NOTE

REAL ESTATE

EDI Real Estate, LLC

Through EDI Real Estate, as of

December 31, 2019,

the Company owns a total of

eleven

units consisting of

six

units held for investment,

two

units held for resale, and

three

vacant lots held for resale as noted below:

EDI Real Estate	December 31, 2019	December 31, 2018
Units occupied or available for rent	6	6
Vacant units being prepared for rent	—	3
Total units held for investment	6	9

Units held for resale	2	—
Vacant lots held for resale	3	3
Total units held for resale	5	3

Units held for investment consist of single-family residential rental units.

The leases in effect, as of

December 31, 2019,

are based on annual time periods and typically include month-to-month provisions after the completion of the initial term. An outside property management company manages these rental properties on behalf of the Company. The property management company has introduced updated and renewed leases for existing rental properties.

EDI Real Estate	December 31, 2019			December 31, 2018
Total real estate held for investment	$	484,590		$	710,022
Accumulated depreciation		(104,075	)		(107,576	)
Real estate held for investment, net		380,515			602,446

Real estate held for resale	$	98,910		$	40,047

For the year ended

December 31, 2019,

depreciation expense on the EDI Real Estate portfolio of properties was

$22,161.

This compares to depreciation expense for the year ended

December 31, 2018,

when depreciation expense on the EDI Real Estate portfolio of properties was

$21,215.

During the year ended

December 31, 2019,

one

property held for resale was sold for gross proceeds of

$95,000.

Net proceeds totaled

$85,037.

This compares to its carrying value of

$95,000,

which resulted in

gain or loss being recognized on the transaction. This compares to the year ended

December 31, 2018,

when

two

residential properties and

one

commercial property held for resale were sold for gross proceeds of

$88,000.

Net proceeds totaled

$82,656.

This compares to their carrying value of

$95,033,

which resulted in a loss of

$7,033.

properties were purchased during the year ended

December 31, 2019

2018

for the EDI Real Estate portfolio.

During the year ended

December 31, 2019,

net impairment adjustments of

$26,170

were recorded on real estate held for resale through EDI Real Estate, LLC in order to properly reflect sales activity throughout the year. During the year ended

December 31, 2018,

an impairment adjustment of

$64,038

was recorded to real estate held for resale through EDI Real Estate, LLC in order to properly reflect market value for those properties held during the year.

Mt Melrose, LLC

Management has determined that the Company

longer has a controlling financial interest in Mt Melrose and is

longer the primary beneficiary as of

June 27, 2019.

All activity prior to the deconsolidation event has been included on the accompanying consolidated statements of operations for the year ended

December 31, 2019,

under the real estate segment. Simultaneously, as of

June 27, 2019,

all previously consolidated assets and liabilities of Mt Melrose, LLC have been removed from the accompanying consolidated balance sheets. Note that this deconsolidation event is separate from the deconsolidation event that took place on

November 1, 2018,

related to the change in variable interest reporting. As of

December 31, 2018,

the Company did have a controlling financial interest in Mt Melrose and was the primary beneficiary. The consolidated Mt Melrose assets as of

December 31, 2018,

included the following units:

Mt Melrose	December 31, 2018
Units occupied or available for rent		98
Vacant units being prepared for rent		15
Total units - held for investment		113

Residential and commercial units		48
Vacant lots		9
Total units - held for resale		57

As of

December 31, 2018,

units held for investment consisted of single-family and multi-family residential rental units. The leases in effect for the occupied Mt Melrose units as of

December 31, 2018,

were based on either annual or multi-year time periods. Month-to-month leases were reserved for special circumstances. Units held for resale consisted of single-family units, multi-family units, commercial properties, and undeveloped lots of land.

As of

December 31, 2018,

the Mt Melrose portfolio of properties was carried at the following amounts on the accompanying consolidated balance sheets:

Mt Melrose	December 31, 2018
Total real estate held for investment	$	9,049,945
Accumulated depreciation		(159,514	)
Real estate held for investment, net		8,890,431

Real estate held for resale	$	2,278,865

During the period ended

June 27, 2019,

depreciation expense on the Mt Melrose portfolio of properties totaled

$110,978.

This compares to the year ended

December 31, 2018,

when depreciation expense on the Mt Melrose portfolio of properties was

$159,514.

purchases were made during the period ended

June 27, 2019.

During the year ended

December 31, 2018,

Mt Melrose purchased a total of

properties, outside of the original purchase agreement, for a gross purchase price of

$2,585,463.

The majority of these purchases resulted in a note payable.

During the period ended

June 27, 2019,

Mt Melrose sold

nineteen

residential properties and

five

vacant lots for gross proceeds of

$775,850.

Net proceeds totaled

$151,672.

This compares to their carrying value of

$755,918,

which resulted in a net gain of

$16,932.

During the year ended

December 31, 2018,

Mt Melrose sold

three

residential properties consisting of

five

rental units for gross proceeds of

$295,000

and net proceeds of

$113,734.

This compares to their carrying value of

$237,273,

which resulted in a net gain of

$57,727.

During the year ended

December 31, 2019,

an impairment adjustment of

$126,827

was recorded on a commercial warehouse held for resale in order to properly reflect market value at that time. During the year ended

December 31, 2018,

an impairment adjustment of

$964,743

was recorded to real estate held for resale through Mt Melrose, LLC in order to properly reflect market value for those properties held at the end of the year. This adjustment was the result of

properties being transitioned to “held for resale” from “held for investment” as part of a portfolio redirection intended to reduce high-interest debt.

Future Minimum Rental Revenues

The future anticipated minimum rental revenues based on leases in place as of

December 31, 2019,

for EDI Real Estate, LLC are as follows:

2020	$	34,660
2021		2,000
2022		—
Total	$	36,660