Home Treasure Finders, Inc.

The right-of-use asset represent the right to use the underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. A right-of-use asset and lease liabilities were recognized at the commencement date based on the present value of lease payments over the lease term. As the lease does not provide an implicit rate, the Company used its estimated incremental borrowing rate of 10% in determining the present value of the lease payments.

In the acquisition of Halcyon, the Company assumed Halcyon’s rights to any future recoveries related to the fire loss. The Company has filed for additional claims of in excess of $1.0 million against Halcyon’s insurance carrier including violation of Prompt Payment of Claims Act and Texas Insurance Code violations. The Company may also pursue additional recovery of its losses against the third-party general contractor and its insurers. No amounts have been recognized for the possible recovery of these losses.

On April 6, 2021, the Company announced that Chad Burkhardt has joined the Company as its Vice President and General Counsel, effective April 1, 2021. In addition to his annual salary, the Company agreed to make a future grant to Mr. Burkhardt of $750,000 worth of options for the purchase of our common stock at an exercise price equal to the fair market value of the Company’s common stock on the date of grant. Such options will vest annually in equal installments over a three year period from his date of hire.

General and Administrative Expense. General and administrative expenses totaled $1.1 million for the three months ended March 31, 2021 as compared with $570 thousand in 2020 period. The increase in general and administrative expense in the 2021 period is principally due to bonus compensation totaling $600 thousand paid to our CEO for successful completion of the Halcyon acquisition and achievement of strategic goals for the Company partially offset by lower professional fees incurred. This special bonus was also given in consideration of the minimal compensation paid to the CEO during calendar year 2020. General and administrative expense for the first quarter of 2021 also includes $42 thousand of non-cash stock-based compensation expense.

Depreciation and Amortization. Depreciation and amortization expense totaled $350 thousand in the three months ended March 31, 2021 as compared with $23 thousand for the same period of 2020. The increase in the 2021 period is due to completion of the Halcyon acquisition including $245 thousand for amortization of acquired intangible assets. The allocation of the purchase price to the assets acquired in the Halcyon acquisition is preliminary. Final adjustments, including increases and decreases to depreciation and amortization resulting from the allocation of the purchase price to amortizable tangible and intangible assets, may be material.