Asset Acquisitions:

6 Months Ended

Jun. 30, 2019

Asset Acquisitions

Asset Acquisitions:

Note 4

Asset Acquisitions:

Sacramento Home Lots

Roseville Road is a 9.63-acre, approximately 65 home, small lot single family detached development located in Sacramento County. Jessie Avenue is a 13.68-acre, 94 home, small lot single family detached development located in Sacramento County. On June 30, 2018, Gadsden purchased Jessie Avenue and Roseville Road located in Sacramento California that are entitled for development for $3,408. Gadsden paid the following consideration for such properties: 47,482 shares of its Series A Preferred Stock (based on a valuation of $25.00 per share) and assumed debt and certain liabilities of $2,121. Included in the cost of acquiring the Sacramento Home Lots was $99 of warrants for investment advisory fees and $1 in other closing fees that are recorded in accrued expenses at June 30, 2018 and issued on July 10, 2018. 

On June 6, 2019, the Company entered into a letter of intent, and on August 23, 2019 closed on the transaction with an independent third party, to sell the land parcel located at Roseville Road & Elkhorn Blvd, Sacramento, CA 95842. The sales price is $1,500 cash, net of delinquent property taxes, liens, mortgage debt, accrued interest and customary sales commissions and closing costs. Net proceeds to the Company were $277. The property is included in Assets and Liabilities held for sale, in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2019 and in land as of December 31, 2018.

T9 Property Acquisition and Subsequent Foreclosure 

On July 10, 2018, the Company acquired all the interests in T9, a debtor in bankruptcy, which through its wholly owned subsidiaries, owns a property, the T9 Property, which is a 65-acre, mixed-use, transit-oriented master planned community. Gadsden purchased the limited liability company interests in T9 for an enterprise value of approximately $88,000, less the senior mortgage debt at the closing of approximately $55,587. The purchase price for the T9 LLC Interests was $32,413, which was paid by the issuance of (i) $8,407 in value of Gadsden Series A Preferred Stock (336,284 shares); (ii) $18,146 in value of Gadsden Series B Preferred Stock (1,814,573 shares); and (ii) $5,860 in value of Gadsden common stock (586,004 shares). Gadsden Series B Preferred Stock was subsequently reduced by $15,693 (1,569,308 shares) reflecting final closing adjustments as allowed for in the purchase and sale agreement and an additional $1,325 (132,500 shares) due to a share exchange to Series A preferred. There was a DIP ("debtor in possession") financing facility of $10,000 in the bankruptcy case, of which $2,000 was assumed and an additional $3,000 was drawn through December 28, 2018. The interest on such DIP financing was 10% per annum, compounded annually. 

On September 30, 2018 the Company recognized an impairment of the value on the T9 Property adjusting it to its fair value. The impairment adjusted the value of the asset downward by $15,593 for the year ended December 31, 2018. The planned sale of the T9 Property under Section 363 of the Bankruptcy Code was unsuccessful. Multiple bids were received that did not meet the minimum bid requirements under court sale procedures. Accordingly, per the terms of the T9 Stipulation, the Secured Creditor in the Bankruptcy Case foreclosed on the T9 Property on December 28, 2018 as result of the Trustee Sale of the T9 Property. 

Mission Hills Square

Mission Hills Square is a new mixed-use development located in Fremont, California and slated for completion in the fourth quarter of 2020. Situated in the foothills of the San Francisco Bay Area along Highway 680, Mission Hills Square will offer 158 residential apartment units and more than 53,900 square feet of commercial retail space. Mission Hills future commercial tenants are anticipated to include retail stores, sit-down restaurants, and casual eateries. 

On January 31, 2019, Gadsden acquired from FHDC, LLC (the "Seller") all of the outstanding shares of Fremont Hills Development Corporation, a California corporation ("Fremont"), which owned a property known as Mission Hills Square which is under development. The fair value of the asset at January 31, 2019 was $124,757 of which $15,400 was allocate to land and $109,358 was real estate under development. The current value of the asset in development is recorded at $128,354 on the Company's unaudited condensed consolidated balance sheet as of June 30, 2019, which is comprised of $15,400 allocated to land and $112,954 allocated to real estate under development. In the acquisition of Fremont by Gadsden from the Seller, Gadsden escrowed part of the purchase consideration, in the form of 2,500,000 Series B OPCO Units and 2,901,835 Series B preferred shares of Gadsden securities, that was issued to the Seller.

The following table lists the relative fair values of assets purchased January 31, 2019.

Consideration	Shares		Fair value of consideration as recorded in financials
Assumed note payable		-	$	34,417
Common stock		212,409,295	$	39,924
Series A preferred stock		440,469	$	11,012
Series B preferred stock		2,901,835	$	13,321
Series C preferred stock		2,000,000	$	9,181
Series B OPCO units		2,500,000	$	11,451
Class B OPCO units		300,000	$	3,000
Warrants		-	$	2,451
Total		220,551,599	$	124,757

Fremont entered into a Construction Loan Agreement, dated January 31, 2018, with Parkview Financial Fund 2015, LP and Trez Capital Corporation (the "Loan Agreement") for a loan of up to $65,000 for construction of this project. As of June 30, 2019, Fremont had borrowed $37,721 under the Loan Agreement, which was extended to November 15, 2019, so the seller could refinance the construction loan. The Seller is responsible for the completion of the Mission Hills Square project and the Seller and its principals continue to have personal and other guarantees of the Loan Agreement. There can be no assurance that the Seller will be able to refinance the loan. Should the refinancing not be completed timely, the project may not be completed on time, or at all.

As part of the asset purchase agreement, Gadsden agreed to certain tag along rights in which the seller could participate in the sale of any shares of common stock by the Company not to exceed 5,000,000 shares when net proceeds from any offering of the Company that exceeds $25,000. The agreement also provides for additional consideration of 50% up to $1,000 of any offering that exceeds $5,000 is raised within one year of asset acquisition closing.

The Company issued warrants to its financial advisor in connection with the Company's acquisition of the Sacramento Home Lots, 9,900 warrants with a value of $99, the T9 Property, 225,000 warrants with a value of $225 and Mission Hills Square, 245,100 warrants with a value of $245 of which 217,110 of these warrants were recorded in deferred acquisition costs as of December 31, 2018 and the remaining 27,990 warrants with a value of $280 for the advisory fee were issued for the Mission Hills acquisition when it closed on January 31, 2019.