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Notes Receivable | 3 Months Ended
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Apr. 30, 2020
Priority return payments |
Notes Receivable | 16. NOTES RECEIVEABLE Sale of IBC Hospitality Technologies; IBC Hotels LLC (IBC) On August 15, 2018, the Trust entered into a final sale agreement for its subsidiary IBC Hotels LLC (IBC) with an effective sale date as of August 1, 2018 to an unrelated third-party buyer (Buyer). The sale price was $3,000,000, to be paid to IHT as follows:
| 1. | $250,000 at closing, which was received in cash on August 14, 2018;
| 2. | A secured promissory note receivable 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. The note was amended after closing, so that interest shall accrue for the first 26 months (starting August 2018), thereafter for month 27 and 28 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 November 2025. Future receipts from this note are shown in the table below.
FISCAL YEAR |  |  |
2021 |  |  | - |
2022 |  |  | 550,000 |
2023 |  |  | 550,000 |
2024 |  |  | 550,000 |
Thereafter |  |  | 275,500 |
|  | $ | 1,925,500 |
As of January 31, 2020, the Trust evaluated the carrying value of the note of $2,750,00 for potential impairment. After review, an impairment of $825,000, or 30%, was taken against the note. Factors for the impairment included, but were not limited to:
| ● | Management’s evaluation of the current financial position of the Buyer, based on unaudited financial statements provided.
| ● | A lack of substantial quantitative data, showing the impact of the recently executed digital advertising agreement between the Buyer and Google.
| ● | Management’s best, conservative valuation of IBC’s assets, and their marketability, in the case of a default by the Buyer.
| ● | The current and future impact of the COVID-19 pandemic, on the travel and hospitality industry, in which IBC’s reservation and booking technology operates.
As of April 30, 2020, management evaluated the carrying value of the note and the impairment taken to date and determined no further impairment is needed at this time. The start date of the monthly payments was originally to commence in 2020 but was extended to November 2021 due to the Virus slowing down the economy in general, and the travel industry specifically. The Trust has evaluated the ongoing pandemic conditions and no impairment is deemed necessary as the travel industry is expected to fully recover by Q3 2021. The 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 agreed to provide continuing working capital support for a period of nine months in the amount of approximately $225,000 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. During the fiscal year ended January 31, 2020, IHT provided $125,000. Furthermore, no support was provided in the first quarter ended April 30, 2020. 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, 2021, then 75% of the issued and outstanding IBC interest shall be transferred to IHT, and (b) on or after February 5, 2021, then 51% of the issued and outstanding interest of the Company shall be transferred to IHT. Currently there has been no default due to the extension granted.

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