided to the Hotels were eliminated when their financial
      results were consolidated with the Trust’s results. Revenues and expenses
      relating to services provided by the Management Company and Licensing Corp.
      to
      hotels not owned by the Trust, however, were not eliminated. Payroll
      reimbursements shown in the current period represent amounts received from
      hotels not owned by the Trust.




19




The
      effect of consolidating the financial results of the Management Company and
      Licensing Corp. was accounted for as a cumulative effect of a change in
      accounting principle. As a result of consolidating the financial results of
      the
      Management Company with its results, as of February 1, 2004, the Trust’s
      financial results include a $854,402 charge for the cumulative effect of a
      change in accounting principle on the Statements of Operations resulting in
      a
      reduction in its Stockholders’ Equity which represents the aggregate
      stockholders’ deficit reported by the Management Company as of February 1,
      2004.




After
      June 8, 2004, consolidation of the financial results of the Management
      Company and Licensing Corp. is no longer required by FIN 46R since InnSuites
      Hotels acquired the management contracts and licensing agreements from the
      Management Company on that date. See Note 22 to the Trust’s Consolidated
      Financial Statements - “Purchase of Management and Licensing Contracts.”




In
      May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
      Corrections,” which replaces APB Opinion No. 20, “Accounting Changes,” and
      SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements —
An Amendment of APB Opinion No. 28.” SFAS No. 154 provides guidance on
      the accounting for and reporting of accounting changes and error corrections.
      It
      establishes retrospective application, or the latest practicable date, as the
      required method for reporting a change in accounting principle (unless a
      different method is prescribed by the new standard) and the reporting of a
      correction of an error. SFAS No. 154 is effective for accounting changes
      and corrections of errors made in fiscal years beginning after December 15,
      2005. The adoption of SFAS No. 154 is not expected to have a material
      impact on the Trust’s financial position or results of operations.




In
      June
      2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes.”
The interpretation applies to all tax positions related to income taxes subject
      to SFAS No. 109, “Accounting for Income Taxes.” FIN No. 48 clarifies the
      accounting for uncertainty in income taxes by prescribing a minimum recognition
      threshold in determining if a tax position should be reflected in the financial
      statements. Only tax positions that meet the “more likely than not” recognition
      threshold may be recognized. The interpretation also provides guidance on
      classification, interest and penalties, accounting in interim periods,
      disclosure, and transition requirements for uncertain tax positions. FIN No.
      48
      will be effective for the Trust’s fiscal year ending January 31, 2008. The Trust
      is currently evaluating the impact FIN No. 48 will have on the Trust’s financial
      condition and results of operations.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS
      No. 157 establishes a single authoritative definition of fair value, sets out
      a
      framework for measuring fair value and expands disclosures about fair value
      measurements. SFAS No. 157 applies to fair value measurements already required
      or permitted by existing standards. SFAS No. 157 will be effective for the
      Trust’s fiscal year ending January 31, 2009. The Trust is currently evaluating
      the requirements of SFAS No. 157 and has not yet determined the impact on its
      financial condition and results of operations.





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106, and 132 (R).” This pronouncement requires an employer to make
      certain recognitions, measurements, and disclosures regarding defined benefit
      postretirement plans. The Trust does not have any defined benefit postretirement
      plans, and SFAS No. 158 will not have any impact on its financial condition
      and
      results of operations.





In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin (SAB) No. 108, “Considering the Effects of Prior Year Misstatements in
      Current Year Financial Statements (“SAB 108”). SAB 108 provides guidance on
      consideration of the effects of prior year misstatements in quantifying current
      year misstatements for the purpose of a materiality assessment. SAB 108 is
      effective for fiscal years ending after November 15, 2006. The adoption of
      SAB
      108 did not have an impact on the Trust’s consolidated financial
      statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities,” which permits entities to choose to
      measure many financial instruments and certain other items at fair value that
      are not currently required to be measured at fair value. SFAS No. 159 will
      be
      effective for the Trust on February 1, 2008. The Trust is currently evaluating
      the impact of adopting SFAS No. 159 on its financial position, cash flows and
      results of operations.







20


In
      June
      2006, the FASB issued EITF Issue No. 06-03, “How Taxes Collected from Customers
      and Remitted to Governmental Authorities Should Be Presented in the Income
      Statement (That is, Gross Versus Net Presentation)” which permits entities to
      present certain taxes assessed by a governmental authority on either a gross
      basis (included in revenues and costs) or a net basis (excluded from revenues).
      An entity is not required to reevaluate its existing policies related to taxes
      assessed by a governmental authority but may choose to do so. EITF issue No.
      06-03 is effective for interim and annual reporting periods beginning after
      December 15, 2006. The Trust reports it revenue net of sales taxes. Management
      plans to continue to report revenue net of sales tax.





INFLATION





The
      Trust’s revenue is based on the underlying Hotel revenue. Therefore, the Trust
      relies entirely on the performance of the Hotels and InnSuites Hotels’ ability
      to increase revenue to keep pace with inflation. Operators of hotels in general,
      and InnSuites Hotels in particular, can change room rates quickly, but
      competitive pressures may limit InnSuites Hotels’ ability to raise rates faster
      than inflation.





FORWARD-LOOKING
      STATEMENTS





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





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





·
            fluctuations
                in hotel occupancy rates;


·
            changes
                in room rental rates which may be charged by InnSuites Hotels in
                response
                to market rental rate changes or
                otherwise;


·
            seasonality
                of our business;


·
            interest
                rate fluctuations;


·
            changes
                in governmental regulations, including federal income tax laws and
                regulations;


·
            competition;


·
            any
                changes in the Trust’s financial condition or operating results due to
                acquisitions or dispositions of hotel
                properties;


·
            insufficient
                resources to pursue our current
                strategies;


·
            concentration
                of our investments in the InnSuites Hotels®
                brand;


·
            loss
                of franchise contracts;


·
            real
                estate and hospitality market
                conditions;


·
            hospitality
                industry factors;


·
            our
                ability to meet present and future debt service
                obligations;


·
            terrorist
                attacks or other acts of war;


·
            outbreaks
                of communicable diseases;


·
            natural
                disasters;


·
            loss
                of key personnel;


·
            local
                or national economic and business conditions, including, without
                limitation, conditions which may affect public securities markets
                generally, the hospitality industry or the markets in which the Trust
                operates or will operate; and


·
            uncertainties
                the Trust might encounter in changing from a REIT to a tax-paying
                entity.


21





The
      Trust
      does not undertake any obligation to update publicly or revise any
      forward-looking statements whether as a result of new information, future events
      or otherwise. Pursuant to Section 21E(b)(2)(E) of the Securities
      Exchange Act of 1934, the qualifications set forth hereinabove are inapplicable
      to any forward-looking statements in this Form 10-K relating to the
      operations of the Partnership.





Item 7A. QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





The
      Trust
      is exposed to interest rate risk primarily as a result of its mortgage notes
      payable, notes payable to banks, other notes payable and notes and advances
      payable to related parties. The proceeds from these loans were used to maintain
      liquidity, fund capital expenditures and expand the Trust’s real estate
      investment portfolio and operations. The Trust’s interest rate risk management
      objective is to limit the impact of interest rate changes on earnings and cash
      flow and to lower its overall borrowing costs. To achieve its objectives, the
      Trust borrows using fixed rate debt, when possible. The Trust could enter into
      derivative financial instruments such as interest rate swaps, caps and treasury
      locks in order to mitigate its interest rate risk on a related financial
      instrument. To date, the Trust has not entered into any such derivative
      transactions.





The
      Trust’s interest rate risk is monitored using a variety of techniques. The table
      below presents the principal amounts, weighted average interest rates, fair
      value and other terms required, by year of expected maturity, in order to
      evaluate the expected cash flow and sensitivity to interest rate
      changes.





**Fiscal****Debt
                Type**
            
            **2008**
            
            **2009**
            
            **2010**
            
            **2011**
            
            **2012**
            
            **Thereafter**
            
            **Total**
            
            **Fair
                Value**Fixed
                rate debt (1)
            
            $
            958,139
            
            1,979,181
            
            1,029,124
            
            1,086,687
            
            756,199
            
            10,285,400
            
            16,094,730
            
            16,589,474Average
                interest rate
            
            8.23
            %
            8.23
            %
            8.31
            %
            8.30
            %
            8.27
            %
            8.26
            %
            8.27
            %
            8.25
            %Variable
                rate debt (1)
            
            $
            108,897
            
            868,491
            
            3,864,926
            
            —
            
            —
            
            —
            
            4,842,314
            
            4,880,271Interest
                rate available on January 31, 2007
            
            9.50
            %
            9.50
            %
            9.50
            %
            —
            
            —
            
            —
            
            9.50
            %
            9.50
            %





(1)
            The
                fair value of fixed rate debt and variable rate debt were determined
                based
                on current rates offered for fixed rate debt and variable rate LIBOR
                debt
                with similar risks and maturities.





The
      table
      incorporates only those exposures that exist as of January 31, 2007 and
      does not consider those exposures or positions that could arise after that
      date.
      Moreover, because firm commitments are not represented in the table above,
      the
      information presented therein has limited predictive value. As a result, the
      Trust’s interest rate fluctuations will depend on the exposures that arise
      during any particular period and future interest rates.





22


Item
      8.  FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA





INNSUITES
      HOSPITALITY TRUST


LIST
      OF
      CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES





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





Independent
                Auditors’ Report -January 31, 2007;
            24Independent
                Auditors’ Report -January 31, 2006;
            25Consolidated
                Balance Sheets - January 31, 2007 and 2006;
            26Consolidated
                Statements of Operations - Years Ended January 31, 2007, 2006 and
                2005;
            27Consolidated
                Statements of Shareholders’ (Deficit) Equity - Years Ended
                January 31, 2007, 2006 and 2005;
            28Consolidated
                Statements of Cash Flow - Years Ended January 31, 2007, 2006 and
                2005; and
            29Notes
                to the Consolidated Financial Statements - January 31, 2007, 2006 and
                2005.
            30





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





Schedule III
                - Real Estate and Accumulated Depreciation.
            50Schedule IV
                - Mortgage Loans on Real Estate.
            53





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





23





**REPO****RT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
                the Shareholders and Board of Trustees ofInnSuites
                Hospitality TrustPhoenix,
                Arizona:





We
      have
      audited the accompanying consolidated balance sheet of InnSuites Hospitality
      Trust and subsidiaries (the “Trust”) as of January 31, 2007, and the related
      consolidated statements of operations, shareholders’ equity, and cash flows for
      the year then ended. These financial statements are the responsibility of the
      Trust’s management. Our responsibility is to express an opinion on these
      financial statements based on our audit.





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





In
      our
      opinion, the consolidated financial statements referred to above, present
      fairly, in all material respects, the financial position of InnSuites
      Hospitality Trust and subsidiaries at January 31, 2007, and the results of
      their
      operations and their cash flows for the year then ended, in conformity with
      accounting principles generally accepted in the United States of
      America.





Our
      audit
      was conducted in accordance with the standards of the Public Company Accounting
      Oversight Board (United States) and was made for the purpose of forming an
      opinion on the basic consolidated financial statements taken as a whole. The
      consolidated supplemental schedules III and IV are presented for purposes
      of complying with the Securities and Exchange Commission’s rules and are
      not a part of the basic consolidated financial statements. This schedule has
      been subjected to the auditing procedures applied in our audits of the basic
      consolidated financial statements and, in our opinion, is fairly stated in
      all
      material respects in relation to the basic consolidated financial statements
      taken as a whole.








/s/
      Moss
      Adams LLP


Scottsdale,
      Arizona





May
      1,
      2007


24





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
                the Shareholders and Board of Trustees ofInnSuites
                Hospitality TrustPhoenix,
                Arizona:





We
      have
      audited the accompanying consolidated balance sheets of InnSuites Hospitality
      Trust and subsidiaries as of January 31, 2006, and the related consolidated
      statements of operations, shareholders’ equity (deficit) and cash flows for each
      of the two years in the period then ended. These financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion of these financial statements based on our audits.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.




In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of InnSuites Hospitality Trust and
      subsidiaries as of January 31, 2006, and the results of their operations
      and their cash flows for the each of the two years in the period then ended,
      in
      conformity with accounting principles generally accepted in the United States
      of
      America.




