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Discontinued Operations | 12 Months Ended
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Jan. 31, 2019
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | 23. DISCONTINUED OPERATIONS Sale of IBC Hospitality Technologies; IBC Hotels LLC (IBC) Discontinued operations during the fiscal year ended January 31, 2019 consist of the operations from the IBC Technology Segment (IBC Hotels LLC). On August 15, 2018 Innsuites Hospitality Trust (IHT) entered into a final sale agreement for its subsidiary IBC Hotels LLC (IBC) with an effective sale date as of August 1, 2018 to a unrelated third party buyer (Buyer). The buyer hired IHT’s former Chief Operating Officer, who is a family member of IHT’s CEO. The sale price was $3,000,000, to be paid to IHT as follows:
| 1. | $250,000 at closing, which was received on August 14, 2018;
| 2. | A secured promissory note in the principal amount of $2,750,000 with interest to be accrued at 3.75% per annum, recorded in the accompanying condensed balance sheet in continuing operations. Interest shall accrue for the first 10 months (starting August 2018), thereafter for month 11 and 12 principal and interest payments of 50% ($25,632 per month), then the remaining amount to be amortized over 59 months (payments of $52,054 per month) with maturity in June 2024. Future payments on this note are shown in the table below.
FISCAL YEAR |  |  |  |
2020 |  |  | $ | 229,167 |
2021 |  |  |  | 550,000 |
2022 |  |  |  | 550,000 |
2023 |  |  |  | 550,000 |
2024 |  |  |  | 550,000 |
Thereafter |  |  |  | 320,833 |
|  |  | $ | 2,750,000 |
Note is secured by (1) pledge of the Buyer’s interest in IBC, and (2) a security interest in all assets of IBC, provided IHT shall agree to subordinate such equity interest to commercially reasonable debt financing upon request. If after effective date IBC closes an equity transaction with net proceeds to IBC in excess of $2,500,000, IBC/Buyer shall pay to IHT an amount equal to (a) 50% of the net proceeds received by IBC and (b) 50% of the sum of the unpaid balance of the note and accrued interest accrued but unpaid interest thereon, as the date of receipt of the net proceeds by IBC. IHT has agreed to provide continuing working capital support for a period of six months in the amount of approximately $100,000 over a six month period to IBC for transitional purposes. IHT has no managerial control nor does IHT have the ability to direct the operations or capital requirements of IBC as of August 1, 2018. IHT has no rights to any benefits or losses from IBC, as of August 1, 2018. During the fiscal year ended January 31, 2019 IHT had provided $100,000 to IBC. As a result of the sale, the Trust recorded a gain on sale of approximately $2,394,000, net of taxes of $0. The gain is determined by the sales prices of approximately $3,000,000 less the estimated book value of the assets sold and liabilities assigned of approximately $431,000 and costs associated with the sale of approximately $325,000. Default If Buyer has not paid two or more payments on the note as scheduled, or if Buyer has not satisfied any other provisions in the note, IHT may give Buyer notice of default. If Buyer fails to cure the default within 30 days after notice (a) on or before February 5, 2020, then 75% of the issued and outstanding IBC interest shall be transferred to IHT, and (b) on or after February 5, 2020, then 51% of the issued and outstanding interest of the Company shall be transferred to IHT. Currently there has been no default. Debt/Working Capital adjustment On or before the sixty calendar days following the effective date (August 1, 2018) Buyer prepared and delivered to IHT a written statement (closing statement) setting forth a calculation of the aggregate amount of (i) all indebtedness, (ii) working capital of IBC as of the close of business on the last business day immediately preceding the effective date (closing net working capital) , and (iii) a proposed adjustment to the principal amount of the note payable, calculated as follows:
| ● | If the closing new working capital is between $0 and negative $100,000, the purchase price shall not be adjusted;
| ● | If the closing working capital is less then negative $100,000, the principal amount of the note shall be decreased in amount equal to the amount by which the closing net working capital is greater than negative $100,000; and
| ● | If the closing working capital is greater than $0, the principal amount of the note shall be increased in an amount equal to the closing working capital.
