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Acquisition of International Vacation Hotels

12 Months Ended

Jan. 31, 2017

Acquisition of International Vacation Hotels

27. ACQUISITION OF INTERNATIONAL VACATION HOTELS

On January 8, 2016 (the “Closing Date”), the Trust and IBC Hotels purchased the tangible and intangible assets excluding cash, receivables, prepaid booking/expenses, accrued expenses, and an automobile from Vacation Technologies International, Inc., a Texas Corporation, dba International Vacation Hotels (“International Vacation Hotels”). Assets purchased primarily consist of hotel revenue booking contracts, websites and other key business intangible assets. Under the terms of the Asset Purchase Agreement, at the Closing Date, the Trust paid total of $1.0 million of consideration to the seller consisting of $800,000 cash and $200,000 of the Trust’s Shares of Beneficial Interest based on the average closing price of such securities on the NYSE MKT for the 30 calendar days immediately preceding the closing date of January 8, 2016, which resulted in the issuance of 89,127 of the Trust’s Shares of Beneficial Interest.

On January 8, 2016, the Trust entered into a $400,000 business loan with Laurence Holdings Limited, an Ontario, Canada Corporation, with a maturity date of February 1, 2019, pursuant to the terms of the Security Agreement and Promissory Note (“Agreement”). The agreement requires the funds be used for the purchase of International Vacation Hotels’ assets. The agreement provides interest only payments for the first 3 months of the term and principal and interest payments for the remaining portion of the loan. The agreement sets an interest rate of 8% per annum with no prepayment penalty.

The fair values of acquired assets and liabilities are based on preliminary cash flow projections and other assumptions. The preliminary fair values of acquired intangible assets were determined using several significant unobservable inputs for projected cash flows and a discount rate. These inputs are considered Level 3 inputs under the fair value measurements and disclosure guidance. The transaction has been accounted for as a business combination under the acquisition method of accounting. Tangible assets acquired were considered worthless and therefore were not separately valued. Accordingly, the identifiable intangible assets acquired have been recorded at fair value, with the remaining purchase price recorded as goodwill.

The fair values of assets acquired at the transaction date are summarized below:

Marketing Related Intangibles	$	100,000
Customer Base		400,000
Total identifiable intangible assets		500,000

Goodwill		500,000

Total acquired assets	$	1,000,000

Expected and future amortization expenses is approximately $67,000 for the next five fiscal years.

International Vacation Hotels provides hotel technology services to 600 + independent hotel properties worldwide primarily in Africa, Caribbean and Asia markets. Most of the value in International Vacation Hotels is included in the exclusive long-term automatic renewed contracts. This business relationship is contractual in nature and meets the separability criterion and as a result is considered an identifiable intangible asset recognized separately from goodwill. The value of the business relationship is included in goodwill under US GAAP. Goodwill is calculated as the difference between the fair value of the consideration transferred and the values assigned to the identifiable tangible assets acquired and liabilities assumed. The acquired goodwill presented in the above table reflects the estimated goodwill from the preliminary purchase price allocation.

The establishment of the fair value of the consideration for a merger, and the allocation to identifiable intangible assets, requires the extensive use of accounting estimates and management judgment. The fair values assigned to the assets acquired assumed were based on estimates and assumptions.

Supplemental Pro Forma Information for Acquisition of International Vacation Hotels (unaudited)

The following unaudited supplemental pro forma information for the year ended January 31, 2016, assumes the acquisition of International Vacation Hotels had occurred as of February 1, 2016 and 2015, giving effect to purchase accounting adjustments such as amortization of intangible assets. The pro forma data is for informational purposes only and may not necessarily reflect the actual results of operations had International Vacation Hotels been operated as part of the Trust since February 1, 2016 and 2015.

	Year Ended January 31, 2016
	As Reported			Pro Forma (unaudited)
Revenues	$	11,616,767		$	12,616,499
Consolidated Net Loss	$	339,440		$	468,513
LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST	$	(92,676	)	$	(92,676	)
NET LOSS ATTRIBUTABLE TO CONTROLLING INTERESTS	$	432,116		$	432,116
NET LOSS PER SHARE FROM CONTINUING OPERATIONS – BASIC	$	(0.18	)	$	(0.18	)
NET INCOME PER SHARE FROM DISCONTINUED OPERATIONS – BASIC	$	0.22		$	0.22
NET LOSS PER SHARE PER SHARE TOTAL - BASIC	$	0.04		$	0.04
NET LOSS PER SHARE FROM CONTINUING OPERATIONS – DILUTED	$	(0.12	)	$	(0.12	)
NET INCOME PER SHARE FROM DISCONTINUED OPERATIONS – DILUTED	$	0.15		$	0.15
NET LOSS PER SHARE PER SHARE TOTAL - DILUTED	$	0.03		$	0.03
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC		8,269,827			8,269,827
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED		11,953,896			11,953,896

Intangible Assets

Amortizable intangible assets consist of the following:

	January 31, 2017
	Amount		Accumulated Amortization		Net Amount		Useful Lives (years)
Marketing Related Intangibles	$	100,000	$	10,000	$	90,000		10
Customer Base		400,000		57,000		343,000		7
Total:	$	500,000	$	67,000	$	433,000

Thes Trust recorded amortization expense of $67,000 for the year ended January 31, 2017.

Goodwill

There were no changes in the carrying value of the Trust’s goodwill for the year ended January 31, 2017.