/s/EPSTEIN,
                WEBER & CONOVER, PLCScottsdale,
                ArizonaApril
                24, 2006





25





INNSUITES
      HOSPITALITY TRUST AND SUBSIDIARIES


CONSOLIDATED
      BALANCE SHEETS





**JANUARY 31****2007**
            
            **2006**ASSETSCurrent
                Assets:Cash
                and Cash Equivalents
            
            $
            202,691
            
            $
            34,251Restricted
                Cash
            
            
            128,284
            
            
            226,294Accounts
                Receivable, including $0 and $14,828 from related parties, net of
                Allowance for Doubtful Accounts of $115,000 and $112,000,
                respectively
            
            
            752,232
            
            
            531,961Prepaid
                Expenses and Other Current Assets
            
            
            485,636
            
            
            494,829Total
                Current Assets
            
            
            1,568,843
            
            
            1,287,335Hotel
                Properties, net
            
            
            29,654,942
            
            
            30,215,391Deferred
                Finance Costs, Long-Term Portion
            
            
            140,245
            
            
            175,645Deposits,
                Long-Term
            
            
            14,987
            
            
            14,987Deferred
                Income Tax Benefit
            
            
            —
            
            
            259,000TOTAL
                ASSETS
            
            $
            31,379,017
            
            $
            31,952,358LIABILITIES
                AND SHAREHOLDERS’ EQUITYLIABILITIESCurrent
                Liabilities :Accounts
                Payable and Accrued Expenses, including $518,206 and $95,418 accrued
                interest and payables to related parties as of January 31, 2007 and
                2006, respectively
            
            $
            2,970,080
            
            $
            2,594,733Notes
                Payable to Banks
            
            
            749,777
            
            
            500,000Current
                Portion of Mortgage Notes Payable
            
            
            926,464
            
            
            879,265Current
                Portion of Other Notes Payable
            
            
            109,486
            
            
            121,558Current
                Portion of Notes Payable to Related Parties
            
            
            31,086
            
            
            428,989Total
                Current Liabilities
            
            
            4,786,893
            
            
            4,524,545Mortgage
                Notes Payable
            
            
            17,939,187
            
            
            19,029,612Notes
                Payable to Related Parties
            
            
            1,054,631
            
            
            85,717Other
                Notes Payable
            
            
            126,413
            
            
            206,424TOTAL
                LIABILITIES
            
            
            23,907,124
            
            
            23,846,298MINORITY
                INTEREST IN PARTNERSHIP
            
            
            930,192
            
            
            1,388,132SHAREHOLDERS’
                EQUITYShares
                of Beneficial Interest, without par value; unlimited authorization;
                9,195,856 and 9,145,365 shares issued and outstanding at January 31,
                2007 and 2006, respectively
            
            
            17,030,891
            
            
            17,155,106Treasury
                Stock, 7,536,970 and 7,494,578 shares held at January 31, 2007 and
                2006,
                respectively
            
            
            (10,489,190
            )
            
            (10,437,178
            )TOTAL
                SHAREHOLDERS’ EQUITY
            
            
            6,541,701
            
            
            6,717,928TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            31,379,017
            
            $
            31,952,358





See
      accompanying notes to


consolidated
      financial statements


26


INNSUITES
      HOSPITALITY TRUST AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF OPERATIONS





**YEARS
                ENDED JANUARY 31,****2007**
            
            **2006**
            
            **2005**REVENUERoom
            
            $
            16,057,900
            
            $
            16,029,694
            
            $
            17,729,550Food
                and Beverage
            
            1,273,608
            
            1,122,191
            
            1,238,808Telecommunications
            
            38,163
            
            56,804
            
            99,894Other
            
            396,535
            
            462,462
            
            736,873Management
                and Trademark Fees, including $350,233, $209,862 and $115,105 from
                related
                parties for 2007, 2006 and 2005, respectively
            
            461,579
            
            382,260
            
            278,888Payroll
                Reimbursements, including $3,057,136, $2,471,324 and $2,191,474 from
                related parties for 2007, 2006 and 2005, respectively
            
            3,562,849
            
            3,195,428
            
            2,791,174TOTAL
                REVENUE
            
            21,790,634
            
            21,248,839
            
            22,875,187OPERATING
                EXPENSESRoom
            
            4,110,342
            
            4,222,369
            
            5,010,738Food
                and Beverage
            
            1,123,206
            
            1,168,246
            
            1,226,074Telecommunications
            
            106,438
            
            153,313
            
            226,559General
                and Administrative
            
            3,295,554
            
            3,948,539
            
            4,445,613Sales
                and Marketing
            
            1,299,082
            
            1,362,805
            
            1,642,232Repairs
                and Maintenance
            
            1,471,239
            
            1,427,470
            
            1,387,407Hospitality
            
            771,701
            
            697,625
            
            827,166Utilities
            
            1,224,063
            
            1,166,233
            
            1,232,940Hotel
                Property Depreciation
            
            2,032,955
            
            2,118,492
            
            2,755,499Real
                Estate and Personal Property Taxes, Insurance and Ground
                Rent
            
            1,139,869
            
            1,258,380
            
            1,329,463Other
            
            138,268
            
            180,590
            
            221,969Payroll
                Costs Related to Management Contracts
            
            3,562,849
            
            3,195,428
            
            2,791,174TOTAL
                OPERATING EXPENSES
            
            20,275,566
            
            20,899,490
            
            23,096,834OPERATING
                INCOME (LOSS)
            
            1,515,068
            
            349,349
            
            (221,647
            )Interest
                Income
            
            3,431
            
            2,134
            
            7,517Other
                Income
            
            —
            
            59,677
            
            —Gain
                on Disposition of Hotels and Property
            
            138,751
            
            1,847,425
            
            5,113,540TOTAL
                OTHER INCOME
            
            142,182
            
            1,909,236
            
            5,121,057Interest
                on Mortgage Notes Payable
            
            1,704,169
            
            1,846,801
            
            2,089,708Interest
                on Notes Payable to Banks
            
            41,531
            
            28,322
            
            23,659Interest
                on Notes Payable and Advances Payable to Related Parties
            
            49,891
            
            16,769
            
            125,336Interest
                on Other Notes Payable
            
            20,780
            
            17,205
            
            20,878TOTAL
                INTEREST EXPENSE
            
            1,816,371
            
            1,909,097
            
            2,259,581INCOME
                (LOSS) BEFORE MINORITY INTEREST, INCOME TAXES AND CUMULATIVE EFFECT
                OF
                ADOPTION OF ACCOUNTING PRINCIPLE
            
            (159,121
            )
            349,488
            
            2,639,829LESS
                MINORITY INTEREST
            
            (428,855
            )
            (267,265
            )
            1,384,985Income
                Tax Provision
            
            (316,164
            )
            (75,175
            )
            (160,000
            )INCOME
                (LOSS) ATTRIBUTABLE TO SHARES OF BENEFICIAL INTEREST BEFORE CUMULATIVE
                EFFECT OF ADOPTION OF ACCOUNTING PRINCIPLE
            
            (46,430
            )
            541,578
            
            1,094,844CUMULATIVE
                EFFECT OF ADOPTION OF ACCOUNTING PRINCIPLE
            
            —
            
            —
            
            (854,402
            )INCOME
                (LOSS) ATTRIBUTABLE TO SHARES OF BENEFICIAL INTEREST
            
            $
            (46,430
            )
            $
            541,578
            
            $
            240,442INCOME
                (LOSS) PER SHARE BEFORE CUMULATIVE EFFECT OF ADOPTION OF ACCOUNTING
                PRINCIPLE- Basic
            
            $
            (0.01
            )
            $
            0.06
            
            $
            0.45NET
                LOSS FROM CUMULATIVE EFFECT OF ADOPTION OF ACCOUNTING PRINCIPLE -
                Basic
            
            —
            
            —
            
            (0.35
            )NET
                INCOME (LOSS) PER SHARE - Basic
            
            $
            (0.01
            )
            $
            0.06
            
            $
            0.10WEIGHTED
                AVERAGE NUMBER OF SHARES OUTSTANDING - Basic
            
            9,251,420
            
            9,096,338
            
            2,424,837INCOME
                (LOSS) PER SHARE BEFORE CUMULATIVE EFFECT OF ADOPTION OF ACCOUNTING
                PRINCIPLE- Diluted
            
            $
            (0.01
            )
            $
            0.02
            
            $
            0.45NET
                LOSS FROM CUMULATIVE EFFECT OF ADOPTION OF ACCOUNTING PRINCIPLE -
                Diluted
            
            —
            
            —
            
            (0.35
            )NET
                INCOME (LOSS) PER SHARE - Diluted
            
            $
            (0.01
            )
            $
            0.02
            
            $
            0.10WEIGHTED
                AVERAGE NUMBER OF SHARES OUTSTANDING - Diluted
            
            
            9,251,420
            
            
            13,341,783
            
            
            2,424,837CASH
                DIVIDENDS PER SHARE
            
            $
            .01
            
            $
            .01
            
            $
            .01


See
      accompanying notes to


consolidated
      financial statements





27





INNSUITES
      HOSPITALITY TRUST AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’
EQUITY
      (DEFICIT)


FOR
      THE
      YEARS ENDED JANUARY 31, 2007, 2006 AND 2005





BALANCE,
                JANUARY 31, 2004
            
            $
            (1,573,599
            )Net
                Income Attributable to Shares of Beneficial Interest
            
            240,442Dividends
            
            (23,220
            )Purchase
                of Treasury Stock
            
            (225,917
            )Shares
                of Beneficial Interest issued for Services Received
            
            49,280Shares
                of Beneficial Interest issued to Satisfy Notes Payable to Related
                Parties
            
            690,820Shares
                of Beneficial Interest issued to Purchase Management and Licensing
                Contracts
            
            155,000Shares
                of Beneficial Interest issued to Satisfy Advances Payable to the
                Partnership
            
            3,661,659Shares
                of Beneficial Interest issued to Purchase Yuma Hospitality Minority
                Interest
            
            2,766,515Purchase
                of Yuma Hospitality Minority Interest Above Carrying Value
            
            1,177,425Purchase
                of Partnership Units Above Carrying Value
            
            98,684Reallocation
                of Minority Interest
            
            (752,455
            )BALANCE,
                JANUARY 31, 2005
            
            6,264,634Net
                Income Attributable to Shares of Beneficial Interest
            
            541,578Dividends
            
            (91,450
            )Purchase
                of Treasury Stock
            
            (175,442
            )Shares
                of Beneficial Interest issued for Services Received
            
            37,888Partnership
                Interest Acquired with Shares of Beneficial Interest
            
            213,202Reallocation
                of Minority Interest
            
            (72,482
            )BALANCE,
                JANUARY 31, 2006
            
            $
            6,717,928Net
                Loss Attributable to Shares of Beneficial Interest
            
            (46,430
            )Dividends
            
            (93,302
            )Purchase
                of Treasury Stock
            
            (190,301
            )Shares
                of Beneficial Interest issued for Services Received
            
            134,055Partnership
                Interest Acquired with Shares of Beneficial Interest
            
            24,560Reallocation
                of Minority Interest
            
            (4,809
            )BALANCE,
                JANUARY 31, 2007
            
            $
            6,541,701





See
      accompanying notes to


consolidated
      financial statements


28


INNSUITES
      HOSPITALITY TRUST AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH FLOW





**YEARS
                ENDED JANUARY 31,****2007**
            
            **2006**
            
            **2005**CASH
                FLOW FROM OPERATING ACTIVITIESNet
                Income (Loss) Attributable to Shares of Beneficial
                Interest
            
            $
            (46,430
            )
            $
            541,578
            
            $
            240,442Adjustments
                to Reconcile Net Income (Loss) Attributable to Shares of Beneficial
                Interest to Net Cash Provided by Operating Activities:Cumulative
                Effect of Adoption of Accounting Principle
            
            —
            
            —
            
            854,402Net
                Income from Variable Interest Entities
            
            —
            
            —
            
            352,882Issuance
                of Shares for Management and Licensing Contracts
            
            —
            
            —
            
            155,000Stock
                Compensation Expense
            
            96,390
            
            36,436
            
            40,580Provision
                for Uncollectible Receivables
            
            146,340
            
            354,165
            
            377,465Minority
                Interest
            
            (428,855
            )
            (267,265
            )
            1,032,103Hotel
                Property Depreciation
            
            2,032,955
            
            2,118,492
            
            2,755,499Deferred
                Income Taxes
            
            259,000
            
            (89,000
            )
            (170,000)(Gain)
                Loss on Disposal of Hotel Property
            
            (135,791
            )
            (1,834,080
            )
            (4,999,797
            )Amortization
                of Deferred Loan Fees
            
            35,400
            
            36,373
            
            38,312Changes
                in Assets and Liabilities:Decrease
                (Increase) in Prepaid Expenses and Other Assets
            
            9,193
            
            (57,734
            )
            311,781(Increase)
                Decrease in Accounts Receivable
            
            (358,106
            )
            134,808
            
            (439,814
            )Increase
                in Purchase Deposit from Related Party
            
            —
            
            —
            
            700,000Increase
                (Decrease) in Accounts Payable and Accrued Expenses
            
            404,507
            
            (95,887
            )
            (588,430
            )NET
                CASH PROVIDED BY OPERATING ACTIVITIES
            
            2,014,603
            
            877,886
            
            660,425CASH
                FLOW FROM INVESTING ACTIVITIESProceeds
                From Sale of Hotel Properties
            
            160,000
            
            1,190,192
            
            9,377,138Improvements
                and Additions to Hotel Properties
            
            (1,496,715
            )
            (1,272,259
            )
            (1,308,008
            )Change
                in Restricted Cash
            
            98,010
            
            17,311
            
            (113,852
            )NET
                CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
            
            (1,238,705
            )
            (64,756
            )
            7,955,278CASH
                FLOW FROM FINANCING ACTIVITIESPrincipal
                Payments on Mortgage Notes Payable
            
            (1,043,226
            )
            (931,386
            )
            (6,087,771
            )Payments
                on Notes Payable to Banks
            
            (2,755,839
            )
            (2,217,000
            )
            (720,000
            )Borrowings
                on Notes Payable to Banks
            
            3,005,616
            
            2,217,000
            
            500,000Repurchase
                of Partnership Units
            
            (246
            )
            (774
            )
            (453,223
            )Repurchase
                of Treasury Stock
            
            (182,389
            )
            (30,191
            )
            (113,517
            )Payment
                of Dividends
            
            (93,302
            )
            (91,450
            )
            (23,220
            )Distributions
                to Minority Interest Holders
            
            —
            
            —
            
            (85,683
            )Payments
                on Notes and Advances Payable to Related Parties
            
            (28,989
            )
            (35,806
            )
            (1,740,299
            )Borrowings
                on Notes and Advances Payable to Related Parties
            
            600,000
            
            400,000
            
            198,000Payments
                on Other Notes Payable
            
            (109,083
            )
            (90,615
            )
            (88,647
            )NET
                CASH USED IN FINANCING ACTIVITIES
            
            (607,458
            )
            (780,222
            )
            (8,614,360
            )NET
                INCREASE IN CASH AND CASH EQUIVALENTS
            
            168,440
            
            32,908
            
            1,343CASH
                AND CASH EQUIVALENTS AT BEGINNING OF YEAR
            
            34,251
            
            1,343
            
            —CASH
                AND CASH EQUIVALENTS AT END OF YEAR
            
            $
            202,691
            
            $
            34,251
            
            $
            1,343





See
      accompanying notes to


consolidated
      financial statements


29





INNSUITES
      HOSPITALITY TRUST AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


AS
      OF AND
      FOR THE YEARS ENDED JANUARY 31, 2007, 2006 AND 2005





1.
      NATURE
      OF OPERATIONS AND BASIS OF PRESENTATION





InnSuites
      Hospitality Trust (the “Trust”) owns, as of January 31, 2007, directly and
      through a partnership interest, five hotels with an aggregate of 843 suites
      in
      Arizona, southern California and New Mexico (the “Hotels”). The Hotels operate
      as InnSuites Hotels.





