(a)

The original mortgage loan for the Franklin Square Property in the amount of $14,275,000 matured on October 6, 2021. Effective on October 6, 2021, the Company entered into a forbearance agreement with the current lender extending the maturity date for thirty days with a right to extend the maturity date for an additional thirty days. On November 8, 2021, the Company closed on a new loan in the principal amount of $13,250,000 with a ten-year term and a maturity date of December 6, 2031. In addition to the funds from the new loan, the Company used $2,242,273 in cash on hand for loan issuance costs (totaling $283,721), to fund escrows and to repay the remaining balance of the original mortgage loan. The Company has guaranteed the payment and performance of the obligations of the new mortgage loan. The new mortgage loan bears interest at a fixed rate of 3.808 percent and is interest only until January 6, 2025, at which time the monthly payment will become $61,800, which includes interest and principal based on a 30 year amortization schedule. The Company accounted for this refinancing transaction under debt extinguishment accounting in accordance with ASC 470. The new mortgage includes covenants for the Company to maintain a net worth of $13,250,000, excluding the assets and liabilities associated with the Franklin Square Property and for the Company to maintain liquid assets of no less than $1,000,000. As of September 30, 2022 and December 31, 2021, the Company believes that it is compliant with these covenants.

(b)

The mortgage loan for the Hanover Square Property bears interest at a fixed rate of 4.25 percent until January 1, 2023, when the interest rate will adjust to a new fixed rate which will be determined by adding 3.00 percentage points to the daily average yield on United States Treasury securities adjusted to a constant maturity of five years, as made available by the Federal Reserve Board, with a minimum of 4.25 percent. The fixed monthly payment of $56,882 which includes interest at the fixed rate, and principal, based on a 25 year amortization schedule. The mortgage loan agreement for the Hanover Square property includes covenants to (i) maintain a Debt Service Coverage Ratio (“DSCR”) in excess of 1.35 and (ii) maintain a loan-to-value of real estate ratio of 75 percent. As of September 30, 2022 and December 31, 2021, respectively, the Company believes that it is compliant with these covenants.

(c)

The mortgage loan for the Ashley Plaza Property bears interest at a fixed rate of 3.75 percent and was interest only for the first twelve months. Beginning on October 1, 2020, the monthly payment became $52,795 for the remaining term of the loan, which includes interest at the fixed rate, and principal, based on a 30 year amortization schedule.

(d)

The mortgage loan for the Brookfield Property bears interest at a fixed rate of 3.90 percent and is interest only for the first twelve months. Beginning on November 1, 2020, the monthly payment became $22,876 for the remaining term of the loan, which includes interest at the fixed rate, and principal, based on a 30 year amortization schedule.

(e)

The mortgage loan for the Parkway Property bears interest at a variable rate based on LIBOR with a minimum rate of 2.25 percent. The interest rate payable is the ICE LIBOR rate plus 225 basis points. As of September 30, 2022 and December 31, 2021, the rate in effect for the Parkway Property mortgage was 4.814 percent and 2.3493 percent, respectively. The monthly payment, which varies based on the interest rate in effect each month, includes interest at the variable rate, and principal based on a 30 year amortization schedule.

(f)

On June 13, 2022, the Company entered into a mortgage loan facility with Wells Fargo Bank (the “Wells Fargo Mortgage Facility”) in the principal amount of $18,609,500. The proceeds of this mortgage were used to finance the acquisition of the Salisbury Marketplace Property and to refinance the mortgages payable on the Lancer Center Property and the Greenbrier Business Center Property (see notes (g) and (h), below). The Wells Fargo Mortgage Facility bears interest at a fixed rate of 4.50 percent for a five year term. The monthly payment, which includes interest at the fixed rate, and principal, based on a 25 year amortization schedule, is $103,438. The Company has provided an unconditional guaranty of the payment of and performance under the terms of the Wells Fargo Mortgage Facility. The Wells Fargo Mortgage Facility credit agreement includes covenants to maintain a debt service coverage ratio of not less than 1.50 to 1.00 on an annual basis, a minimum debt yield of 9.5 percent on the Salisbury Marketplace, Lancer Center and Greenbrier Business Center properties, and the maintenance of liquid assets of not less than $1,500,000. As of September 30, 2022, the Company believes that it is compliant with these covenants.

(g)

On June 13, 2022, the Company refinanced the mortgage loan for the Lancer Center Property, using proceeds from the Wells Fargo Facility discussed above. The Company accounted for this refinancing transaction under debt extinguishment accounting in accordance with ASC 470, and for the three and nine months ended September 30, 2022, recorded a loss on extinguishment of debt of $0 and $113,282, respectively. The original mortgage loan for the Lancer Center Property bore interest at a fixed rate of 4.00 percent. The monthly payment was $34,667 which included interest at the fixed rate and principal, based on a twenty-five year amortization schedule.