There were no working capital adjustments to the sale price at the conclusion of the 60 day adjustment period. Office Lease/Contracts IHT will maintain an existing reservation center contract with IBC requiring IHT to make payments of $7,500 per month for a minimum of 6 months after closing. There is no maximum period, and the obligation may be cancelled after six months. As of February 1, 2019 the payment was reduced to $6,500, and further reduced to $5,500 going forward as of March 1, 2019 by mutual agreement. IHT will continue to rent office space to IBC on the same terms and conditions as in effect currently on a month to month basis at a monthly rent of approximately $2,500, terminable by either IHT or IBC on a 30-day prior written notice. Indemnification IHT has agreed to indemnify and hold harmless the Buyer from and against any and all losses suffered, sustained or incurred by any Buyer indemnified party, resulting from, arising in connection with or related to (i) any breach of a representation or warranty made by IHT, (ii) any breach of a seller fundamental representation by IHT, (iii) any breach of any covenant made by IHT in this agreement, certification or writing delivered pursuant to the agreement, (iv) any claims or liabilities under, related to or in connection with any person status as a security holder of the company prior to closing, or (v) any transaction expense or indebtedness not accounted for in the final determination of the purchase price. Incentive Bonus On September 4, 2018, the Board approved to pay a $15,000 bonus to the daughter of the CEO, and who was then the Chief Operating Officer, in connection with the sale of IBC. The CEO’s daughter is now employed by the Company that acquired IBC. In addition, the Board approved to pay a $10,000 bonus to the Executive Vice President of the Trust in connection with the sale of IBC. These bonuses will be paid upon receipt of the monthly payments to be received in connection with the note receivable described above starting in September 2019 at $1,000 per month. The Trust also paid the former CFO a $5,000 compensation bonus related to the sale of IBC. Sale of Yuma Property On July 31, 2018, IHT entered into a purchase and sale agreement to sell its Innsuites Yuma Hotel and Suites Best Western (Yuma), together with certain furniture, fixtures, equipment, operating supplies and other ancillary items pertaining to the daily operations to an unrelated third party. The sale was completed on October 24, 2018. The sales price, as revised, was approximately $16.05 million, of which the net proceeds (net of mortgage payoff, commissions and closing costs) received by the IHT was approximately $9.93 million The Trust recorded a gain on sale of approximately $11,080,000, net of estimated tax of approximately $381,000. The gain was determined by the sale price less the estimated book value other assets sold of approximately $4,589,000. In connection with the sale of the Yuma property the related mortgage note payable in the amount of approximately $5,560,000 at the time of the sale was paid in full. The following tables list the assets and liabilities of discontinued operations for the fiscal year ended January 31, 2019 and January 31, 2018 and the discontinued operations for fiscal year ended January 31, 2019 and January 31, 2018. DISCONTINUED OPERATIONS
|  | JANUARY 31, 2019 |  |  | JANUARY 31, 2018 |
ASSETS |  |  |  |  |  |  |  |
Current Assets: |  |  |  |  |  |  |  |
Cash and Cash Equivalents |  | $ | 305,835 |  |  |  | 200,705 |
Accounts Receivable |  |  | 932 |  |  |  | 414,787 |
Prepaid Expenses and Other Current Assets |  |  | 13,680 |  |  |  | 50,828 |
Current Portion of Notes Receivable |  |  |  |  |  |  |  |
Total Current Assets of Discontinued Operations |  |  | 320,447 |  |  |  | 666,320 |
Noncurrent assets of Discontinued Operations |  |  | - |  |  |  |  |
Property, Plant and Equipment, net |  |  | - |  |  |  | 5,240,535 |
TOTAL ASSETS OF DISCONTINUED OPERATIONS |  | $ | 320,447 |  |  |  | 5,906,855 |
LIABILITIES |  |  |  |  |  |  |  |
LIABILITIES |  |  |  |  |  |  |  |
Current Liabilities: |  |  |  |  |  |  |  |
Accounts Payable and Accrued Expenses |  | $ | 546,803 |  |  |  | 607,488 |
Current Portion of Notes Payable to Banks, net of Discount |  |  | - |  |  |  | 145,549 |
Total Current Liabilities of Discontinued Operations |  |  | 546,803 |  |  |  | 753,037 |
Noncurrent Liabilities of Discontinued Operations |  |  |  |  |  |  |  |
Mortgage Notes Payable, net of Discount |  |  | - |  |  |  | 4,677,444 |
Notes Payable to Banks, net of Discount |  |  | - |  |  |  | 812,930 |
TOTAL LIABILITIES OF DISCONTINUED OPERATIONS |  | $ | 546,803 |  |  |  | 6,243,411 |
|  | FOR THE YEARS ENDED |
|  | JANUARY 31, |
|  | 2019 |  |  | 2018 |
REVENUE |  |  |  |  |  |
Room |  | $ | 3,225,783 |  |  | $ | 5,455,777 |
Food and Beverage |  |  | 27,569 |  |  |  | 106,919 |
Reservation and Convention |  |  | 173,399 |  |  |  | 1,051,454 |
Other |  |  | 41,057 |  |  |  | 32,985 |
TOTAL REVENUE |  |  | 3,467,808 |  |  |  | 6,647,135 |
OPERATING EXPENSES |  |  |  |  |  |  |  |
Room |  |  | 1,261,875 |  |  |  | 1,930,833 |
Food and Beverage |  |  | 35,592 |  |  |  | 125,559 |
Telecommunications |  |  | 21,803 |  |  |  | 34,268 |
General and Administrative |  |  | 766,475 |  |  |  | 1,987,723 |
Sales and Marketing |  |  | 469,457 |  |  |  | 1,524,621 |
Reservation Acquisition Costs |  |  | 142,842 |  |  |  | 234,000 |
Repairs and Maintenance |  |  | 185,148 |  |  |  | 381,356 |
Hospitality |  |  | 167,874 |  |  |  | 332,493 |
Utilities |  |  | 160,641 |  |  |  | 277,020 |
Depreciation |  |  | 393,581 |  |  |  | 749,964 |
Intangible Amortization |  |  | - |  |  |  | 933,000 |
Real Estate and Personal Property Taxes, Insurance and Ground Rent |  |  | 88,344 |  |  |  | 149,550 |
Other |  |  | - |  |  |  | 10,297 |
TOTAL OPERATING EXPENSES |  |  | 3,693,632 |  |  |  | 8,670,684 |
OPERATING LOSS |  |  | (225,824 | ) |  |  | (2,023,548 | )
Interest Income |  |  | - |  |  |  | 961 |
TOTAL OTHER INCOME |  |  | - |  |  |  | 961 |
Interest on Mortgage Notes Payable |  |  | 214,811 |  |  |  | 402,611 |
Interest on Notes Payable to Banks |  |  | 41,390 |  |  |  | 50,236 |
TOTAL INTEREST EXPENSE |  |  | 256,201 |  |  |  | 452,847 |
CONSOLIDATED NET LOSS OF DISCONTINUED OPERATIONS |  | $ | (482,025 | ) |  | $ | (2,475,434 | )

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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