Prior
      to
      February 1, 2004, the Trust operated as a self-managed and
      self-administered “umbrella partnership real estate investment trust (“REIT”),”
with operations through an operating partnership, RRF Limited Partnership,
      a
      Delaware limited partnership (the “Partnership”). Effective February 1,
      2004, the Trust terminated its election to be taxed as a REIT. The Trust is
      the
      sole general partner of the Partnership and owned 69.89% and 69.14% of the
      Partnership as of January 31, 2007 and 2006, respectively. The Trust’s
      weighted average ownership for the years ended January 31, 2007, 2006, and
      2005 was 69.56%, 67.87% and 57.00%, respectively. The Partnership owns four
      of
      the hotel properties and incurs the related expenses. The Trust owns and
      operates the Yuma, Arizona hotel property directly, which it acquired from
      the
      Partnership on January 31, 2005. Prior to May 1, 2004, the Hotels were leased
      to
      InnSuites Hotels, Inc. (“InnSuites Hotels”), a wholly-owned subsidiary of the
      Trust. Subsequent to May 1, 2004, the Trust and the Partnership operate the
      Hotels owned by each of them. Prior to June 8, 2004, InnSuites Hotels held
      the franchise agreement for each Hotel and contracted with Suite Hospitality
      Management, Inc. (the “Management Company”) for certain property management
      services and employment services. Until July 2, 2003, the Management
      Company was owned 9.8% by the James F. Wirth (“Mr. Wirth”), Chairman, President
      and Chief Executive Officer of the Trust. On June 8, 2004, the Trust
      purchased the “InnSuites” trademarks and tradenames and related licensing
      agreements and acquired the management agreements with the Management Company.
      See Note 22 - “Purchase of Management and Licensing Contracts.”





As
      of
      January 31, 2007, InnSuites Hotels provides hotel management services to the
      Hotels, as well as four hotels featuring 544 suites owned by affiliates of
      Mr.
      Wirth. Under the management agreements, InnSuites Hotels provides the personnel
      at the hotels, the expenses of which are reimbursed at cost, and manages the
      hotels’ daily operations. All such expenses and reimbursements between InnSuites
      Hotels and the Partnership have been eliminated in consolidation. InnSuites
      Hotels received 2.5% of gross revenue from the hotels owned by the
      Partnership and the Trust in exchange for management services during fiscal
      years 2007 and 2006, and 2.0% of room revenue during fiscal year 2005. During
      fiscal year 2007 and the second half of fiscal year 2006, InnSuites Hotels
      also
      received an accounting fee between $1,000 and $2,000 per month under these
      agreements. These agreements expire on January 31, 2008. InnSuites Hotels
      received between 1% and 2% of room revenue from the hotels owned by affiliates
      of Mr. Wirth in exchange for management services during fiscal years 2006 and
      2005 and between $1,000 and $2,000 per month for accounting services during
      fiscal year 2006. These agreements required that these hotels pay 2% of room
      revenue, unless these hotels failed to reach 80% of their budgeted profit,
      at
      which point the fees were reduced to 1% of room revenue. During fiscal year
      2007, these management fees were fixed at 2.0% of room revenue plus $2,000
      per
      month for accounting services. Effective February 1, 2007, the management fees
      are fixed at 2.5% of room revenue. These agreements have no expiration date
      and
      may be cancelled by either party with 90-days notice or 30-days notice in the
      event the property changes ownership. InnSuites Hotels received 5% of total
      revenue from an unrelated hotel in San Diego, California in exchange for
      management services during fiscal years 2007, 2006and 2005. This agreement
      was cancelled by the hotel owners effective September 20, 2006.





As
      of
      January 31, 2007, InnSuites Hotels owns the “InnSuites” trademark and holds
      trademark agreements with the Hotels, as well as four hotels featuring 544
      suites owned by affiliates of Mr. Wirth and one unrelated hotel property
      featuring 175 suites. InnSuites Hotels received 1.25% (2.5% for the hotel which
      does not carry a third-party franchise) of total revenue from the Hotels owned
      by the Partnership and the Trust in exchange for use of the “InnSuites”
trademark during fiscal year 2006 and 1.0% (2.0% for the hotel without a
      third-party franchise) during fiscal year 2005. The revenue and expenses related
      to these contracts have been eliminated in consolidation. These agreements
      have
      no expiration date. InnSuites Hotels received between 1% and 2% of room revenue
      from the Hotels owned by affiliates of Mr. Wirth in exchange for use of the
      “InnSuites” trademark during fiscal years 2006 and 2005. These agreements
      required that these hotels pay 2% of room revenue, unless these hotels failed
      to
      reach 80% of their budgeted profit, at which point the fees were reduced to
      1%
      of room revenue. During fiscal year 2007, these fees were fixed at 1.25% of
      room
      revenue. Effective February 1, 2007, the fees are fixed at 1.25% for the two
      hotels owned by affiliates of Mr. Wirth which carry a third party franchise
      and
      2.0% for the two hotels which do not carry a third-party franchise. These
      agreements have no expiration date and may be cancelled by either party
      with 12-months notice or 90-days notice in the event the property changes
      ownership. InnSuites Hotels received 2% of total revenue from the unrelated
      hotel in San Diego, California in exchange for trademark licensing services
      during fiscal years 2007, 2006 and 2005. This agreement was cancelled by the
      hotel owners effective September 20, 2006. InnSuites Hotels received 0.5% of
      room revenue from the unrelated hotel in Buena Park, California in exchange
      for
      trademark licensing services during fiscal years 2007, 2006 and 2005. This
      agreement has no expiration date and may be cancelled by either party with
      30-days notice.


30





As
      a
      REIT, through January 31, 2004, the Trust was prohibited from operating its
      properties other than through an independent management company or a taxable
      REIT subsidiary. On June 8, 2004, the management agreements of the
      Management Company were purchased by the Trust and the Trust began managing
      the
      Hotels, certain hotels owned by Mr. Wirth and an unrelated hotel. See Note
      22 -
“Purchase of Management and Licensing Contracts.”





PARTNERSHIP
      AGREEMENT





The
      Partnership Agreement of the Partnership provides for the issuance of two
      classes of limited partnership units, Class A and Class B. Class A and
      Class B limited partnership units are identical in all respects, except that
      each Class A limited partnership unit shall be convertible into one
      newly-issued Share of Beneficial Interest of the Trust, at any time at the
      option of the particular limited partner. The Class B limited partnership
      units may only become convertible with the approval of the Board of Trustees,
      in
      its sole discretion. As of January 31, 2007 and
      2006, 570,067 and 669,617 Class A limited partnership units were issued and
      outstanding representing 4.3% and 5.1%, respectively, of the total partnership
      units. Additionally, as of January 31, 2007 and 2006, 3,407,938 and
      3,407,938, respectively, Class B limited partnership units were outstanding
      to Mr. Wirth and his affiliates, in lieu of the issuance of Class A
      limited partnership units representing 25.8% as of January 31, 2007 and 2006,
      of
      the total partnership units. If all of the Class A and B limited
      partnership units were converted as of January 31, 2007, the limited partners
      in
      the Partnership would receive 3,978,005 Shares of Beneficial Interest of the
      Trust. As of January 31, 2007 and 2006, the Trust owns 9,233,512 and
      9,133,962 general partner units in the Partnership, representing 69.89% and
      69.14%, respectively, of the total partnership units. The
      Trust
      purchased 6,667, 51,300 and 532,077 Partnership units during the years ended
      January 31, 2007, 2006 and 2005 at an average price of 
$1.40 ,
      $1.61 and
      $2.17 per unit, respectively.




BASIS
      OF
      PRESENTATION





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


RECLASSIFICATIONS


Certain
        reclassifications have been made to the cash flow statement to conform to
        current year presentation. This change has no affect on operations.


2.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





USE
      OF
      ESTIMATES





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





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


31


HOTEL
      PROPERTIES





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





The
      Trust
      adopted Statement of Financial Accounting Standards (“SFAS”) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets,” in accounting
      for its hotel properties effective the beginning of fiscal year 2003 and
      previously applied SFAS No. 121 “ Accounting
      for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
      Of” ****** in
      accounting for its hotel properties in fiscal year 2002. The adoption of SFAS
      No. 144 had no significant effect on the financial statements.





Management
      applies SFAS No. 144 to determine when it is required to test an asset for
      recoverability of its carrying value. If the carrying amount of an asset exceeds
      the estimated undiscounted future cash flows over its estimated remaining life,
      the Trust recognizes an impairment expense to reduce the asset’s carrying value
      to its fair value. The estimated future cash flows are based upon, among other
      things, assumptions about expected future operating performance, and may differ
      from actual cash flows. Long-lived assets evaluated for impairment are analyzed
      on a property-specific basis independent of the cash flows of other groups
      of
      assets. If the sum of the projected undiscounted cash flows (excluding interest)
      is less than the carrying value of the assets, the assets will be written down
      to the estimated fair value in the period in which the determination is made.
      The Trust determines the estimated useful lives of its assets based on the
      expected future economic benefit of the asset and its ability to hold such
      assets. Fair value is determined by the most current third-party property
      appraisal, which was performed in fiscal year 2005. Evaluation of future cash
      flows is based on historical experience and other factors, including certain
      economic conditions and committed future bookings. Management has determined
      that no additional impairment of long-lived assets exists during fiscal years
      2005, 2006 and 2007.





During
      fiscal years 2006 and 2005, events and circumstances indicated that one of
      the
      Trust’s properties held in use should be evaluated for impairment. However, the
      Trust’s estimated future undiscounted cash flows and the third-party appraisal
      of the property obtained in fiscal year 2005 both indicated that the value
      of
      the property exceeded its carrying value. However, it is possible that future
      changes in the economic climate or real estate markets may adversely impact
      the
      fair values of the hotel properties, resulting in the need for the Trust to
      recognize an impairment expense to adjust the carrying value of those properties
      to their fair values.





Gains
      and
      losses on sales of properties are recognized at the time of sale or deferred
      to
      the extent required by generally accepted accounting principles.





The
      Trust
      will classify a hotel property as “held for sale” in the period (generally not
      to exceed one year) in which (1) it has made the decision to actively seek
      a buyer of the property and/or (2) a binding agreement to purchase the
      property has been signed under which the buyer has committed a significant
      amount of refundable cash and no significant financing contingencies exist
      which
      could cause the transaction not to be completed in a timely manner. If these
      criteria are met, the Trust will record an impairment loss if the fair value
      less the costs to sell is lower than the carrying amount of the hotel and will
      cease recording depreciation.





CASH
      AND
      CASH EQUIVALENTS





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





RESTRICTED
      CASH





Restricted
      cash consists of amounts held in reserve by lenders to pay property taxes and
      fund capital improvements to the properties.


32





REVENUE
      RECOGNITION





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





RECEIVABLES
      AND ALLOWANCE FOR DOUBTFUL ACCOUNTS





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


The
                  amounts charged to the allowance for doubtful accounts are as follows
                  for
                  the years ended January 31:**Balance
                  at the****Beginning
                  of**
              
              **Charged
                  to**
              
              
              
              **Balance
                  at the****Year**
              
              **Year**
              
              **Expense**
              
              **Deductions**
              
              **End
                  of Year**2005
              
              $106,773
              
              $377,465
              
              $(206,145)
              
              $278,0932006
              
              278,093
              
              354,165
              
              (519,835)
              
              112,4232007
              
              112,423
              
              146,340
              
              (143,793)
              
              114,970





STOCK-BASED
      COMPENSATION





Prior
      to
      February 1, 2006, the Trust applied the provisions of Accounting Principles
      Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and
      provides pro forma net income (loss) disclosures for employee stock-based
      compensation grants as if the fair-value-based method defined in SFAS No. 123R,
      “Share Based Payment,” had been applied. In accordance with APB Opinion No. 25,
      stock-based compensation expense is recorded in the statement of operations
      over
      the vesting period only if the current estimated market price on the underlying
      stock on the date an option is granted exceeds the exercise price. The Trust
      adopted SFAS 123R during fiscal year 2006. The Trust adopted SFAS 123R using
      the
      modified prospective method. The adoption of this Statement had no effect on
      the
      Trust’s results of operations in 2006.