(h)

On June 13, 2022, the Company refinanced the mortgage loan for the Greenbrier Business Center Property, using proceeds from the Wells Fargo Facility discussed above. The Company accounted for this refinancing transaction under debt extinguishment accounting in accordance with ASC 470, and for the three and nine months ended September 30, 2022, recorded a loss on extinguishment of debt of $0 and $56,393, respectively. The Company assumed the original mortgage loan for the Greenbrier Business Center Property from the seller. The original mortgage loan bore interest at a fixed rate of 4.00 percent and would have been interest only until August 1, 2022, at which time the monthly payment would have become $23,873, which would have included interest at the fixed rate, and principal, based on a twenty-five year amortization schedule.

Interest rate protection transaction

On October 28, 2021, the Company entered into an Interest Rate Protection Transaction to limit the Company’s exposure to increases in interest rates on the variable rate mortgage loan on the Parkway Property. Under this agreement, the Company’s interest rate exposure is capped at 5.25 percent if USD 1-Month ICE LIBOR exceeds 3 percent. USD 1-Month ICE LIBOR was 3.143 percent and 0.102 percent as of September 30, 2022 and December 31, 2021, respectively. In accordance with the guidance on derivatives and hedging, the Company records all derivatives on the balance sheet at fair value under other assets. The Company determines fair value based on the three-level valuation hierarchy for fair value measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active; and inputs other than quoted prices. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. As of September 30, 2022 and December 31, 2021, respectively, the fair value of the interest Rate Protection Transaction, based on level 1 inputs, was $283,461 and $37,350. The Company reports changes in the fair value of the derivative as a decrease (increase) in fair value-interest rate cap on its consolidated statements of operations.

Mortgages payable, net, associated with assets held for sale

The Company’s mortgages payables, net, associated with assets held for sale, consists of the following:

Balance

September 30,

Monthly

Interest

2022

December 31,

Property

Payment

Rate

Maturity

(unaudited)

2021

Clemson Best Western (a)

Interest only

Variable

October 2022

—

7,750,000

Unamortized issuance costs, net

—

(134,632)

Total mortgages payable, net, associated with assets held for sale

—

7,615,368

(a.)

As of March 31, 2021, the Company reclassified the mortgage loan for the Clemson Best Western Property to mortgages payable, net, associated with assets held for sale. The mortgage loan for the Clemson Best Western Property bore interest at a variable rate based on LIBOR with a minimum rate of 7.15 percent. The interest rate payable was the USD LIBOR one-month rate plus 4.9 percent. As of September 30, 2022 and December 31, 2021, respectively, the rate in effect for the Clemson Best Western Property mortgage was 7.15 percent. On September 29, 2022, the Company sold the Clemson Best Western Property and repaid the Clemson Best Western Property mortgage payable. The Company accounted for the repayment of the mortgage payable under debt extinguishment accounting in accordance with ASC 470. During the three months ended September 30, 2022, the Company recorded a loss on extinguishment of debt of $219,532, consisting of $84,900 in fees paid to the lender and a write off of $134,632 of unamortized loan issuance costs.

During the three and nine months ended September 30, 2022, the Company incurred $227,164 in expenses related to its efforts to refinance the Clemson Best Western Property mortgage payable in anticipation of its October 6, 2022 maturity, had the Company not successfully closed on the sale of the Clemson Best Western Property on September 29, 2022. These expenses for lender fees and other third-party costs are recorded as other expenses on the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2022. No such expenses were recorded during the three and nine months ended September 30, 2021.

Wells Fargo Line of Credit

On June 13, 2022, the Company, through its wholly owned subsidiaries, entered into a loan agreement with Wells Fargo Bank for a $1,500,000 line of credit (the “Wells Fargo Line of Credit”). During the three and nine months ended September 30, 2022, the Company did not make any draws or repayments on the Wells Fargo Line of Credit. As of September 30, 2022, the Wells Fargo Line of Credit had an outstanding balance of $0. Outstanding balances on the Wells Fargo Line of Credit will bear interest at a floating rate of 2.25 percent above the daily secured overnight financing rate (“SOFR”). The Wells Fargo Line of Credit has a one-year, renewable term, is unconditionally guaranteed by the Company, and any outstanding balances are secured by the Lancer Center Property, the Greenbrier Business Center Property and the Salisbury Marketplace Property.

