Item
1.01 Entry into a Material Definitive Agreement.
On August 18, 2016, we entered into a purchase
contract (the Zinnia Agreement”) with Zinnia Investments, LLC (“Zinnia”), a Wyoming limited liability company,
which was 100% owned by Esteban Coaloa. On January 3, 2017, Zinnia amended its operating agreement to admit Jacaranda Investments,
Inc. (“Jacaranda”) as a 45% member and the Marisol Trust, Lorenzo Soria, as Trustee, as a 10% member. On January 3,
2017, all of the members of Zinnia approved the sale of Zinnia to us. Jacaranda is 100% owned by our Chairman
and CEO and Esteban Coaloa is our Vice President. Under the terms of the Zinnia Agreement, we will acquire 100% of the membership
interests of Zinnia for $925,000 (the “Purchase Price”). Zinnia’s sole asset is the real property located at
2909 South Catalina Street, Los Angeles, California (the “Property”). Under the terms of the Zinnia Agreement, our
consideration for the Purchase Price is: (1) a $655,000 All Inclusive Deed of Trust, secured by the Property, and a promissory
note (the “Note”), which bears interest at 6%, interest only, with $145,000 due in one (1) year and the balance due
on in two (2) years; and (2) 270,000 share of our Series 1 Convertible Preferred Stock at an issuance price of $1.00 per share,
for $270,000 (the “Zinnia Preferred Stock”). The interest rate on the Note will decrease to the greater of 3.5%, principal
and interest or the 11
th
District Cost of Funds Index plus 2.8% principal and interest, rounded up to the nearest 0.125%
and adjusted every six (6) months starting the 1
st
day of month 6 following the $145,000 payoff, and adjusting every
6 months thereafter. The Zinnia Preferred Stock is convertible into our common stock at the lesser of $0.50 per share or a 10%
discount to the average closing price of our common stock for the five (5) days prior to the holders’ date of conversion.
The Zinnia Preferred Stock pays a 5% dividend in-kind, annually. Under the terms of the Zinnia Agreement, the closing was subject
to our verification of title, rental income and our satisfaction with the completion and results of Zinnia’s audited financial
statements.
On September 26, 2016, we entered into a purchase contract (the Akebia Agreement”)
with Akebia Investments, LLC (“Akebia”), a Wyoming limited liability company, which was 100% owned by Esteban Coaloa.
On January 2, 2017, Akebia amended its operating agreement and admitted Jacaranda as a 90% member. On January 2, 2017, all of
the members of Akebia approved the sale to us. Jacaranda and Esteban Coaloa are related parties as described above. We agreed
to acquire 100% of the membership interests of Akebia for $890,000 (the “Purchase Price”). Akebia’s sole asset
is the real property located at 3711 South Western Avenue, Los Angeles, California (the “Akebia Property”). The terms
of the Akebia Agreement, our consideration for the Purchase Price is: (1) a $710,000 All Inclusive Deed of Trust, secured by the
Akebia Property and a promissory note (the “Akebia Note”), which bears interest at 6%, interest only, with $100,000
due in one (1) year and the balance due on August 1, 2019; and (2) 180,000 shares of our Series 1 Convertible Preferred Stock
at an issuance price of $1.00 per share, for $180,000 (the “Akebia Preferred Stock”). After the $100,000 is paid off,
the interest rate on the balance of the note will decrease to 4% principal and interest. The Akebia Preferred Stock is convertible
into our common stock at the lesser of $0.50 per share or a 10% discount to the average closing price of our common stock for
the five (5) days prior to the holders’ date of conversion. The Akebia Preferred Stock pays a 5% dividend in-kind, annually.
Under the terms of the Akebia Agreement, the closing was subject to our verification of title, rental income and our satisfaction
with the completion and results of Akebia’s audited financial statements.
On
April 4, 2017, our auditors completed their audits of Zinnia’s and Akebia’s financial statements and, on April
7, 2017, our sole director approved of the audited results and the acquisitions of Zinnia and Akebia to close the transactions
on April 10, 2017.
The
foregoing description of the acquisition of Zinnia and the Zinnia Agreement and the transaction contemplated thereby contained
herein is qualified in its entirety by reference to the Zinnia Agreement, a copy of which is attached hereto as Exhibit 10.1 and
incorporated into this Item 1.01 by reference.
The
foregoing description of the acquisition of Akebia and the Akebia Agreement and the transaction contemplated thereby contained
herein is qualified in its entirety by reference to the Akebia Agreement, a copy of which is attached hereto as Exhibit 10.2 and
incorporated into this Item 1.01 by reference.
Set
forth in Item 9.01 is the financial statement prepared pursuant to Rule 3-14 of Regulation S-X relating to the acquisition of
Zinnia and Akebia, which are each individually significant within the meaning of Rule 3-14.