No
      compensation cost has been recognized for options granted to employees for
      the
      years ended January 31, 2007, 2006 and 2005. The following pro forma
      information presents pro forma net loss information as if compensation expense
      had been recognized for stock-based compensation as determined under the
      fair-value-based method prescribed by SFAS No. 123R using the Black-Scholes
      options pricing model:





**2005**Net
                income:
            $
            240,442Plus:Stock
                compensation recorded in the statements of operations
            
            49,280Minus:Total
                stock-based compensation expense as defined under the fair value
                method
            
            (49,280
            )Pro
                forma stock compensation expense
            
            —Pro
                forma
            $
            240,442Net
                income per share - basicAs
                reported
            $
            0.10Pro
                forma
            $
            0.10





No
      stock
      options were issued during the fiscal years ended January 31, 2007, 2006
      and 2005. During the second quarter of fiscal year 2006, the Trust accepted
      the
      voluntary surrender of all outstanding stock options. The options were
      surrendered in order to reduce costs and simplify the Trust’s reporting and
      compliance obligations to the Securities and Exchange Commission and the
      American Stock Exchange. The Trust made no payments to the holders of the
      options for their surrender. The Trust has no obligation, explicit or implied,
      for the surrender of the options, including but not limited to the reissuance
      of
      options at some time in the future. As of January 31, 2007, the Trust has
      no stock options outstanding.


33


During
      the year ended January 31, 2007, the Trust granted restricted stock
      awards.  All were fully vested in  fiscal year 2007 resulting in stock
      based compensation expense of $96,390 net of amounts reimbursed through the
      payroll reimbursement under the management contracts of $8,505 and amounts
      accrued as bonuses at January 31, 2006 of $29,160.








Restricted
                SharesShares
            Weighted-Average
                Grant Date Fair ValueBalance
                at January 31, 2006
            —
            —Granted
            99,300
            $1.35Vested
            (99,300)
            $1.35Forfeited
            —
            —Balance
                of unvested awards at January 31, 2007
            —
            —




INCOME
      TAXES





Prior
      to
      February 1, 2004, the Trust elected to be taxed as a REIT under
      Sections 856 through 860 of the U.S. Internal Revenue Code (the “Code”). To
      qualify as a REIT, the Trust was required to meet a number of organizational
      and
      operational requirements, including a requirement that it currently distribute
      at least 90% of its adjusted taxable income to its shareholders. As a REIT,
      the
      Trust was not subject to federal corporate income tax on that portion of its
      net
      income that was distributed to shareholders.





Effective
      February 1, 2004, the Trust relinquished its REIT status. As of that date,
      any distributions to its shareholders are not deductible for purposes of
      computing the Trust’s taxable income and the Trust will be subject to income
      tax, including any applicable alternative minimum tax, on its taxable income
      at
      regular corporate rates, without offset for distributions of such income to
      its
      shareholders.





Subsequent
      to February 1, 2004, the Trust became subject to federal and state
      corporate income tax and accounts for deferred taxes utilizing a liability
      method whereby deferred tax assets are recognized for deductible temporary
      differences and deferred tax liabilities are recognized for taxable
      temporary differences. Temporary differences are the differences between
      the reported amounts of assets and liabilities and their tax bases. Deferred
      tax
      assets are reduced by a valuation allowance when it was determined to be
      more likely than not that some portion or all of the deferred tax
      assets will not be realized. Deferred tax assets and liabilities were
      adjusted for the effects of changes in tax laws and rates on the date of
      enactment.





DIVIDENDS
      AND DISTRIBUTIONS





In
      fiscal
      years 2007, 2006 and 2005, the Trust paid dividends of $0.01 per share in the
      fourth quarter of each year. The Trust’s ability to pay dividends is largely
      dependent upon the operations of the Hotels.





MINORITY
      INTEREST





The
      Trust
      accounts for minority interest in accordance with Emerging Issues Task Force
      (“EITF”) Issue No. 94-2 “Treatment of Minority Interests in Certain Real
      Estate Investments” and EITF Issue No. 95-7 “Implementation Issues Related
      to the Treatment of Minority Interest in Certain Real Estate Investment
      Trusts.”





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





INCOME
      (LOSS) PER SHARE





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


34





For
      the
      twelve months ended January 31, 2007, 2006 and 2005, there were
      Class A and Class B limited partnership units outstanding, which are
      convertible into Shares of Beneficial Interest of the Trust. Assuming conversion
      at the beginning of each period, the aggregate weighted-average of these Shares
      of Beneficial Interest would have been 4,021,840, 4,245,445 and 5,680,962 in
      addition to the basic shares outstanding for fiscal year 2007, 2006 and 2005,
      respectively. These Shares of Beneficial Interest issuable upon conversion
      of
      the Class A and Class B limited partnership units were anti-dilutive during
      fiscal years 2007 and 2005 due to the fact that the conversion of these units
      would result in decreased loss per share and increased earnings per share for
      the two years respectively. Therefore, they have not been included in the number
      of issued and outstanding Shares of Beneficial Interest used in the calculation
      of diluted earnings per share for that year.





For
      the
      twelve months ended January 31, 2005, 232,600 stock options were not
      included in the computation of diluted earnings per share as their inclusion
      would have had an antidilutive effect because of the fact that the option
      exercise prices are greater than the average market price of the Trust’s Shares
      of Beneficial Interest. As of January 31, 2007, there are no stock options
      outstanding.





The
      following is a reconciliation of basic earnings per share to diluted earnings
      per share:





**For
                the Twelve Months Ended January 31,****2007**
            **2006**
            **2005**Income
                (Loss) attributable to Shares of Beneficial Interest
            $
            (46,430)
            $
                541,578
            $
                240,442Plus:
                Income (Loss) attributable to minority interest unit
                holders
            —
            (267,265)
            1,384,985Income
                attributable to Shares of Beneficial Interest after unit
                conversion
            $
            (46,430)
            $
                274,313
            $
                1,625,427Weighted
                average common shares outstanding, basic
            9,251,420
            9,096,338
            2,424,837Plus:
                Weighted average incremental shares resulting from unit
              conversion
            —
            4,245,445
            —Weighted
                average common shares outstanding after unit conversion
            9,251,420
            13,341,783
            2,424,837Diluted
                Earnings Per Share
            $
            (0.01)
            $
                0.02
            $
                0.10





35


FAIR
      VALUE OF FINANCIAL INSTRUMENTS





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





The
      fair
      value of mortgage notes payable, notes payable to banks and notes and advances
      payable to related parties is estimated by using the current rates which would
      be available for similar loans having the same remaining maturities. The
      carrying value of accounts payable and accrued expenses and other notes payable
      approximates fair value, due to their short-term nature. See Note 16 - “Fair
      Value of Financial Instruments.”





NEW
      ACCOUNTING PRONOUNCEMENTS





In
      May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
      Corrections,” which replaces APB Opinion No. 20, “Accounting Changes,” and
      SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements —
An Amendment of APB Opinion No. 28.” SFAS No. 154 provides guidance on
      the accounting for and reporting of accounting changes and error corrections.
      It
      establishes retrospective application, or the latest practicable date, as the
      required method for reporting a change in accounting principle (unless a
      different method is prescribed by the new standard) and the reporting of a
      correction of an error. SFAS No. 154 is effective for accounting changes
      and corrections of errors made in fiscal years beginning after December 15,
      2005. The adoption of SFAS No. 154 is not expected to have a material
      impact on the Trust’s financial position or results of operations.





In
      June
      2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes.”
The interpretation applies to all tax positions related to income taxes subject
      to SFAS No. 109, “Accounting for Income Taxes.” FIN No. 48 clarifies the
      accounting for uncertainty in income taxes by prescribing a minimum recognition
      threshold in determining if a tax position should be reflected in the financial
      statements. Only tax positions that meet the “more likely than not” recognition
      threshold may be recognized. The interpretation also provides guidance on
      classification, interest and penalties, accounting in interim periods,
      disclosure, and transition requirements for uncertain tax positions. FIN No.
      48
      will be effective for the Trust’s fiscal year ending January 31, 2008. The Trust
      is currently evaluating the impact FIN No. 48 will have on the Trust’s financial
      condition and results of operations.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS
      No. 157 establishes a single authoritative definition of fair value, sets out
      a
      framework for measuring fair value and expands disclosures about fair value
      measurements. SFAS No. 157 applies to fair value measurements already required
      or permitted by existing standards. SFAS No. 157 will be effective for the
      Trust’s fiscal year ending January 31, 2009. The Trust is currently evaluating
      the requirements of SFAS No. 157 and has not yet determined the impact on its
      financial condition and results of operations.





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106, and 132 (R).” This pronouncement requires
      an employer to make certain recognitions, measurements, and disclosures
      regarding defined benefit postretirement plans. The Trust does not have any
      defined benefit postretirement plans, and SFAS No. 158 will not have any impact
      on its financial condition and results of operations.


36




In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin (SAB) No. 108, “Considering the Effects of Prior Year Misstatements in
      Current Year Financial Statements (“SAB 108”). SAB 108 provides guidance on
      consideration of the effects of prior year misstatements in quantifying current
      year misstatements for the purpose of a materiality assessment. SAB 108 is
      effective for fiscal years ending after November 15, 2006. The adoption of
      SAB
      108 did not have an impact on the Trust’s consolidated financial
      statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities,” which permits entities to choose to
      measure many financial instruments and certain other items at fair value that
      are not currently required to be measured at fair value. SFAS No. 159 will
      be
      effective for the Trust on February 1, 2008. The Trust is currently evaluating
      the impact of adopting SFAS No. 159 on its financial position, cash flows and
      results of operations.





In
      June
      2006, the FASB issued EITF Issue No. 06-03, “How Taxes Collected from Customers
      and Remitted to Governmental Authorities Should Be Presented in the Income
      Statement (That is, Gross Versus Net Presentation)” which permits entities to
      present certain taxes assessed by a governmental authority on either a gross
      basis (included in revenues and costs) or a net basis (excluded from revenues).
      An entity is not required to reevaluate its existing policies related to taxes
      assessed by a governmental authority but may choose to do so. EITF issue No.
      06-03 is effective for interim and annual reporting periods beginning after
      December 15, 2006. The Trust reports it revenue net of sales taxes. Management
      plans to continue to report revenue net of sales tax.





SEGMENT
      REPORTING





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





ADVERTISING
      COSTS





Amounts
      incurred for advertising costs with third parties are expensed as incurred.
      Advertising expense totaled approximately $823,000, $755,000 and $785,000 for
      the years ended January 31, 2007, 2006, and 2005,
      respectively.





3.
      HOTEL
      PROPERTIES





As
      of
      January 31 of the respective years, hotel properties, and hotel properties
      held for sale, consisted of the following:





**2007**
            
            **2006**Land
            
            $
            2,824,520
            
            $
            2,824,520Building
                and improvements
            
            34,101,584
            
            33,520,145Furniture,
                fixtures and equipment
            
            7,413,834
            
            7,213,866Total
                hotel properties
            
            44,339,938
            
            43,558,531Less
                accumulated depreciation
            
            (14,684,996
            )
            (13,343,140
            )Hotel
                properties, net
            
            $
            29,654,942
            
            $
            30,215,391





4.
      ACQUISITIONS





During
      the second quarter of fiscal year 2005, the Trust acquired the management and
      licensing agreements. See
      Note
      22 -
      “Purchase of Management and Licensing Contracts.”





37


5.
      PREPAIDS AND OTHER CURRENT ASSETS





Prepaid
      expenses and other current assets are carried at face value and expect to be
      consumed within one year. Prepaid expenses and other current assets consisted
      of
      the following:





**January
                31,****2007**
            ****
            **2006**Prepaid
                Insurance
            
            $
            125,108
            
            
            121,964Deferred
                Financing Costs, Current Portion
            
            
            35,683
            
            
            35,683Tax
                and Insurance Escrow
            
            
            310,159
            
            
            320,017Other
                Prepaid Expenses and Current Assets
            
            
            14,686
            
            
            17,165TotalPrepaidExpenses
                and Current Assets
            
            $
            485,636
            
            
            494,829











6.
      ACCOUNTS PAYABLE AND ACCRUED LIABILITIES





The
      carrying value of accounts payable and accrued expenses approximates fair value,
      due to their short-term nature. The carrying value of accounts payable and
      accrued liabilities was $2.97 million and $2.60 million at January 31, 2007
      and
      2006 respectively. Accounts payable and accrued liabilities consisted of the
      following:





**January
                31,**
            ********
            ****
            **2007**
            ****
            **2006**Accounts
                Payable
            
            $
            845,413
            
            
            863,723Accrued
                Salaries and Wages
            
            
            503,447
            
            
            368,288Accrued
                Vacation
            
            
            208,706
            
            
            188,965Sales
                Tax Payable
            
            
            240,468
            
            
            169,702Accrued
                Interest Payable
            
            
            95,550
            
            
            102,363Advanced
                Customer Deposits
            
            
            46,248
            
            
            33,637Income
                Tax Liability
            
            
            31,805
            
            
            240,671Accrued
                Property Taxes
            
            
            266,619
            
            
            282,043Accrued
                Land Lease
            
            
            106,393
            
            
            97,750Accrued
                Other
            
            
            113,745
            
            
            189,149Advances
                From Related Parties, net
            
            
            511,686
            
            
            58,442Total
                Accounts Payable and Accrued Liabilities
            
            $
            2,970,080
            
            
            2,594,733





38





7.
      MORTGAGE NOTES PAYABLE





At
      January 31, 2007, the Trust had mortgage notes payable outstanding with
      respect to each of the Hotels. The mortgage notes payable have various repayment
      terms and have scheduled maturity dates ranging from July 29, 2009 to
      May 1, 2016. Weighted average interest rates on the mortgage notes payable
      for the years ended January 31, 2007, 2006 and 2005 were 8.56%, 8.21% and
      8.03%, respectively.





