Acquisition of Real Estate Assets

9 Months Ended

Sep. 30, 2017

Acquisition Of Real Estate Assets

Acquisition of Real Estate Assets

Note 2

Acquisition of Real Estate Assets:

The Company elected to early adopt ASU 2017-01 Business Combinations (Topic 805) Clarifying the Definition of a Business. Accordingly, the determination whether the asset contribution transaction represents a business combination was evaluated by applying the ASU 2017-01 guidance. The Company has determined that the group of assets assumed in the First Contribution (and also, none of them on a stand-alone basis) include, an input and a substantive process that together significantly contribute to the ability to create output and thus it was determined that the First Contribution represents an acquisition of assets rather than a business combination. Accordingly, the total sum of the fair value of consideration given (i.e. the fair value of the equity interests issued) together with the transaction costs and the fair value of financial assets and financial liabilities resulting from the Second Contribution and the Optional Contribution, was allocated to the individual assets acquired and liabilities assumed in the first contribution based on their relative fair values at the date of acquisition. Such allocation did not give rise to goodwill. 

The consideration of the asset acquisition as of May 17, 2017 consists of the following:

Fair value of FC Global common stock	$	1,275
Fair value of FC Global series A  preferred stock		4,483
Fair value of financial liability related to Optional contribution (A)		857
Fair value of  Warrant (A)		1,925
Fair value of asset related to future mandatory asset contribution (B)		(4,175	)
Fair value of assumed note payable on acquired asset		470
Transaction costs		283
Total consideration	$	5,118

A.	See Note 1 “Second Contribution”
B.	See Note 1 “Optional Contribution”

● Based on first contribution date values.

The fair value of the assets acquired and liabilities assumed were based on management estimates and values derived from an outside independent appraisal. The following table summarizes the allocation of the consideration to the assets acquired in the transaction.

The allocation of total consideration:

Investment properties		2,450
Investment in other company		2,668
Total assets acquired at fair value	$	5,118

The fair value of options granted was estimated at the dates of grant using the Black-Scholes option pricing model. The following are the data and assumptions used:

Options Value:

	May 17, 2017		September 30, 2017
Dividend yield (%)		0		0
Expected volatility (%)		39.45		39.45
Risk free interest rate (%)		1.25		1.25
Strike price (US dollars)		1.93		1.93
Stock price (US dollars)		1.45		1.15
Probability (%)		50		50
Expected term of options (years)		0.62		0.25

Warrants Value:

	May 17, 2017		September 30, 2017
Dividend yield (%)		0		0
Expected volatility (%)		39.45		39.45
Risk free interest rate (%)		1.25		1.25
Strike price (US dollars)		3		3
Stock price (US dollars)		1.45		1.15
Probability (%)		50		50

Expected term of options (years) 5 4.63

 Asset related to future mandatory asset contribution:

	May 17, 2017		September 30, 2017
Dividend yield (%)		0		0
Stock price (US dollars)		1.45		1.15
Probability (%)		70		70

During the period from the closing of the first contribution to September 30, 2017, the Company recognized a $ 2.9 million net gain as revaluation of the fair value of the financial asset and liabilities described above.