Convertible Debentures

On October 27, 2020, the Company entered into a definitive agreement with a financing entity to issue and sell convertible debentures in an aggregate principal amount of up to $5 million pursuant to a private offering exempt from registration under the Securities Act of 1933, as amended. The debentures were issued at a 5 percent discount to the principal amount, accrue interest at a rate of 5 percent per annum (payable at conversion or maturity), and were closed in three separate tranches as follows: (i) convertible debenture of $1.5 million issued and sold on October 27, 2020 upon the signing of the definitive agreement, (ii) convertible debenture of $2.0 million issued and sold on December 22, 2020 upon the filing of a registration statement with the U.S. Securities and Exchange Commission (“SEC”) relating to the shares of common stock that may be issued upon the conversion of the convertible debentures, and (iii) convertible debenture of $1.5 million issued and sold on January 5, 2021, the date the registration statement was declared effective by the SEC. The second and third closings of the convertible debentures were subject to the Company successfully obtaining approval from its common stockholders for the issuance of shares of common stock that may be issued upon the conversion of the convertible debentures. Net proceeds from the issuance and sale of the convertible debentures totaled $4,231,483.


							Debt
			Principal				Issuance		Net Cash
Tranche	Closing Date		Amount		Discount		Costs – Cash		Proceeds
Tranche 1		October 27, 2020	$	1,500,000	$	(75,000)	$	(155,555)	$	1,269,445
Tranche 2		December 22, 2020		2,000,000		(100,000)		(207,407)		1,692,593
Tranche 3		January 5, 2021		1,500,000		(75,000)		(155,555)		1,269,445
Total			$	5,000,000	$	(250,000)	$	(518,517)	$	4,231,483

The 5 percent issue discount totaled $250,000 and was amortized over the one-year term of the debentures using the effective interest method. The Company also paid a total of $518,517 in issuance costs, including legal, accounting, other professional fees, and underwriting discounts. In addition to the closing costs paid in cash, the Company paid $123,000 in debt issuance costs in common shares of the Company. These issuance costs were recorded as deferred debt issuance costs on the accompanying condensed consolidated balance sheets as a direct deduction from the carrying amount of the convertible debentures and were amortized over the one-year term of the debentures using the effective interest method.

Based on the terms and relevant conversion details, the debt component and embedded conversion option of the debentures are not bifurcated for accounting purposes under ASC 815, Derivative Instruments and Hedging Activities. Because the variable conversion price of the debentures was lower than the market price of the Company’s common stock at the commitment date, the debentures have a beneficial conversion feature as outlined in ASC 470, Debt. The intrinsic value of the beneficial conversion feature totaled $946,840 and was recorded as an increase in additional paid-in capital and a corresponding incremental discount on the carrying value of the debentures.

Each tranche of the convertible debentures had a maturity date one year from its closing date. At its option, the holder at any time may elect to convert any portion of the principal and accrued interest into shares of the Company’s common stock. Conversions into common stock occur at the lower of (1) a fixed conversion price of $2.47, or (2) a variable conversion price equal to 88 percent of the volume-weighted average price of the Company’s common shares for the ten consecutive trading days preceding the conversion date, except that the conversion price cannot be lower than $0.6175. Based on securities and stock exchange regulations, the agreement limits the percentage of the Company’s common shares that may be held at any time by the debenture holder, which effectively limits the amount of principal and interest that the debenture holder may convert without disposing of shares received in earlier conversions. The agreement includes customary representations and warranties, as well as provisions for conversion price adjustments that prevent dilution of the holder’s conversion shares in the event the Company issues additional shares of its common stock prior to the maturity or full conversion of the debentures. At its option, the Company may redeem all or any portion of the outstanding principal and accrued interest prior to the maturity date at a 15% premium to the principal amount, provided that the trading price of its common stock at that time is less than the $2.47 fixed conversion price and it provides the holder with ten business days’ written notice to allow the holder the opportunity to elect conversion of the debentures prior to the redemption.

Between January 6, 2021 and May 11, 2021, the convertible debenture holder completed the full conversion of the total $5,000,000 principal balance of the convertible debentures and $58,788 in accrued interest, to the Company’s common shares, receiving 3,181,916 common shares in a series of 17 conversions at an average conversion price of $1.59 per common share.

Interest expense

Interest expense, including amortization of capitalized issuance costs consists of the following:


	For the three months ended September 30, 2022
	(unaudited)
			Amortization
	Mortgage		of discounts and		Other
	Interest		capitalized		interest
	Expense		issuance costs		expense		Total
Franklin Square mortgage	$	128,943	$	7,093	$	—	$	136,036
Hanover Square mortgage		108,222		3,223		—		111,445
Hampton Inn mortgage		—		—		—		—
Ashley Plaza mortgage		105,438		4,357		—		109,795
Clemson Best Western mortgage		146,507		—		1,082		147,589
Brookfield Center mortgage		46,844		2,838		—		49,682
Parkway Center mortgage		56,023		2,757		—		58,780
Wells Fargo Mortgage Facility		212,895		6,722		—		219,617
Amortization and preferred stock dividends on mandatorily redeemable preferred stock		—		56,311		100,000		156,311
Total interest expense	$	804,872	$	83,301	$	101,082	$	989,255