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





**2007**
            
            **2006**Mortgage
                note payable, due in variable monthly installments ($41,521 as of
                January
                31, 2007), including interest at prime rate plus 1.0% per year (9.5%
                as of
                January 31, 2007), through July 29, 2009, secured by the Tucson St.
                Mary’s property with a carrying value of $9.3 million at January 31,
                2007.
            
            $
            4,092,537
            
            $
            4,191,981Mortgage
                note payable, due in monthly installments of $48,738, including interest
                at 8% per year, through May 1, 2016, secured by the Tucson Oracle
                property
                with a carrying value of $5.1 million at January 31,
                2007.
            
            3,837,263
            
            4,103,465Mortgage
                note payable, due in monthly installments of $71,141, including interest
                at 8.28% per year, through May 11, 2011, secured by the Ontario property
                with a carrying value of $6.8 million at January 31,
                2007.
            
            8,297,893
            
            8,448,212Mortgage
                note payable, due in monthly installments of $15,858, including interest
                at 8.875% per year, through September 1, 2015, secured by the
                Albuquerque property with a carrying value of $1.7 million at
                January 31, 2007.
            
            1,147,738
            
            1,232,062Mortgage
                note payable, due in monthly installments of $41,168, including interest
                at 9.25% per year, through August 1, 2011, secured by the Yuma
                property with a carrying value of $6.4 million at January 31,
                2007.
            
            1,490,220
            
            1,933,157Totals
            
            $
            18,865,651
            
            $
            19,908,877





Mr. Wirth
      and certain of his affiliates have guaranteed $1,745,110 and $1,966,579 of
      the
      mortgage notes payable as of January 31, 2007 and 2006, respectively. The net
      book value of the properties securing these mortgage notes payable at
      January 31, 2007 and 2006 was $15,776,000 and $15,862,000, respectively.
      See Note 11 - “Minimum Debt Payments” for scheduled minimum
      payments.





8.
      NOTES
      PAYABLE TO BANKS





On
      July 21, 2004, the Trust obtained a bank line of credit secured by a
      security agreement, business loan agreement and commercial guaranty of the
      Partnership all dated July 21, 2004. As of January 31, 2006, the Trust
      had drawn the entire $500,000 available under the line of credit. The Trust
      satisfied the line with a new bank line of credit on August 18,
      2006.





On
      August
      18, 2006, the Trust entered into an agreement for an unsecured bank line of
      credit. Under the agreement, the Trust can draw $750,000, bearing interest
      at
      prime plus 0.5% (8.75% as of January 31, 2007), with interest-only payments
      due
      monthly. During specified times over the duration of the line of credit, the
      Trust must pay the line of credit down to zero and is unable to borrow against
      the line of credit for a period of 30 days. The line of credit matures on
      February 18, 2008. As of January 31, 2007 the Trust had drawn $749,777 of the
      funds available under the line of credit.




39


9.
      NOTES
      AND ADVANCES PAYABLE TO RELATED PARTIES





Notes
      and
      advances payable to related parties consist of funds provided by Mr. Wirth,
      certain of his affiliates and other related parties to permit the Trust to
      repurchase additional general partnership units in the Partnership and to fund
      working capital and capital improvement needs. The aggregate amounts outstanding
      to related parties were approximately $1.1 million and $515,000 as of
      January 31, 2007 and 2006, respectively. The notes and advances payable to
      related parties are as follows as of January 31 of the respective
      years:





**2007**
            
            **2006**Line
                of credit payable to Rare Earth Financial, L.L.C., an affiliate of
                Mr.
                Wirth, unsecured and bearing interest at 7% per annum. Due in one
                installment of accrued interest and unpaid principal on March 1,
                2008.
            
            $
            1,000,000
            
            $
            —Note
                payable to The Anderson Charitable Remainder Unitrust, an affiliate
                of
                Mason Anderson, former Trustee of the Trust, bearing interest at
                7% per
                annum, and secured by Shares of Beneficial Interest in the Trust.
                Due in
                monthly principal and interest payments of $1,365 through
                November 2009.
            
            41,985
            
            54,929Note
                payable to Wayne Anderson, son of Mason Anderson, former Trustee
                of the
                Trust, bearing interest at 7% per annum, and secured by Shares of
                Beneficial Interest in the Trust. Due in monthly principal and interest
                payments of $574 through June 2009.
            
            15,280
            
            20,886Note
                payable to Karen Anderson, daughter of Mason Anderson, former Trustee
                of
                the Trust, bearing interest at 7% per annum, and secured by Shares
                of
                Beneficial Interest in the Trust. Due in monthly principal and interest
                payments of $574 through June 2009.
            
            15,280
            
            20,886Note
                payable to Kathy Anderson, daughter of Mason Anderson, former Trustee
                of
                the Trust, bearing interest at 7% per annum, and secured by Shares
                of
                Beneficial Interest in the Trust. Due in monthly principal and interest
                payments of $495 through June 2009.
            
            13,172
            
            18,005Note
                payable to Rare Earth Financial, L.L.C., an affiliate of Mr. Wirth,
                unsecured and bearing interest at 7% per annum. Satisfied in full
                during
                fiscal year 2007 with proceeds from the line of credit with Rare
                Earth
                Financial.
            
            —
            
            400,000Totals
            
            $
            1,085,717
            
            $
            514,706





During
      the first quarter of fiscal year 2005, the Trust repurchased 433,036 Class
      B
      limited partnership units in the Partnership from affiliates of Mr. Wirth, issuing promissory notes in the
      aggregate amount of $974,331. During the first quarter of fiscal year 2005,
      the
      Trust repaid $449,500 of these notes. During the fourth quarter of fiscal year
      2005, the Trust repaid the remaining balance of these notes with Shares of
      Beneficial Interest with an aggregate value of $467,552. Additionally, Mr.
      Wirth
      converted 100,000 Class B limited partnership units in the Partnership into
      100,000 Shares of Beneficial Interest.




As
      of
      February 2, 2004, J. R. Chase, the sole stockholder of the Management
      Company, agreed to transfer 32,363 Shares of Beneficial Interest in the Trust
      to
      the Management Company in order to facilitate the Management Company’s
      acquisition of Licensing Corp. from Mr. Wirth. In consideration of the transfer
      of those Shares, the Management Company agreed to pay Mr. Chase $72,817. The
      Management Company fully satisfied this obligation during June 2004. See
      Note 22, “Purchase of Management and Licensing Contracts.”




During
      the second quarter of fiscal year 2005, the Trust issued promissory notes
      totaling $83,000 to affiliates of Mason Anderson, who was Trustee of the Trust
      from January through August 2005, in exchange for 47,084 Shares of Beneficial
      Interest in the Trust.




During
      the second quarter of fiscal year 2005, the Trust issued 55,423 Shares of
      Beneficial Interest to satisfy unpaid principal and interest totaling $95,882
      to
      Mr. Robson, a Trustee of the Trust.




During
      the fourth quarter of fiscal year 2005, the Partnership reclassified $700,000
      of
      advances payable to Rare Earth Financial, L.L.C., an affiliate of Mr. Wirth,
      to
      a deposit for the purchase of the Phoenix, Arizona hotel property by another
      affiliate of Mr. Wirth.




During
      the third quarter of fiscal year 2006, the Partnership issued a promissory
      note
      in the amount of $400,000 to Rare Earth Financial, L.L.C., an affiliate of
      Mr.
      Wirth. The full unpaid principal and accrued interest was due in one installment
      on April 15, 2006. This note was paid off during fiscal year 2007 using a new
      line of credit with Rare Earth Financial, L.L.C.





During
      the first quarter of fiscal year 2007, the Partnership established a $700,000
      subordinated line of credit with Rare Earth Financial, L.L.C., an affiliate
      of
      Mr. Wirth. The line of credit is secured by 49% of the Partnership’s
      interest in its Tucson St. Mary’s hotel property, and is subordinated to the
      Trust’s commercial bank line of credit. Outstanding borrowings under the line of
      credit will bear interest at 7.0% per year. The Trust borrowed $400,000 under
      the line of credit during the first quarter of fiscal year 2007 in order to
      refinance an outstanding promissory note payable to Rare Earth Financial. During
      the fourth quarter of fiscal year 2007, the line of credit limit was increased
      to $1.0 million. As of January 31, 2007, $1.0 million was outstanding on
      the line of credit.





The
      Trust
      paid interest on related party notes to Mr. Wirth and his affiliates in the
      amounts of $45,644, $8,905 and $443,959 for the twelve months ended
      January 31, 2007, 2006 and 2005, respectively. The Trust incurred interest
      expense on related party notes to Mr. Wirth and his affiliates in the
      amounts of $42,782, $10,856 and $122,314 for the twelve months ended
      January 31, 2007, 2006 and 2005, respectively.


40





10.
      OTHER
      NOTES PAYABLE





As
      of
      January 31, 2007, the Trust had $235,899 in secured promissory notes
      outstanding to unrelated third parties arising from the repurchase of 187,008
      Class A limited partnership units in the Partnership and the repurchase of
      91,222 Shares of Beneficial Interest in privately negotiated transactions.
      The
      promissory notes bear interest at 7% per year and are due in varying monthly
      payments through March 2011. The repurchased Class A limited partnership
      units and Shares of Beneficial Interest secure the notes. As
      of
      January 31, 2006, the Trust had $327,982 in secured promissory notes
      outstanding to unrelated third parties arising from the repurchase of 207,850
      Class A limited partnership units in the Partnership and the repurchase of
      84,312 Shares of Beneficial Interest in privately negotiated
      transactions.





11.
      MINIMUM DEBT PAYMENTS





Scheduled
      minimum payments of debt as of January 31, 2007 are as follows in the
      respective fiscal years indicated:





**FISCAL
                YEAR ENDED**
            
            **RELATED
                PARTIES**
            
            **MORTGAGES**
            
            **OTHER
                NOTES PAYABLE**
            
            **TOTAL**2008
            
            $
            31,086
            
            $
            926,464
            
            $
            109,486
            
            $
            1,067,0362009
            
            1,033,333
            
            1,007,403
            
            806,936
            
            2,847,6722010
            
            21,298
            
            4,834,138
            
            37,614
            
            4,894,0502011
            
            —
            
            1,057,051
            
            29,636
            
            1,086,6872012
            
            —
            
            754,195
            
            2,004
            
            756,199Thereafter
            
            —
            
            10,285,400
            
            —
            
            10,285,400$
            1,085,717
            
            $
            18,865,651
            
            $
            985,676
            
            $
            20,937,044





12.
      DESCRIPTION OF CAPITAL STOCK





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





On
      January 2, 2001, the Board of Trustees approved a share repurchase program
      under Rule 10b-18 of the Securities Exchange Act of 1934, as amended, for
      the purchase of up to 250,000 limited partnership units in the Partnership
      and/or Shares of Beneficial Interest in open market or privately negotiated
      transactions. Additionally, on September 10, 2002, the Board of Trustees
      approved the purchase of up to 350,000 additional limited partnership units
      in
      the Partnership and/or Shares of Beneficial Interest in open market or privately
      negotiated transactions. On August 18, 2005, the Board of Trustees approved
      the purchase of up to 350,000 additional limited partnership units in the
      Partnership and/or Shares of Beneficial Interest in open market or privately
      negotiated transactions. Acquired Shares of Beneficial Interest will be held
      in
      treasury and will be available for future acquisitions and financings and/or
      for
      awards granted under the InnSuites Hospitality Trust 1997 Stock Incentive and
      Option Plan. During fiscal year 2007, the Trust acquired 134,865 Shares of
      Beneficial Interest in open market transactions at an average price of $1.35
      per
      share and 6,427 Shares of Beneficial Interest in privately-negotiated
      transactions at an average price of $1.38. During
      fiscal year 2006, the Trust acquired 20,100 Shares of Beneficial Interest in
      open market transactions at an average price of $1.34 per share and 112,253
      Shares of Beneficial Interest in privately-negotiated transactions at an average
      price of $1.32. During
      fiscal year 2005, the Trust acquired 130,717 Shares of Beneficial Interest
      in
      open market and privately negotiated transactions at an average price of $1.73
      per share. The Trust intends to continue repurchasing Shares of Beneficial
      Interest in compliance with applicable legal and American Stock Exchange
      requirements. The Trust is authorized to repurchase an additional 66,153 limited
      partnership units and/or Shares of Beneficial Interest pursuant to the share
      repurchase program.





