NOTE

ASSET ACQUISITION OF REAL ESTATE PROPERTIES

Historical Acquisition

December 10, 2017,

the Company entered into a certain Master Real Estate Asset Purchase Agreement (the “Purchase Agreement”) with Mt. Melrose, LLC, a Kentucky limited liability company (“Old Mt. Melrose”), that owned and managed a portfolio of residential real estate in Lexington, Kentucky. Old Mt. Melrose was owned by Jeffrey I. Moore (“Moore”), a former Company director.

January 10, 2018,

the Company’s wholly-owned subsidiary, Mt Melrose, LLC (“New Mt Melrose”), completed the

first

acquisition of

residential and other income-producing real properties under the Purchase Agreement for a total purchase price of

$3,956,389,

which consisted of

$500,000

in cash,

120,602

shares of common stock valued at

$1,658,270,

and the assumption of

$1,798,119

of existing debt.

The Company accounted for the initial purchase of properties as an asset acquisition (consisting of a concentrated group of similarly identifiable assets, including land, buildings, improvements, and in-place leases) following the guidance contained in ASU

No.

2017

01.

The total purchase price, along with approximately

$45,250

of transaction expenses, was allocated to the land and buildings acquired based on their relative fair values, as follows:

Land	$	800,328
Buildings		3,201,311
Total Value	$	4,001,639

June 29, 2018,

New Mt Melrose completed the

second

acquisition of

residential and other income-producing real properties under the Purchase Agreement for a total purchase price of

$5,174,722,

which consisted of

148,158

shares of common stock valued at

$2,407,564,

and the assumption of

$2,767,158

of existing debt.

The Company accounted for the

second

purchase of properties as an asset acquisition (consisting of a concentrated group of similarly identifiable assets, including land, buildings, improvements, and in-place leases). The total purchase price, along with approximately

$7,393

of transaction expenses, was allocated to the land and buildings acquired based on their relative fair values, as follows:

Land	$	1,036,423
Buildings		4,145,692
Total Value	$	5,182,115

Pursuant to that certain Termination of Master Real Estate Asset Purchase Agreement entered into effective

November 1, 2018,

between the Company and Old Mt. Melrose, the parties mutually agreed to terminate the Purchase Agreement as of

November 1, 2018.

Accordingly, neither the Company nor New Mt Melrose had any further rights or obligations concerning additional acquisitions of real properties from Old Mt. Melrose under the Purchase Agreement as of that time. A

third

-party property manager was engaged as of

November 1, 2018,

to manage certain of the real properties previously acquired. Management also determined that it was necessary to right-size New Mt Melrose operations to reduce its level of high-interest debt. Accordingly, New Mt Melrose began to immediately sell various properties with an emphasis on selling properties that had high-interest-rate loans and did

not

produce income.

In an effort to expedite the optimization of the Mt Melrose portfolio, management subsequently determined that a dedicated operator was necessary to manage the subsidiary. On

June 27, 2019,

as per the Current Report on Form

-K filed with the SEC on

July 3, 2019,

the Company sold

65%

of its membership interest in Mt Melrose, LLC to an unaffiliated

third

-party purchaser, Woodmont Lexington, LLC (“Woodmont”). As consideration for the transaction, Woodmont paid the Company

$100,000

and agreed to assume full responsibility for the management and operation of Mt Melrose and its real estate portfolio. See Note

for more information.

Historical Variable Interests

As of the quarterly periods ended

March 31, 2018,

June 30, 2018,

and

September 30, 2018,

the Company had determined that Old Mt. Melrose was a “variable interest entity” because the seller’s equity interests in Old Mt. Melrose were

not

effective in determining whether the seller or New Mt Melrose had a controlling financial interest, and that New Mt Melrose’s rights under a certain Cash Flow Agreement that had been entered into on

January 10, 2018

with Old Mt. Melrose (the “Cash Flow Agreement”) were deemed to be variable interests in Old Mt. Melrose. At those times, the Company had determined that New Mt Melrose was the primary beneficiary of Old Mt. Melrose since substantially all of Old Mt. Melrose’s activities had been conducted on behalf of New Mt Melrose and because New Mt Melrose

may

have been required to provide financial support to Old Mt. Melrose under the Cash Flow Agreement. As its primary beneficiary, New Mt Melrose previously consolidated Old Mt. Melrose’s financial results beginning on

January 10, 2018.

The fair values of the assets and liabilities of Old Mt. Melrose had been consolidated accordingly on the unaudited consolidated balance sheets for the quarterly periods ended

March 31, 2018,

June 30, 2018,

and

September 30, 2018.

As noted on the unaudited consolidated statements of stockholders’ equity during those quarters, the ending noncontrolling interest allocated to the variable interest entity represented the remaining equity held by Old Mt. Melrose for properties that had

not

yet been acquired under the Purchase Agreement. The ending noncontrolling interest amount also included any income or loss generated by the remaining properties that were to be acquired under the Purchase Agreement for the period then ended.

As of

November 1, 2018,

pursuant to the termination of the Master Real Estate Asset Purchase Agreement and Cash Flow Agreement noted above, New Mt Melrose was

longer the primary beneficiary of Old Mt. Melrose. Additionally, as of

November 1, 2018,

New Mt Melrose

longer had a controlling financial interest in Old Mt. Melrose. Consequently, as of

November 1, 2018,

the Company

longer consolidated the fair values of the assets, liabilities, or operating results of Old Mt. Melrose, and the balance of noncontrolling interest as of

December 31, 2019

and

2018,

is zero.