	For the three months ended September 30, 2021
	(unaudited)
			Amortization
	Mortgage		of discounts and		Other
	Interest		capitalized		interest
	Expense		issuance costs		expense		Total
Franklin Square mortgage	$	171,458	$	2,317	$	—	$	173,775
Hanover Square mortgage		108,571		3,223		—		111,794
Hampton Inn mortgage		116,422		—		1,655		118,077
Ashley Plaza mortgage		107,459		4,358		—		111,817
Clemson Best Western mortgage		141,609		—		357		141,966
Brookfield Center mortgage		47,708		2,838		—		50,546
Lancer Center mortgage		65,959		7,156		—		73,115
Amortization and preferred stock dividends on mandatorily redeemable preferred stock		—		51,637		100,000		151,637
Other interest		—		—		332		332
Total interest expense	$	776,666	$	71,760	$	102,344	$	950,770


	For the nine months ended September 30, 2022
	(unaudited)
			Amortization
	Mortgage		of discounts and		Other
	Interest		capitalized		interest
	Expense		issuance costs		expense		Total
Franklin Square mortgage	$	382,625	$	21,279	$	—	$	403,904
Hanover Square mortgage		319,640		9,668		—		329,308
Hampton Inn mortgage		—		—		—		—
Ashley Plaza mortgage		314,378		13,072		—		327,450
Clemson Best Western mortgage		425,109		—		1,648		426,757
Brookfield Center mortgage		139,646		8,513		—		148,159
Lancer Center mortgage		115,179		11,928		—		127,107
Greenbrier Business Center mortgage		81,409		1,155		—		82,564
Parkway Center mortgage		124,490		8,270		—		132,760
Wells Fargo Mortgage Facility		254,766		6,722		—		261,488
Amortization and preferred stock dividends on mandatorily redeemable preferred stock		—		165,338		300,000		465,338
Total interest expense	$	2,157,242	$	245,945	$	301,648	$	2,704,835


	For the nine months ended September 30, 2021
	(unaudited)
			Amortization
	Mortgage		of discounts and		Other
	Interest		capitalized		interest
	Expense		issuance costs		expense		Total
Franklin Square mortgage	$	508,783	$	6,961	$	—	$	515,744
Hanover Square mortgage		328,636		9,680		—		338,316
Hampton Inn mortgage		456,300		9,000		10,544		475,844
Ashley Plaza mortgage		320,316		13,074		—		333,390
Clemson Best Western mortgage		420,211		22,437		5,847		448,495
Brookfield Center mortgage		142,188		8,514		—		150,702
Lancer Center mortgage		100,493		10,814		—		111,307
Greenbrier Business Center mortgage		17,480		231		—		17,711
Amortization and preferred stock dividends on mandatorily redeemable preferred stock		—		151,616		300,000		451,616
Amortization and interest on convertible debentures		—		1,718,487		42,486		1,760,973
Other interest		—		—		5,100		5,100
Total interest expense	$	2,294,407	$	1,950,814	$	363,977	$	4,609,198

Interest accrued and accumulated amortization of capitalized issuance costs consist of the following:


	As of September 30, 2022
	(unaudited)				As of December 31, 2021
			Accumulated				Accumulated
			amortization of				amortization
			capitalized		Accrued		of capitalized
	Accrued interest		issuance costs		interest		issuance costs
Franklin Square mortgage	$	42,046	$	23,643	$	—	$	2,364
Hanover Square mortgage		37,562		56,658		38,287		46,990
Ashley Plaza mortgage		—		53,752		—		40,679
Clemson Best Western mortgage		—		—		47,716		134,622
Brookfield Center mortgage		—		34,055		15,979		25,542
Lancer Center mortgage		—		—		22,042		17,971
Greenbrier Business Center mortgage		—		—		15,482		924
Parkway Center mortgage		20,100		10,108		9,966		1,838
Wells Fargo Mortgage Facility		—		6,722		—		—
Amortization and accrued preferred stock dividends (1) on mandatorily redeemable preferred stock		70,004		532,096		70,004		366,758
Total	$	169,712	$	717,034	$	219,476	$	637,688

(1)

Recorded as accrued interest under accounts payable and accrued liabilities on the Company’s condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively.

Debt Maturity

The Company’s scheduled principal repayments on indebtedness as of September 30, 2022 are as follows:


For the remaining three months ending December 31, 2022	$	269,798
2023		1,101,643
2024		1,142,095
2025		1,429,359
2026		1,488,466
Thereafter		56,874,070
Total principal payments and debt maturities		62,305,431
Less unamortized issuance costs		(752,580)
Net principal payments and debt maturities	$	61,552,851