For
      the
      years ended January 31, 2007, 2006 and 2005, the Trust repurchased 141,292,
      132,353 and 130,717 Shares of Beneficial Interest at an average price of $1.35,
      $1.33 and $1.73 per share, respectively. Repurchased Shares of Beneficial
      Interest are accounted for as treasury stock at its cost in the Trust’s
      Consolidated Statements of Shareholders’ Equity (Deficit).





41





13.
      FEDERAL INCOME TAXES





The
      Trust
      and subsidiaries have an income tax net operating loss carryforward of
      approximately $11.4 million at January 31, 2007.  The quarterly
      allocation of cash dividends paid per Share of Beneficial Interest and the
      characterization of dividends as either ordinary income or return of capital
      for
      an individual shareholder’s income tax purposes were as follows:





**CALENDAR
                2006**
            
            **CALENDAR
                2005**
            
            **CALENDAR
                2004****Month**
              **Paid**
            
            **Ordinary**
              **Income**
            
            **Return
                of**
              **Capital**
            
            **Total**
              **Paid**
            
            **Ordinary**
              **Income**
            
            **Return
                of**
              **Capital**
            
            **Total**
              **Paid**
            
            **Ordinary**
              **Income**
            
            **Return
                of**
              **Capital**
            
            **Total**
              **Paid**January
            
            —
            
            $
            .01
            
            $
            .01
            
            —
            
            $
            .01
            
            $
            .01
            
            —
            
            $
            .02
            
            $
            .02May
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —July
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —October
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —Total
            
            —
            
            $
            .01
            
            $
            .01
            
            —
            
            $
            .01
            
            $
            .01
            
            —
            
            $
            .02
            
            $
            .02





The
      tax
      status of distributions to shareholders in calendar 2007 will be dependent
      on
      the level of the Trust’s earnings in that year. If certain changes in the
      Trust’s ownership should occur, there could be an annual limitation on the
      amount of carryforwards that can be utilized, which could potentially impair
      the
      ability to utilize the full amount of the carryforwards.




On
      January 31, 2005 the Trust underwent an
      ownership change under Internal Revenue Code section 382. As a result the
      utilization of future NOLs will be limited to $452,000 annually (accumulative
      if
      not used) plus any realized "built in gains." The Trust estimates built in
      gains exceeded the total NOL carryforward at the change date. However, unless
      built in gains are realized prior to January 31, 2010 there will be a limitation
      on the amount of carryforwards that can be utilized. Therfore, the ability
      to
      utilize the full amount of the carryforwards could be permanently
      impaired.





The
      total
      dividends per Share of Beneficial Interest applicable to operating results
      for
      the years ended January 31, 2007, 2006 and 2005, amounted to $0.01 per
      share, $0.01 per share and $0.01 per share, respectively.





The
      Trust
      and subsidiaries have federal and state net operating loss carryforwards which
      are estimated to expire as follows at January 31, 2007:





**Amount****Year**
            
            **Federal**
            
            **State**2008
            
            $
            —
            
            $               197,6572009
            
            —
            
            1,143,9582012
            
            2,468,326
            
            46,6022019
            
            1,163,799
            
            93,9622020
            
            1,979,025
            
            —2021
            
            250,847
            
            —2022
            
            1,580,590
            
            —2023
            
            1,671,294
            
            —2024
            
            2,302,410
            
            —$
            11,416,291
            
            $
            1,482,179





**Total
                and net deferred income tax assets at January 31,**
            
            
            **2007**
            
            
            **2006**Net
                operating loss carryforwards
            
            $
            3,944,000
            
            $
            5,600,000Bad
                debt allowance
            
            31,000
            
            
            50,000Alternative
                minimum tax credit
            
            43,000
            
            
            —Total
                deferred income tax assets
            
            4,018,000
            
            
            5,650,000Deferred
                income tax liability associated with book/tax differences in hotel
                properties
            
            (2,791,000
            )
            
            (2,900,000
            )Net
                deferred income tax asset
            
            1,227,000
            
            
            2,750,000Valuation
                allowance
            
            (1,227,000
            )
            
            (2,491,000
            )Net
                deferred income tax asset
            
            $
            —
            
            $
            259,000





42





**Income
                taxes for the year ended January 31,**
            ****
            **2007**
            
            **2006**
            
            **2005**Current
                income tax provision
            
            $
            57,000
            
            $
            164,000
            
            $
            330,000Deferred
                income tax provision (benefit)
            
            
            259,000
            
            
            (89,000
            )
            
            (170,000
            )Net
                income tax provision
            
            $
            316,000
            
            $
            75,000
            
            $
            160,000





The
      differences between the statutory and effective tax rates is as follows for
      the
      year ended January 31, 2007:


Federal
                statutory rates
            $
            92,000
            
            
            34
            %State
                income taxes (net of federal benefit)
            
            12,000
            
            
            5
            %Utilization
                of federal net operating loss carryforward and related recognition
                of tax
                benefit
            
            (1,264,000
            )
            
            (469
            )%True
                up of prior year net operating loss carryforward
            
            1,443,000
            
            
            535
            %Other
            
            33,000
            
            
            12
            %Effective
                rate
            $
            316,000
            
            
            117
            %





The
      differences between the statutory and effective tax rates is as follows for
      the
      year ended January 31, 2006:




Federal
                statutory rates
            $
            210,000
            
            
            34
            %State
                income taxes
            
            37,000
            
            
            6
            %Utilization
                of federal net operating loss carryforward and related recognition
                of tax
                benefit
            
            (214,000
            )
            
            (35
            )%Alternative
                minimum tax
            
            42,000
            
            
            7
            %Effective
                rate
            $
            75,000
            
            
            12
            %





The
      differences between the statutory and effective tax rates is as follows for
      the
      year ended January 31, 2005:





Federal
              statutory rates
            $
            426,000
            
            
            34
            %State
                income taxes
            
            75,000
            
            
            6
            %Utilization
                of federal net operating loss carryforward and related recognition
                of tax
                benefit
            
            (341,000
            )
            
            (27
            )%Effective
                rate
            $
            160,000
            
            
            13
            %





In
      accordance with SFAS No. 109 "Accounting for Income Taxes", the Trust has
      established a valuation allowance against its net deferred income tax assets
      at
      January, 31, 2007. As defined by the standard, Mangement believes it is more
      likely than not that its deferred income tax assets may not be realized due
      to a
      history of losses sustained by the Trust. Realization of a deferred tax asset
      is
      dpendent on whether or not there will be sufficient taxable income in future
      periods in which operating loss carryforwards can be utilized.




The
      valuation allowance decreased by approximately $1,264,000 in the year ended
      January 31, 2007, primarily due to the utilization of approximately $2,580,000
      of federal and $130,000 of state net operating loss carryforwards.  The
      valuation allowance decreased by approximately $730,000 in the year ended
      January 31, 2006, primarily due to the utilization of approximately $2,607,185
      of federal and state net operating loss carryforwards.




The
      Trust
      had income taxes payable of $32,000 and $241,000 recorded as of January 31,
      2007
      and 2006, respectively.




14.
      ADVISORY AGREEMENT/EMPLOYMENT AGREEMENTS





Mr. Wirth
      has an employment agreement with the Trust that expires in December 2007.
      The employment agreement provides that Mr. Wirth will receive no
      compensation from the Trust as long as a previously enforceable advisory
      agreement is in effect. However, pursuant to the terms of the employment
      agreement, since the Advisor (as defined in the advisory agreement) no longer
      provides services to the Partnership or the Trust, Mr. Wirth is to be
      compensated at an amount up to the same annual basis as the Advisor would have
      been compensated under the terms of the advisory agreement had it remained
      in
      effect. However, during fiscal years 2007 and 2006, Mr. Wirth was
      compensated at a lesser rate of $141,000 a year.





15.
      OTHER
      RELATED PARTY TRANSACTIONS





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





As
      of
      January 31, 2007 and 2006, Mr. Wirth and his affiliates held 3,407,938
      Class B limited partnership units, which represented 25.8% of the total
      outstanding partnership units. As of January 31, 2007 and 2006,
      Mr. Wirth and his affiliates held 5,573,624 and 5,569,624 Shares of
      Beneficial Interest in the Trust, respectively, which represented 60.6% and
      60.9% of the total issued and outstanding Shares of Beneficial
      Interest.


43


At
      January 31, 2007 and 2006, the Trust owned a 69.89% interest and 69.14%
      interest, respectively, in the Hotels through its sole general partner’s
      interest in the Partnership.








16.
      FAIR
      VALUE OF FINANCIAL INSTRUMENTS





The
      carrying amounts and fair values of the Trust’s significant financial
      instruments at January 31, 2007 and 2006 are as follows:





**2007**
            
            **2006****CARRYING**
              **AMOUNT**
            
            **FAIR**
              **VALUE**
            
            **CARRYING**
              **AMOUNT**
            
            **FAIR**
              **VALUE**Mortgage
                notes payable
            
            $
            18,865,651
            
            $
            19,405,055
            
            $
            19,908,877
            
            $
            20,867,605Notes
                payable to banks
            
            749,777
            
            749,777
            
            500,000
            
            500,000Notes
                and advances payable to related parties
            
            1,085,717
            
            1,079,918
            
            514,706
            
            513,500Other
                notes payable
            
            235,899
            
            234,995
            
            327,982
            
            325,669





17.
      SUPPLEMENTAL CASH FLOW DISCLOSURES





**2007**
            
            **2006**
            
            **2005**Cash
                paid for interest
            
            $
            1,787,785
            
            $
            1,894,693
            
            $
            2,514,975Cash
                paid for income taxes
            
            
            26,867
            
            
            120,698
            
            
            433,572Promissory
                notes issued by the Trust to acquire Class A limited partnership
                units
            
            8,842
            
            81,933
            
            179,500Promissory
                notes issued by the Trust to acquire Shares of Beneficial
                Interest
            
            8,158
            
            145,251
            
            112,400Promissory
                notes issued by the Trust to acquire Class B limited partnership
                units
            
            —
            
            —
            
            971,831Shares
                issued to Trustees and Officers in exchange for services
            
            37,665
            
            37,888
            
            49,280Shares
                issued to affiliates to satisfy notes payable
            
            —
            
            —
            
            690,821





During
      the first quarter of fiscal year 2005, the Trust reduced the principal balance
      of its note payable to Hulsey Hotels Corporation, an affiliate of Mr. Wirth,
      by
      $119,427 to offset receivables in the same amount that were owed to the Trust
      by
      other entities affiliated with Mr. Wirth.




During
      the first quarter of fiscal year 2005, J. R. Chase, the sole stockholder of
      the
      Management Company, agreed to transfer 32,363 Shares of Beneficial Interest
      in
      the Trust to the Management Company in order to facilitate the Management
      Company ’s
      acquisition of Licensing Corp. from Mr. Wirth. In consideration of the transfer
      of those Shares, the Management Company agreed to pay Mr. Chase $72,817.
      The Management Company fully satisfied this obligation during
      June 2004.




During
      the second quarter of fiscal year 2005, Rare Earth Financial, an affiliate
      of
      Mr.Wirth, assumed from the Management Company a note payable with a principal
      balance of $23,303.




The
      Trust
      issued 92,883, 528,469 and 113,048 Shares of Beneficial Interest during the
      years ended January 31, 2007, 2006 and 2005, respectively, in exchange for
      Class A limited partnership units. The issued Shares of Beneficial Interest
      were valued at $117,186, $693,173 and $205,747, respectively.




18.
      COMMITMENTS AND CONTINGENCIES





Two
      of
      the Hotels are subject to non-cancelable ground leases expiring in 2050 and
      2033. Total expense associated with the non-cancelable ground leases for the
      fiscal years ended January 31, 2007, 2006 and 2005 was $196,234, $193,018
      and $190,378, respectively, plus a variable component based on gross revenues
      of
      each property that totaled approximately $98,000, $90,000 and $80,000,
      respectively.





44


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





**Fiscal
                Year Ending**2008
            
            $
            198,1332009
            
            198,1332010
            
            198,1332011
            
            198,1332012
            
            198,133Thereafter
            
            5,984,547Total
            
            $
            6,975,212





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





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





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





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





19.
      STOCK
      OPTION PLAN





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





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





There
      were no options granted in fiscal year 2007, 2006 or 2005, and no options
      outstanding as of January 31, 2007. The Plan currently has 1,000,000
      options available to grant.





The
      Plan
      also permits the Trust to award stock appreciation rights, none of which, as
      of
      January 31, 2007, have been issued.







45


The
      following table summarizes the stock option activity
      during fiscal years 2007, 2006 and 2005, and provides information about the
      stock options outstanding at January 31, 2007:


**Number
                of Options**
            
            **Weighted-**
              **Average**
              **Exercise
                Price**Stock
                Option ActivityOutstanding,
                January 31, 2004
            
            246,000
            
            $
            2.50Granted
            
            —
            
            —Forfeited
            
            (13,400
            )
            2.50Exercised
            
            —
            
            —Outstanding,
                January 31, 2005
            
            232,600
            
            $
            2.50Granted
            
            —
            
            —Forfeited
            
            (232,600
            )
            2.50Exercised
            
            —
            
            —Outstanding,
                January 31, 2006
            
            —
            
            $
            —Granted
            
            —
            
            —Forfeited
            
            —
            
            —Exercised
            
            —
            
            —Outstanding,
                January 31, 2007
            
            —
            
            $
            —





**Stock
                Option Information**
            
            **January 31,**
              **2007
                and 2006**Options
                exercisable
            
            —Weighted
                Average Exercise Price
            
            
            —Weighted
                Average Remaining Contractual Life
            
            —





For
      stock
      options granted to non-employees of the Trust, compensation was recognized
      over
      the respective vesting period based upon the fair value of the options as
      calculated using the Black-Scholes pricing model. The Trust did not grant any
      stock options to non-employees during fiscal years 2007, 2006 and 2005. The
      Trust
      had equity related compensation expense of $96,390, $36,436 and $40,580 for
      the
      years ended January 31, 2007, 2006, and 2005, respectively.





