|12 Months Ended|
Dec. 31, 2019
|Business Combinations [Abstract]|
NOTE 4. ASSET ACQUISITION
On December 20, 2019, the Company entered into a purchase agreement (the “Rental Home Portfolio Asset Purchase Agreement”) with (i) USHR, (ii) the holders (the “Equity Sellers”) of 100% of the equity interests in the entities owned by the Equity Sellers that collectively hold a real estate asset portfolio consisting of 3,184 rental homes located across the United States (the “Entities”), (iii) Vision Property Management, LLC, a South Carolina limited liability company (“Vision” and together with the Equity Sellers, the “Sellers”), and (iv) Alexander Szkaradek, in his capacity as the representative of the Sellers (the “Sellers’ Representative”). On December 30, 2019, the parties amended the Rental Home Portfolio Agreement in order to address certain changes to the Rental Home Portfolio Agreement, including, among other things, to allow the $9,750 balance of the cash portion of the purchase price to be paid in cash or short-term promissory notes, and to reduce the Equity Sellers’ indemnification deductible to $100. On December 30, 2019, the Company completed the acquisition of the Entities pursuant to the Rental Home Portfolio Agreement, as amended. The Company accounted for the asset acquisition in accordance with ASC 350, Intangibles-Goodwill and Other, whereby the purchase price was allocated to the individual assets purchased and liabilities assumed based on their fair value.
Pursuant to the Rental Home Portfolio Asset Purchase, as amended, USHR purchased (a) all of the equity interests in the Entities and (b) all of rental home portfolio assets that are related to its business, including certain assumed contracts and assumed intellectual property, excluding certain specified assets. The fair value of consideration transferred was $229,828 consisting of (i) $250 of cash; (ii) $9,750 in promissory notes payable on or before March 31, 2020 as extended by the forbearance period; (iii) the amount of outstanding indebtedness of the Entities, of $86,737, of which $1,230 was due to related parties; (iv) 4,222,474 shares of the Company’s common stock, par value $0.001, which had a fair value at the time of acquisition of $15,385; and (v) shares of a newly designated Series I Non-Convertible Preferred Stock having a fair value of $117,926 at the date of acquisition.
The following table summarizes the fair value of the consideration transferred for the acquisition of Rental Home Portfolio Assets:
(1)The Company is required to keep certain accounts at the issuing bank for one of the assumed notes payable for the i) aggregate amount of interest due and payable under all outstanding issuer notes on the next monthly payment date, and ii) the estimated costs and expenses related to the ownership, servicing, operation and maintenance of the purchased assets and iii) reserve for applicable tax liabilities, with cash balances temporarily restricted for regular business operations.
The following table summarizes the acquisition date fair value of the purchase price allocation assigned to each major class of assets acquired and liabilities assumed as of December 30, 2019, the closing date for the Rental Home Portfolio Assets:
The fair values are based on management’s analysis, including work performed by third-party valuation specialists. A number of significant assumptions and estimates were involved in the application of the valuation methods, including revenues, royalty rates, expenses, tax rates, capital spending, discount rates, and working capital changes. Cash flow forecasts were generally based on USHR forecasts. Valuation methodologies used for the identifiable assets acquired and liabilities assumed utilize Level 1, Level 2, and Level 3 inputs including quoted prices in active markets and discounted cash flows using current interest rates. See Note 15.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef