NOTE 2. CORPORATE REORGANIZATION

On December 10, 2013, the date the Company was incorporated, a stock subscription was received by us for 1,000 shares of our common stock from Meier Family Holdings, LLC and Meier Management Company (collectively, the “Founders”).

On May 22, 2014, we closed the reorganization of SDS, SDPC, SDF, ET, MPS, SDPCA, and ML into wholly-owned subsidiaries of the Company under the terms of an agreement and plan of reorganization, dated December 15, 2013 (the “Reorganization”). In exchange for their ownership interest in those entities, the Founders received 8,813,860 shares of our common stock, in addition to the initial 1,000 shares of our common stock. Each of the subsidiaries is considered to be the historical accounting predecessor for financial statement reporting purposes. See Note 12 for further discussion of the income tax impact of Reorganization.

On May 29, 2014, the Company completed its initial public offering of common stock pursuant to a registration statement on Form S-1 (File 333-195085), as amended and declared effective by the SEC on May 22, 2014 (the “Offering”). Pursuant to the registration statement, the Company registered the offer and sale of 7,762,500 shares of common stock, which included 1,012,500 shares of common stock pursuant to an option granted to the underwriters to cover over-allotments. The Company’s sale of the shares in the Offering closed on May 29, 2014.

The gross proceeds of the Offering, based on the public offering price of $4.00 per share, were approximately $31.05 million. After subtracting underwriting discounts and commissions of $2.4 million, the Company received net proceeds of approximately $28.7 million from the Offering. The Company used $12.5 million of the net proceeds to acquire Hard Rock (See Note 4).

The Naples property loan was used by a now-defunct limited liability company in which Troy Meier was an investor to purchase approximately 11 unimproved acres in Naples, Utah for a now-terminated property development venture. When the venture failed, the Company took title to the property and assumed this loan. This loan was secured by the purchased property. The raw land loan was used to purchase approximately 47 unimproved acres in Vernal, Utah that is contiguous to the Meier’s residence for approximately $0.7 million. This loan was secured by the purchased property. Prior to closing the Offering, the Naples property loan and the raw land loan totaling $1.7 million and $0.7 million, respectively, were distributed to the Founders. The land being held as collateral under the Naples property loan and the raw land loan were also distributed at historical cost totaling approximately $2.1 million.

Upon closing of the Offering, the Company issued notes to the Founders, in the amounts of $1,280,000 and $720,000, respectively, as additional consideration for the Reorganization. The obligations are required to be paid by the Company on or before January 2, 2015. Until repayment, the obligation accrues interest at the Prime rate of JPMorgan Chase Bank plus 0.25%. As of September 30, 2014 the JP Morgan prime rate was 3.25%. The Company has made payments on these notes in the aggregate of $150,000, which includes principle payment of approximately $148,000 in aggregate, as of September 30, 2014.

Upon closing of the Offering, the Company’s $2 million Bridge Loan automatically converted into 714,286 shares of our common stock, and a four-year warrant to purchase an equivalent number of shares of our common stock at $4.00 per share (see also Note 7). The conversion feature and detachable warrants qualified as a derivative liability at inception and recorded at a fair value of $1.9 million. Upon conversion, the detachable warrant was recognized in additional paid in capital at a fair value of $1.1 million. Fair value was determined using a Black-Scholes option model with level 3 fair value inputs as follows:

Strike price per share	$	4.00
Market price per share	$	4.00
Volatility		47.3	%
Term		4 years
Risk-free rate		0.69	%