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NOTES RECEIVEABLE | 6 Months Ended
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Jul. 31, 2021
Notes Receiveable |
NOTES RECEIVEABLE | 16. NOTES RECEIVEABLE Sale of IBC Hospitality Technologies; IBC Hotels LLC (IBC) On August 15, 2018 InnSuites Hospitality Trust (IHT) entered into a final sale agreement for its technology subsidiary, IBC Hotels LLC (IBC), with an effective sale date as of August 1, 2018 to an unrelated third-party buyer (Buyer). The payment terms to the sale agreement were later amended due to the effects of Covid-19, on December 7, 2020, as further described below. As a part of the sale, the Trust received a secured promissory note in the principal amount of $2,750,000 with interest to be accrued at 3.75% per annum, which is recorded in the accompanying condensed balance sheet in continuing operations, net of impairment of $825,000 as described below.
| ● | No interest accrued through November 2021.
| ● | Payments on the note receivable include principal and interest beginning in November 2021
| ● | 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 or pre-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.
| ● | The note matures on June 1, 2024
| ● | Future payments on this note are shown in the table below.
SCHEDULE OF FUTURE PAYMENTS OF DEBT
FISCAL YEAR |  |  |
2022 |  |  | 137,500 |
2023 |  |  | 550,000 |
2024 |  |  | 550,000 |
2025 |  |  | 550,000 |
Thereafter |  |  | 962,500 |
Total |  | $ | 2,750,000 |
Impairment |  |  | (825,000 | )
Notes receivable |  | $ | 1,925,000 |
Less: current portion of note receivable |  | $ | 137,500 |
Long term portion of note receivable |  | $ | 1,787,500 |
As of January 31, 2020, the Trust evaluated the carrying value of the note of $2,750,000 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.
| ● | 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 July 31, 2021, management evaluated the carrying value of the note and the impairment taken to date and determined no further impairment is needed at this time. 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.

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