Commitments and Contingencies: | Note 7 Commitments and Contingencies: Litigation Suneet Singal On September 21, 2018, Suneet Singal, the Company’s former Chief Executive Officer filed a suit against the Company and its transfer agent, Broadridge Corporate Issuer Solutions Inc., in the Supreme Court of New York for the County of New York. The suit alleges breach of contract, breach of good faith and, with regard to Broadridge, a violation of UCC Article 8-401, and demands the issuance and release to Mr. Singal of 1,000,000 shares of the Company’s common stock, as well as other unspecified damages. On December 18, 2018, the Company filed a counterclaim regarding several matters undertaken by Mr. Singal while he served in leadership roles with the Company. The Company filed a Motion to Dismiss the suit. On October 14, 2019, the Company was notified that the Court had dismissed Mr. Singal’s suit, with prejudice. Fremont Litigation On October 18, 2018, the Securities and Exchange Commission (the “SEC”) commenced a civil action (the “Civil Action”) against Jean Danhong Chen, Tony Jianyun Ye, Kai Hao Robinson, Kuansheng Chen, the Law offices of Jean D. Chen, A Professional Corporation, Tree Lined Holdings, LLC, and Golden State Regional Center, LLC all unrelated to the Company. The defendants are accused of several unlawful activities. The complaint also alleges that the named defendants used Fremont, the property acquired by the Company in 2019, during 2014 - 2016 for their unlawful activities giving rise to the complaint. Neither the Company, Gadsden, nor any of their respective subsidiaries are named as defendants in the Civil Action, and no legal claim has been asserted in the Civil Action against the Mission Hills Square property or Fremont. Additionally, FDHC (“the Seller”) is also not a defendant in the Civil Action. None of the defendants in the Civil Action are directors, officers, or affiliates of the Company, or any owner of 5% or more of the Company’s voting securities or, based upon current knowledge, any associate of any director, officer or affiliate of the Company. Although the individual defendants in the Civil Action are alleged by the SEC to have used Fremont in connection with the actions described in the Civil Action, there are no claims in the Civil Action that Gadsden, Fremont, or the Seller participated in the actions described since they acquired Fremont in 2018. On March 7, 2019, Jean Danhong Chen and Tony Jianyun Ye were indicted by a Federal Grand Jury for Visa Fraud, Obstruction of Justice, Identity and Aggravated Identity Theft and Criminal Forfeiture. This indictment was unsealed on March 25, 2019. On March 25, 2019 Gadsden was informed it was a subject of a criminal investigation by the US Department of Justice. In the acquisition of Fremont by Gadsden from the Seller, Gadsden escrowed part of the purchase consideration, in the form of Gadsden securities, that was issued to the Seller, which had at that time an estimated value of approximately $55,000. The Civil Action alleges that at least $40,000 was loaned by Bay Area Investment Fund I to Fremont. This loan has been assumed by the Seller, is currently being paid by the Seller and is not in default. Gadsden has not reserved any amounts in its financial statements and may use the escrowed securities for any undisclosed liabilities, including any liabilities related to the Civil Action. Gadsden is not able to determine if there is any liability of Fremont in the Civil Action, of Gadsden in the criminal investigation, or related matters, or if any such liability will be in excess of the escrowed amount. Gadsden believes that, if there is any liability to the Company, it is not in excess of the escrowed amount, and intends to vigorously defend itself against any such allegations if made, although such defenses can be expensive and there can be no guarantee that such defenses will be successful. Nevertheless, as described above, Gadsden agreed to indemnify and hold the Company harmless from all losses of Gadsden or any of its subsidiaries arising from or related to the Civil Action, the facts described therein and all civil or other actions arising from or related to such Civil Action. Gadsden does not believe that there will be any negative consequences to its ownership of Mission Hills as a result of this action, and therefore cannot at this time make any provision for any contingency in this matter. Nevertheless, the Company will continue to monitor this matter and intends to defend its rights in this matter to the fullest extent possible. DSKX litigation On February 16, 2016, the Company and certain of its subsidiaries entered into two Merger Agreements (the “Merger Agreements”) with DS Healthcare Group, Inc. (“DSKX”). Those mergers failed to occur and the Company alleged that the failure was due to certain actions by DSKX, and that as a result of those actions the Company was entitled to certain break-up fees under the terms of the Merger Agreements. DSKX disputed those claims and asserted its own claims against the Company. On June 23, 2017, the Company and DSKX entered into a Confidential Settlement and Mutual Release Agreement (the “Settlement Agreement”) to resolve that litigation, under which DSKX agreed to make certain payments to the Company, including a minimum payment of at least $800 within ten business days of the resolution of DSKX’s legal malpractice lawsuit against Fox Rothschild, LLP. The Fox Rothschild lawsuit was resolved on April 26, 2019, yet DSKX did not make any payments to the Company. Therefore, on June 24, 2019, the Company served a summons and Complaint for breach of contract on DSKX seeking payment by DSKX of the amounts owed under that settlement agreement. On September 13, 2019, the Company entered into a Settlement and Mutual Release Agreement (the “Agreement”) with DSKX, under which DSKX will pay to the Company the original settlement sum of $800 plus applicable interest of 6% per annum. The Agreement took effect upon the Company’s receipt of an initial payment of $80 from DSKX on September 13, 2019. Under