| NOTES RECEIVABLE |
6.
NOTES RECEIVABLE
Sale
of IBC Hospitality Technologies; IBC Hotels LLC (IBC)
On
August 15, 2018 InnSuites Hospitality Trust (IHT) entered into a final sale agreement of its technology subsidiary, IBC Hotels LLC (IBC),
to an unrelated third-party buyer (Buyer). As a part of the amended sale agreement, the Trust received a secured promissory note adjusted
to the principal amount of $1,925,000 with interest to be accrued at 3.75% per annum, which is recorded in the accompanying consolidated
balance sheet in continuing operations, which was subsequently adjusted to 3.25%, due in 2030.
| |
● |
No
interest accrued through May 2024, and no payments on the note receivable including principal and interest based on the previously
extended time period were due through May 2024. |
| |
|
|
| |
● |
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
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 has been extended further and modified. |
| |
● |
Future
payments on this note are shown in the table below. |
SCHEDULE
OF FUTURE PAYMENTS OF DEBT
| FISCAL YEAR | |
| |
| 2030 | |
| 1,925,000 | |
| Total | |
$ | 1,925,000 | |
| |
● |
Management’s
best, conservative valuation of IBC’s assets, and their marketability, in the case of a default by the Buyer. |
| |
|
|
| |
● |
There
were past negative impact of the COVID-19 pandemic, on the travel and hospitality industry,
in which IBC’s reservation and booking technology operates. IHT strongly believes the
IBC business model is sound and viable, partly because IBC focus is on independent hotels.
Half of the world’s hotels are non-affiliated hotels. There are only two major hotel
reservation systems, both with multi-billion dollar valuation, which are both focused on
affiliated hotels.
|
| |
● |
IBC
was purchased by an affiliate of the Trust Chairman with modified terms and maturity date. The RRF subsidiary of the Trust now manages
IBC Hotels, with a five-year option to buy at cost. |
Rare
Earth Financial LLC (REF), an affiliate majority-owned by our President and CEO, James Wirth, entered into an agreement with the Obasa
Group of Companies, on March 5, 2025, to purchase 102037739 Saskatchewan Ltd, and its subsidiary IBC. RRF LLLP, a subsidiary of IHT,
agreed to become the Management Company of IBC, in an effort to rekindle earlier operations that were partially successful, until the
Covid-19 pandemic in early 2020. The Note Payable to IHT was extended until June 30, 2030, with interest to be paid at 3.25%. REF intends
to make any outstanding interest payments potentially due in Fiscal Year 2027 (February 1, 2026 to January 31, 2027). As part of the
Management Agreement, RRF obtained a five-year option to purchase IBC at the net cost of REF. If the rekindling of IBC is successful,
this option could prove to be a valuable asset of IHT in the future.
As
of January 31, 2026, management evaluated the carrying value of the note determined no impairment is needed at this time.
|