46


20.
      QUARTERLY RESULTS (UNAUDITED)





The
      following is a summary of the results of operations, by quarter, for the fiscal
      years ended January 31, 2007 and 2006. Management believes that all
      adjustments (consisting of normal recurring accruals) necessary for a fair
      presentation of such interim results have been included. The results of
      operations for any interim period are not necessarily indicative of those for
      the entire fiscal year.





**FISCAL
                2007**
            
            **APRIL 30**
            
            **JULY 31**
            
            **OCTOBER 31**
            
            **JANUARY 31**
            
            **FISCAL
                2007**Total
                revenue
            
            $
            6,512,055
            
            $
            4,923,168
            
            $
            5,021,806
            
            $
            5,333,605
            
            $
            21,790,634Total
                revenue less interest expense on mortgage loans and operating
                expenses
            
            $
            848,893
            
            (534,652
            )
            (214,370
            )
            (288,972
            )
            $
            (189,101
            )Net
                income (loss)
            
            $
            685,510
            
            (340,610
            )
            6,230
            
            (385,477
            )
            $
            (46,430
            )Income
                (loss) per share - basic
            
            $
            0.07
            
            (0.04
            )
            0.00
            
            (0.04
            )
            $
            (0.01
            )Income
                (loss) per share - diluted
            
            $
            0.06
            
            (0.04
            )
            0.00
            
            (0.04
            )
            $
            (0.01
            )Dividends
                declared per share
            
            $
            —
            
            —
            
            —
            
            .01
            
            $
            .01





**FISCAL
                2006**
            
            **APRIL 30**
            
            **JULY 31**
            
            **OCTOBER 31**
            
            **JANUARY 31**
            
            **FISCAL
                2006**Total
                revenue
            
            $
            6,573,433
            
            $
            4,852,780
            
            $
            4,698,158
            
            $
            5,124,468
            
            $
            21,248,839Total
                revenue less interest expense on mortgage loans and operating
                expenses
            
            $
            419,576
            
            (869,643
            )
            (628,114
            )
            (419,271
            )
            $
            (1,497,452
            )Net
                income (loss)
            
            $
            404,301
            
            658,129
            
            (371,668
            )
            (162,321
            )
            $
            541,578Income
                (loss) per share - basic
            
            $
            .05
            
            .07
            
            (.04
            )
            (.02
            )
            $
            0.06Income
                (loss) per share - diluted
            
            $
            .03
            
            .07
            
            (.04
            )
            (.02
            )
            $
            0.02Dividends
                declared per share
            
            $
            —
            
            —
            
            —
            
            .01
            
            $
            .01





47


21.
      SALE
      OF HOTEL PROPERTIES





On
      March 25, 2004, the Trust sold its Tempe, Arizona hotel to Tempe/Phoenix
      Airport Resort LLC ( “Tempe
      Resort”), an affiliate of Mr. Wirth, for its appraised value of $6.8
      million, which was also its carrying value. The purchase price was satisfied
      by
      Tempe Resort assuming the Trust’s mortgage note payable on the property of $1.7
      million and assuming notes payable to Mr. Wirth and affiliates of $5.1
      million.




On
      April 1, 2004, the Trust sold its San Diego, California hotel to an
      unrelated third party for $9.7 million, which the Trust received in cash. The
      Trust used $4.8 million of the proceeds to satisfy its mortgage note payable
      on
      the property, $1.4 million to satisfy notes and interest payable to related
      parties, and retained the remaining proceeds to reduce trade payables and to
      fund future operations and capital improvements.




The
      net
      gain realized on both sales was $5,113,540, of which approximately $2,217,000
      was applicable to the minority interest.




On
      July 27, 2005, the Trust sold its Phoenix, Arizona hotel to Phoenix
      Northern Resort LLC, an affiliate of Mr. Wirth, for its appraised value of
      $5.1 million. The buyer satisfied the purchase price by assuming the Trust’s
      $3.2 million mortgage note payable secured by the property, paying $1.7 million
      in cash prior to the closing, and paying $192,000 in cash at the closing. The
      total gain on the sale was $1.8 million, with $1.3 million of the gain
      attributable to holders of Shares of Beneficial Interest.




None
      of
      the above-listed properties have been reported as discontinued operations in
      the
      Trust’s financial statements. Based on the criteria of EITF Abstract Issue No.
      03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144,
      Accounting for the Impairment or Disposal of Long-Lived Assets, in Determining
      Whether to Report Discontinued Operations,” the Trust concluded it was not
      necessary to report hotels “held for sale” or “disposed of” when the Trust
      maintains significant continuing involvement. The Trust provides management,
      trademark, reservation and advertising services to all of the hotel properties
      listed above, which management believes provides the Trust the ability to
      significantly influence the operating and financial policies of these
      hotels.




22.
      PURCHASE OF MANAGEMENT AND LICENSING CONTRACTS





In
      February 2004, the Trust adopted FIN 46R, which amended FIN 46, “Consolidation
      of Variable Interest Entities,” an interpretation of Accounting Research
      Bulletin No. 51, “Consolidated Financial Statements.” FIN 46R requires an
      existing unconsolidated variable interest entity to be consolidated by its
      primary beneficiary if the entity does not effectively disperse risk among
      all
      parties involved or if other parties do not have significant capital to finance
      activities without subordinated financial support from the primary beneficiary.
      The primary beneficiary is the party that absorbs a majority of the entity’s
      expected losses, receives a majority of its expected residual returns, or both,
      as a result of holding variable interests, which are the ownership, contractual
      or other pecuniary interests in an entity.




As
      of
      February 1, 2004, the Trust recorded a charge for the cumulative effect of
      a change in accounting principle resulting from its recognition of the $854,000
      net stockholder’s deficit of the Management Company, which was the Trust’s
      variable interest entity under FIN 46R. The $854,000 charge represented the
      net
      effect of the Trust reporting $160,000 in net assets (consisting primarily
      of
      receivables) and $1,014,000 in net liabilities (consisting primarily of debt)
      upon consolidating the financial results of the Management Company.




The
      effect of consolidating the financial results of the Management Company and
      Licensing Corp. was accounted for as a cumulative effect of a change in
      accounting principle. As a result of consolidating the financial results of
      the
      Management Company with its results, as of February 1, 2004, the Trust’s
      financial results include a $854,402 charge for the cumulative effect of a
      change in accounting principle on the Statements of Operations resulting in
      a
      reduction in its stockholders’ equity which represents the aggregate
      stockholders’ deficit reported by the Management Company as of February 1,
      2004.




In
      connection with the Trust’s relinquishment of its REIT status, the Trust no
      longer required the services of a separate management company. The Trust
      determined it was in its best interest to buy out the management contracts
      and
      licensing agreements and directly manage the Hotels through the Trust’s wholly
      owned subsidiary, InnSuites Hotels. As a result of this buy out, the Management
      Company (which was the Trust’s variable interest entity under FIN 46R) was no
      longer consolidated in the second quarter. As of June 8, 2004, all of the
      Trust’s obligations were satisfied, and the Management Company has subsequently
      been liquidated.




48


Effective
      June 8, 2004, InnSuites Hotels acquired the management agreements under
      which the Management Company provided management services to the Hotels. In
      consideration of the acquisition, the stockholder of the Management Company
      received $20,000 and 90,000 Shares of Beneficial Interest of the Trust,
      reflecting a transaction value of approximately $159,500 in the aggregate.
      Following the acquisition, InnSuites Hotels has self-managed the Hotels. The
      Trust also managed one unrelated hotel in San Diego, California until September
      20, 2006 and manages four hotels owned by Mr. Wirth.




Effective
      June 8, 2004, InnSuites Hotels acquired the license agreements under which
      Licensing Corp. provided licensing services to the Hotels, and the related
      registered and unregistered InnSuites trademarks and tradenames. In
      consideration of the acquisitions, the Management Company (as the sole
      stockholder of Licensing Corp.) received $60,000 and 10,000 Shares of Beneficial
      Interest of the Trust and InnSuites Hotels satisfied Licensing Corp.’s line of
      credit in the amount of $459,000, reflecting a transaction value of
      approximately $534,500 in the aggregate. The Trust also provided licensing
      services to one unrelated hotel in San Diego, California until September 20,
      2006 and provides licensing services to one unrelated hotel in Buena Park,
      California and to four hotels owned by Mr. Wirth. The Trust paid $459,000
      in cash to satisfy Licensing Corp.’s line of credit. An additional $80,000 was
      paid to the Management Company to satisfy the Trust’s obligation for net
      liabilities of approximately the same amount. The Shares of Beneficial Interest
      issued by the Trust for both the management contracts and licensing agreements
      were valued at $155,000, which amount was recorded as an expense.




23.
      SUBSEQUENT EVENTS





On
      February 23, 2007, Tucson Saint Mary ’s
      Suite
      Hospitality, an entity owned by the Partnership, established a $2 million
      non-revolving line of credit. The interest rate applied to the unpaid principal
      balance is the prime rate as published by the Wall Street Journal plus 0.75%.
      The initial interest rate is 9.00%. The line of credit is secured by the Tucson
      Saint Mary’s hotel property and matures on February 23, 2008. As of April 30,
      2007, $1.5 million was borrowed under the line of credit to pay down debt and
      to
      pay for renovations to that hotel.




On
      February 26, 2007, the Trust’s Board of Trustees decided to explore potential
      strategic alternatives for the Trust in order to maximize shareholder value.
      Strategic alternatives the Trust may pursue could include, but are not limited
      to, the sale of some or all of the Trust’s Hotels. The Trust has been informed
      by Mr. Wirth that one of the four hotels owned by his affiliates for which
      the
      Trust provides management and trademark licensing services has been listed
      for
      sale with a real estate broker and that the three remaining hotels owned by
      his
      affiliates may also be listed for sale.




49


SCHEDULE III





INNSUITES
      HOSPITALITY TRUST AND SUBSIDIARY


REAL
      ESTATE AND ACCUMULATED DEPRECIATION


AS
      OF
      JANUARY 31, 2007





**Initial**
              **Cost**
              **to
                Tenant**
            
            **Cost**
              **Capitalized**
              **Subsequent
                to Acquisition**
            
            **Gross
                Amounts at**
              **Which
                Carried at**
              **Close
                of Period****Encumbrances**
            
            **Land**
            
            **Building
                and**
              **Improvements**
            
            **Land**
            
            **Building
                and**
              **Improvements**
            
            **Land**
            
            **Building
                and**
              **Improvements**InnSuites
                Hotel and SuitesTucson,
                Catalina Foothills Best WesternTucson,
                Arizona
            
            $
            3,837,263
            
            $
            —
            
            $
            4,220,820
            
            $
            —
            
            $
            2,283,686
            
            $
            —
            
            $
            6,504,506InnSuites
                Hotels and SuitesYumaYuma,
                Arizona
            
            1,490,220
            
            251,649
            
            4,983,292
            
            53,366
            
            2,600,747
            
            305,015
            
            7,584,039Best
                WesternAirport
                Ontario Hotel and SuitesOntario,
                California
            
            8,297,893
            
            1,633,064
            
            5,450,872
            
            —
            
            1,757,633
            
            1,633,064
            
            7,208,505InnSuites
                Hotels and SuitesTucson
                St. Mary’sTucson,
                Arizona
            
            4,092,537
            
            900,000
            
            9,166,549
            
            (20,564
            )
            1,275,001
            
            879,436
            
            10,441,550InnSuites
                Hotels and SuitesAlbuquerque
                Airport Best WesternAlbuquerque,
                New Mexico
            
            1,147,738
            
            —
            
            1,903,970
            
            —
            
            383,352
            
            —
            
            2,287,322InnSuites
                Hospitality TrustPhoenix,
                Arizona
            
            —
            
            7,005
            
            75,662
            
            —
            
            —
            
            7,005
            
            75,662$
            18,865,651
            
            $
            2,791,718
            
            $
            25,801,165
            
            $
            32,802
            
            $
            8,300,419
            
            $
            2,824,520
            
            $
            34,101,584








50


SCHEDULE
      III





INNSUITES
      HOSPITALITY TRUST AND SUBSIDIARY


REAL
      ESTATE AND ACCUMULATED DEPRECIATION


AS
      OF
      JANUARY 31, 2007


(CONTINUED)





**Gross
                Land**
              **and
                Building**
            
            **Accumulated**
              **Depreciation**
            
            **Net**
              **Book
                Value**
              **Land
                and**
              **Buildings**
              **and
                Improvements**
            
            **Date
                of**
              **Construction**
            
            **Date
                of**
              **Acquisition**
            
            **Depreciation**
              **in
                Income**
              **Statement
                is**
              **Computed**InnSuites
                Hotel and SuitesTucson,
                Catalina Foothills Best WesternTucson,
                Arizona
            
            $
            6,504,506
            
            $
            1,641,888
            
            $
            4,862,618
            
            1981
            
            1998
            
            5-40
                yearsInnSuites
                Hotels and SuitesYumaYuma,
                Arizona
            
            7,889,054
            
            1,854,797
            
            6,034,257
            
            1982
            
            1998
            
            5-40
                yearsBest
                WesternAirport
                Ontario Hotel and SuitesOntario,
                California
            
            8,841,569
            
            2,307,105
            
            6,534,464
            
            1990
            
            1998
            
            5-40
                yearsInnSuites
                Hotels and SuitesTucson
                St. Mary’sTucson,
                Arizona
            
            11,320,986
            
            2,535,590
            
            8,785,396
            
            1960
            
            1998
            
            5-40
                yearsInnSuites
                Hotels and SuitesAlbuquerque
                Airport Best WesternAlbuquerque,
                New Mexico
            
            2,287,322
            
            711,449
            
            1,575,873
            
            1975
            
            2000
            
            5-40
                yearsInnSuites
                Hospitality TrustPhoenix,
                Arizona
            
            82,667
            
            6,305
            
            76,362
            
            2004
            
            2004
            
            33
                years$
            36,926,104
            
            $
            9,057,134
            
            $
            27,868,970





(See
      accompanying independent auditors report.)