the Agreement, DSKX will pay the remainder of the original settlement amount to the Company over a period of not more than 48 months, with an option to prepay. In exchange, the Company received a security interest in DSKX’s future accounts receivable and it dismissed its current suit against DSKX, although the Florida state court in which that suit was filed will retain jurisdiction over the settlement arrangement. Pursuant to the terms of the Agreement, if DSKX fails to make payments, the settlement amount may be accelerated and becomes immediately payable. Each party agreed to a mutual release of claims against the other and paid its own legal fees and costs in connection with the Agreement. The receivable was fully reserved as of June 30, 2019. Other litigation The Company and certain subsidiaries are, have been and may be, involved in other miscellaneous litigation and legal actions, including product liability, consumer, commercial, tax and governmental matters, which can arise from time to time in the ordinary course of the Company’s business. The Company believes that these other litigation and claims will likely be resolved without a material effect on the Company’s consolidated financial position, results of operations or liquidity. However, litigation and legal actions are inherently unpredictable, and excessive verdicts can result in such situations. Although the Company believes it has or will have substantial defenses in these matters, it may, in the future, incur judgments or enter into settlements of claims that could have a material adverse effect on results of operations in a particular period. Purchase Contracts On December 4, 2018, the Company entered into a definitive purchase agreement for the acquisition of a 14.75-acre land parcel located in Carson City, Nevada (the “Carson City Property”) which the Company intends to net lease under a build to suit strategy. The purchase price for this property is $5,500 as adjusted for customary apportionments. The purchase price is payable by a new first mortgage loan of $2,300 with the remaining $3,200 being paid by the Company’s operating partnership issuing Series B OPCO Units that are valued at $10.00 per unit (or share of the Company’s common stock). The Company had a closing deadline of June 30, 2019 which was extended to July 31, 2019. On January 16, 2019, the Company provided a non-refundable deposit of $55 in the form of Series B OPCO Units. Due to not closing or extending the purchase agreement, the Company wrote-off this non-refundable deposit during the three and six months ended June 30, 2019 and is included in the results on the unaudited condensed consolidated statements of operations and comprehensive loss. Commitments On June 4, 2018, we entered into a Loan and Security Agreement with The Pigman Companies, LLC, as the administrative agent, and investors under such agreement (the “Secured Bridge Loan Agreement”). From such date to September 30, 2018, we raised approximately $1,855 of secured loans (the “Bridge Loans”) that were due September 30, 2018. The Bridge Loans are the direct obligations of OPCO and fully guaranteed by the Company. The Company pledged all its assets as security under the Secured Bridge Loan Agreement. The Bridge Loans incur interest at 10% per annum, determined based on a 360-day year, and provide an additional 5% per annum during the period that the Bridge Loans are in default. The interest on the Bridge Loans is payable on the maturity date. Common shares will be issued for the bridge loan equity bonus fee 30 days after the date the Company is listed on a public exchange (after the registration statement becomes effective) and will be equal to the principal balance of the bridge loan on October 31, 2018. On October 31, 2018, the aggregate amount of principal and interest of $1,936 was paid. As principal and interest was paid in full, the equity bonus fee is the only remaining obligation and will be recorded on the Company’s financial statements 30 days after an approved registration statement is effective and will be paid in common stock of the Company in the amount of $1,855. On April 15, 2019, Kris Pigman was nominated and accepted a position as a board director of the Company. Employment and Severance Commitments Under their employment agreements, the Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”), Chief Financial Officer (“CFO”) and Chief Accounting Officer (“CAO”) are entitled an annual base compensation of $350, $250, $250 and $175, respectively for a three year term after which the employment agreements will automatically renew for successive one year terms. Upon filing of an effective registration statement and merger completion, the CEO, COO, CFO and CAO are entitled to a bonus of $250, $150, $125 and $25, respectively. With respect to any separation of employment, (i) if the executive is terminated without “cause” (as defined in the employment agreement) or resigns for “good reason” (as defined in the employment agreement), then, in addition to the amount of base salary earned and benefits accrued as of such separation date, the executive will be entitled to receive a lump sum payment equal to 100% for the CAO, 150% for the COO and CFO and 299% for the CEO of his annual base salary payable within 30 days of the termination of his employment, and (ii) if the executive is terminated for cause or resigns without good reason, then he will be entitled to receive the amount of any base salary earned and benefits accrued as of the date of such separation and the Company will have no further obligation to the executive. In addition, if, within six months of a “change of control” (as defined in the employment agreement), the executive is terminated without cause or resigns for good reason, then, in addition to the amount of base salary earned and benefits accrued as of such separation date, the executive will be entitled to receive a lump sum payment equal to 150% for the COO and CFO, 200% for the CAO and 299% for the CEO of his annual base salary payable within 30 days of the termination of his employment. |