51





(A)  Aggregate
      cost for federal income tax purposes at January 31, 2007 and 2006 are as
      follows:





**2007**
            
            **2006**Land
            
            $
            1,856,788
            
            1,856,788Buildings
                and improvements
            
            19,352,224
            
            20,740,754$
            21,389,012
            
            22,597,542





Reconciliation
      of Real Estate:





Balance
                at January 31, 2005
            
            $
            39,195,496Sale
                of Hotel Properties
            
            (3,456,490
            )Improvement
                to Hotel Properties
            
            605,659Balance
                at January 31, 2006
            
            $
            36,344,665Improvement
                to Hotel Properties
            
            581,439Balance
                at January 31, 2007
            
            $
            36,926,104








52





SCHEDULE IV





MORTGAGES
      LOANS ON REAL ESTATE





**Description**
            
            **Interest
                Rate**
            
            **Maturity
                Date**
            
            **Periodic
                Payment Term**
            
            **Face
                Amount of****Mortgages**
            
            **1/31/07
                Carrying****Amount**Mortgage
                Note Secured by Albuquerque, NM property
            
            8.875
            %
            9/1/2015
            
            180
                monthly installments
            
            $
            1,575,000
            
            $
            1,147,738Mortgage
                Note Secured by Ontario, CA property
            
            8.280
            %
            5/11/2011
            
            120
                monthly installments, with balloon payment of $7,498,458 due at
                maturity
            
            
            9,000,000
            
            
            8,297,893Mortgage
                Note Secured by Yuma, AZ property
            
            9.250
            %
            8/1/2011
            
            180
                monthly installments
            
            
            4,000,000
            
            
            1,490,220Mortgage
                Note Secured by Tucson St. Mary’s, AZ property
            
            Prime
                rate plus 1% (9.5% as of 1/31/07)
            
            7/29/2009
            
            83
                monthly installments, with balloon payment of $3,810,435 due at
                maturity
            
            
            4,500,000
            
            
            4,092,537Mortgage
                Note Secured by Tucson Oracle, AZ property
            
            8.000
            %
            5/1/2016
            
            180
                monthly installments
            
            
            5,100,000
            
            
            3,837,263$
            24,175,000
            
            $
            18,865,651





**Mortgage
      Note Reconciliation**





Balance
                at January 31, 2005
            
            $
            24,007,445Deductions
                during period:Assumed
                by buyer of Phoenix, AZ hotel
            
            (3,167,182
            )Principal
                payments
            
            (931,386
            )Balance
                at January 31, 2006
            
            19,908,877Deductions
                during period:Principal
                payments
            
            (1,043,226
            )Balance
                at January 31, 2007
            
            $
            18,865,651








53





ITEM
      9. CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE .





None.





Item
      9A. CONTROLS
      AND PROCEDURES





As
      of the
      end of the period covered by this report, the Trust conducted an evaluation,
      under the supervision and with the participation of the principal executive
      officer and principal financial officer, of the Trust’s disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
      Securities Exchange Act of 1934). Based on this evaluation, the principal
      executive officer and principal financial officer concluded that the Trust’s
      disclosure controls and procedures were not effective to ensure that information
      required to be disclosed by the Trust in reports that it files or submits under
      the Securities Exchange Act of 1934 is recorded, processed, summarized and
      reported within the time periods specified in the Commission’s rules and
      forms, and that such information is accumulated and communicated to the
      management of the Trust, including the principal executive officer and principal
      financial officer, as appropriate, to allow timely decisions regarding required
      disclosure.




The
      Trust
      identified three reportable conditions under standards established by the
      American Institute of Certified Public Accountants, two that constituted
      material weakness and one that constituted a significant deficiency. The
      first material weakness involved several instances of accounts
      receivable transactions not being properly recorded in a Hotel’s property
      management system and of inadequate files being maintained to support these
      transactions. Management and the auditor agreed that this is a material weakness
      in internal controls. Management has implemented new internal control procedures
      at the Hotel property level in order to improve and re-establish effective
      control over its accounts receivable procedures. The
      second material weakness relates to errors noted in the Trust's income tax
      provision calculation. Management and the auditors agree that this is a material
      weakness in internal controls. Management intends to retain additional third
      party advisors to provide additional technical expertise and to assist the
      Trust
      in calculating its income tax provisions. The significant deficiency
      involved several instances of capital additions being recorded without detail
      postings that could result in future errors upon the disposal of the affected
      capital additions. Management and the auditor agreed that a significant
      deficiency exists in the recording of capital additions. Management has
      implemented new internal control procedures that require adequate detail be
      maintained for all new capital additions.




Except
      as
      described above, there was no change in the Trust’s internal control over
      financial reporting during the Trust’s most recently completed fiscal quarter
      (the fourth fiscal quarter in the case of this annual report) that has
      materially affected, or is reasonably likely to materially affect, the Trust’s
      internal control over financial reporting.




ITEM
      9B. OTHER
      INFORMATION





None.





PART III





ITEM
      10. TRUSTEES,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





Information
      required by this Item 10 as to the Trustees and Executive Officers of the
      Trust is incorporated herein by reference to the information set forth under
      the
      caption “Election of Trustees—Nominees, Trustees and Executive Officers” in the
      Trust’s definitive proxy statement for its 2007 Annual Meeting of Shareholders
      (the “Proxy Statement”), which is expected to be filed with the Securities and
      Exchange Commission pursuant to Regulation 14A of the Securities Exchange
      Act of 1934 within 120 days after the end of the Trust’s fiscal
      year.




The
      information regarding the Audit Committee of the Board of Trustees and the
      information regarding the “audit committee financial expert” are incorporated
      herein by reference to the information set forth under the caption “Board
      Committees— Audit Committee” in the Proxy Statement.




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









54


**Code
      of Ethics for Senior Financial Officers**




The
      Trust
      has adopted a Code of Ethics that applies to its Chief Executive Officer, Chief
      Financial Officer and principal accounting officer and persons performing
      similar functions. The Trust has posted its Code of Ethics on its website at
      www.innsuitestrust.com. The Trust intends to satisfy all Commission and Amex
      disclosure requirements regarding any amendment to, or waiver of, the Code
      of
      Ethics relating to its Chief Executive Officer, Chief Financial Officer and
      principal accounting officer, and persons performing similar functions, by
      posting such information on its website and making any necessary filings with
      the Commission. In addition, the Trust has adopted a Code of Conduct and Ethics
      that applies to all of its employees, officers and Trustees. It is also
      available on the Trust’s website at www.innsuitestrust.com.




ITEM
      11. EXECUTIVE
      COMPENSATION





The
      information required by this Item 11 is incorporated herein by reference to
      the information set forth under the caption “Compensation of Trustees and
      Executive Officers” in the Proxy Statement.









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





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




The
      following table provides information about the Trust’s equity compensation plans
      (other than qualified employee benefits plans and plans available to
      shareholders on a pro rata basis) as of January 31, 2007:




**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 (a))**Equity
                compensation plans approved by security holders
            
            0
            
            $
            N/A
            
            1,000,000Equity
                compensation plans not approved by security holders
            
            None
            
            None
            
            None





ITEM
      13. CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE





The
      information required by this Item 13 is incorporated herein by reference to
      the information set forth under the captions “Certain Transactions” and
“Election of Trustees” in the Proxy Statement.




ITEM
      14. PRINCIPAL
      ACCOUNTANT FEES AND SERVICES





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




55


PART IV





ITEM
      15. EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES





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





Financial
                Statements/Schedules of InnSuites Hospitality Trust1.
            Reports
                of Independent Registered Public Accountants
            242.
            Consolidated
                Balance Sheets at January 31, 2007 and 2006
            263.
            Consolidated
                Statements of Operations for the years ended January 31, 2007, 2006
                and 2005
            274.
            Consolidated
                Statements of Shareholders’ (Deficit) Equity for the years ended
                January 31, 2007, 2006 and 2005
            285.
            Consolidated
                Statements of Cash Flows for the years ended January 31, 2007, 2006
                and 2005
            296.
            Notes
                to Consolidated Financial Statements for the years ended January 31,
                2007, 2006 and 2005
            307.
            Schedule III
                - Real Estate and Accumulated Depreciation
            508.
            Schedule IV
                - Mortgage Loans on Real Estate
            53





56





(a)(3)
            
            Exhibit List





**Exhibit No.**
            
            **Exhibit**3.1
            
            Second
                Amended and Restated Declaration of Trust of InnSuites Hospitality
                Trust
                dated June 16, 1998, as further amended on July 12, 1999
                (incorporated by reference to Exhibit 3.1 of the Registrant’s Annual
                Report on Form 10-K for the fiscal year ended January 31, 2005 filed
                with
                the Securities and Exchange Commission on May 16,
                2005).10.1
            
            First
                Amended and Restated Agreement of Limited Partnership of RRF Limited
                Partnership dated January 31, 1998 (incorporated by reference to
                Exhibit 10.1 of the Registrant’s Registration Statement on
                Form S-2, filed with the Securities and Exchange Commission on
                September 8, 1998).10.2*
            
            Employment
                Agreement dated as of January 31, 1998, between InnSuites Hospitality
                Trust and James F. Wirth (incorporated by reference to Exhibit 10.2
                of the
                Registrant’s Annual Report on Form 10-K for the fiscal year ended January
                31, 2005 filed with the Securities and Exchange Commission on May
                16,
                2005).10.3*
            
            Form
                of Indemnification Agreement between InnSuites Hospitality Trust
                and each
                Trustee and executive officer (incorporated by reference to Exhibit
                10.3
                of the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended
                January 31, 2006 filed with the Securities and Exchange Commission
                on May
                12, 2006).10.4
            
            Amended
                and Restated Promissory Note dated December 1, 2006 by RRF Limited
                Partnership in favor of Rare Earth Financial, L.L.C. (incorporated
                by
                reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form
                10-Q for the quarterly period ended October 31, 2006 filed with the
                Securities and Exchange Commission on December 1,
                2006).10.5
            
            Sales
                and Project Coordination Agreement dated March 1, 2006 between Rare
                Earth
                Development Company and InnSuites Hospitality Trust (incorporated
                by
                reference to Exhibit 10.7 of the Registrant’s Annual Report on Form 10-K/A
                for the fiscal year ended January 31, 2006 filed with the Securities
                and
                Exchange Commission on May 12, 2006).14
            
            Code
                of Ethics for Senior Financial Officers (incorporated by reference
                to
                Exhibit 14 of the Registrant’s Annual Report on Form 10-K for
                the fiscal year ended January 31, 2004, filed with the Securities and
                Exchange Commission on April 30, 2004).21
            
            Subsidiaries
                of the Registrant.31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            
            Certification
                of Chief Executive Officer required by Section 906 of the
                Sarbanes-Oxley Act of 2002.32.2
            
            Certification
                of Chief Financial Officer required by Section 906 of the
                Sarbanes-Oxley Act of 2002.





*  Management
      contract or compensatory plan or arrangement.








57





SIGNATURES





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





INNSUITES
                HOSPITALITY TRUSTDated:May
                1, 2007
            By:
            /s/
                James F. WirthJames
                F. Wirth, Chairman,
              President
                and Chief Executive Officer
              (Principal
                Executive Officer)Dated:
                May 1, 2007
            By:
            /s/
                Anthony B. WatersAnthony
                B. Waters, Chief Financial Officer
              (Principal
                Financial Officer)





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





Dated:
                May 1, 2007
            By:
            /s/
                James F. WirthJames
                F. Wirth, Chairman
              President
                and Chief Executive Officer
              (Principal
                Executive Officer)Dated:
                May 1, 2007
            By:
            /s/
                Anthony B. WatersAnthony
                B. Waters, Chief Financial Officer
              (Principal
                Financial Officer)Dated:
                May 1, 2007
            By:
            /s/
                Marc E. BergMarc
                E. Berg, TrusteeDated:
                May 1, 2007
            By:
            /s/
                Steven S. RobsonSteven
                S. Robson, TrusteeDated:
                May 1, 2007
            By:
            /s/
                Peter A. ThomaPeter
                A. Thoma, TrusteeDated:
                May 1, 2007
            By:
            /s/
                Larry PelegrinLarry
                Pelegrin, Trustee