UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________

FORM 10-Q

____________

☒ Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~June~~September 30, 2022

☐ Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 000-53912

__________

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC.

(Exact name of registrant as specified in its charter)


Maryland			26-3455189
(State or Other Jurisdiction of Incorporation or of Organization)			(I.R.S. Employer Identification Number)

2909 Hillcroft
Suite 420
Houston
Texas			77057
(Address of principal executive offices)			(Zip Code)

_______________

(713) 467-2222

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of ~~August~~November 1, 2022, there were 34,975,377 shares of the Registrant’s common stock issued and outstanding.

Hartman Short Term Income Properties XX, Inc. and Subsidiaries

Table of Contents


PART I FINANCIAL INFORMATION
Item 1.	Financial Statements	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	3433

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	3534
Item 1A.	Risk Factors	3534
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3735
Item 3.	Defaults Upon Senior Securities	3735
Item 4.	Mine Safety Disclosures	3735
Item 5.	Other Information	3735
Item 6.	Exhibits	3735
	SIGNATURES

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements


HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES	HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES					HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS	CONSOLIDATED BALANCE SHEETS					CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)	(in thousands, except share data)					(in thousands, except share data)
		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
ASSETS	ASSETS	(Unaudited)				ASSETS	(Unaudited)
Real estate assets, at cost	Real estate assets, at cost	$	628,744	$	620,585	Real estate assets, at cost	$	633,285	$	620,585
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(186,092)		(173,040)		Accumulated depreciation and amortization	(192,948)		(173,040)
Real estate assets, net	Real estate assets, net	442,652		447,545		Real estate assets, net	440,337		447,545

Cash and cash equivalents	Cash and cash equivalents	206		285		Cash and cash equivalents	462		285
Restricted cash	Restricted cash	14,676		18,972		Restricted cash	17,949		18,972
Accrued rent and accounts receivable, net	Accrued rent and accounts receivable, net	14,193		13,238		Accrued rent and accounts receivable, net	13,247		13,238
Note receivable - related party	Note receivable - related party	1,726		1,726		Note receivable - related party	1,726		1,726
Deferred leasing commission costs, net	Deferred leasing commission costs, net	10,342		10,487		Deferred leasing commission costs, net	10,114		10,487
Goodwill	Goodwill	250		250		Goodwill	250		250
Prepaid expenses and other assets	Prepaid expenses and other assets	5,435		2,100		Prepaid expenses and other assets	4,902		2,100
Real estate held for development	Real estate held for development	10,403		10,403		Real estate held for development	10,403		10,403
Due from related parties, net	Due from related parties, net	1,133		115		Due from related parties, net	1,246		115
Investment in affiliate	Investment in affiliate	201		201		Investment in affiliate	201		201
Total assets	Total assets	$	501,217	$	505,322	Total assets	$	500,837	$	505,322

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Liabilities:	Liabilities:					Liabilities:
Notes payable, net	Notes payable, net	$	298,770	$	297,765	Notes payable, net	$	298,729	$	297,765
Notes payable - related party	Notes payable - related party	17,244		6,012		Notes payable - related party	17,168		6,012
Accounts payable and accrued expenses	Accounts payable and accrued expenses	34,050		38,471		Accounts payable and accrued expenses	39,542		38,471
Tenants' security deposits	Tenants' security deposits	5,962		5,756		Tenants' security deposits	6,088		5,756
Total liabilities	Total liabilities	356,026		348,004		Total liabilities	361,527		348,004

Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Preferred stock, $0.001 par value, 200,000,000 convertible, non-voting shares authorized, 1,000 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		—		—
Common stock, $0.001 par value, 750,000,000 authorized, 34,975,377 shares and 35,110,421 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		35		35
Preferred stock, $0.001 par value, 200,000,000 convertible, non-voting shares authorized, 1,000 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively						Preferred stock, $0.001 par value, 200,000,000 convertible, non-voting shares authorized, 1,000 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	—		—
Common stock, $0.001 par value, 750,000,000 authorized, 34,975,377 shares and 35,110,421 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively						Common stock, $0.001 par value, 750,000,000 authorized, 34,975,377 shares and 35,110,421 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	35		35
Additional paid-in capital	Additional paid-in capital	296,153		297,335		Additional paid-in capital	296,153		297,335
Accumulated distributions and net loss	Accumulated distributions and net loss	(172,483)		(162,355)		Accumulated distributions and net loss	(178,223)		(162,355)
Total stockholders' equity	Total stockholders' equity	123,705		135,015		Total stockholders' equity	117,965		135,015
Noncontrolling interests in subsidiaries	Noncontrolling interests in subsidiaries	21,486		22,303		Noncontrolling interests in subsidiaries	21,345		22,303
Total equity	Total equity	145,191		157,318		Total equity	139,310		157,318
Total liabilities and equity	Total liabilities and equity	$	501,217	$	505,322	Total liabilities and equity	$	500,837	$	505,322

The accompanying notes are an integral part of these consolidated financial statements.


HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES	HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES									HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS	CONSOLIDATED STATEMENTS OF OPERATIONS									CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)	(Unaudited, in thousands, except per share data)									(Unaudited, in thousands, except per share data)

		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Revenues	Revenues									Revenues
Rental revenues	Rental revenues	$	21,320	$	21,614	$	44,486	$	44,824	Rental revenues	$	22,467	$	21,567	$	66,953	$	66,391
Management and advisory income	Management and advisory income	1,120		1,291		2,035		2,206		Management and advisory income	1,014		1,561		3,049		3,767
Total revenues	Total revenues	22,440		22,905		46,521		47,030		Total revenues	23,481		23,128		70,002		70,158

Expenses (income)	Expenses (income)									Expenses (income)
Property operating expenses	Property operating expenses	7,525		6,717		13,049		19,437		Property operating expenses	7,748		7,046		20,797		26,483
Organization and offering costs	Organization and offering costs	14		25		23		29		Organization and offering costs	6		27		29		56

Real estate taxes and insurance	Real estate taxes and insurance	3,633		3,498		6,966		7,061		Real estate taxes and insurance	3,589		3,008		10,555		10,069
Depreciation and amortization	Depreciation and amortization	6,535		6,454		13,052		13,115		Depreciation and amortization	6,856		6,918		19,908		20,033
Management and advisory expenses	Management and advisory expenses	3,620		2,401		6,838		5,437		Management and advisory expenses	2,911		4,066		9,749		9,503
Debt issuance costs write off										Debt issuance costs write off	1,018		—		1,018		—
General and administrative	General and administrative	3,280		2,722		6,503		5,854		General and administrative	3,413		2,524		9,916		8,378
Interest expense	Interest expense	2,655		2,129		4,738		4,163		Interest expense	3,789		2,133		8,527		6,296
Interest and dividend income	Interest and dividend income	(44)		(44)		(87)		(87)		Interest and dividend income	(45)		(44)		(132)		(131)
Total expenses, net	Total expenses, net	27,218		23,902		51,082		55,009		Total expenses, net	29,285		25,678		80,367		80,687
Net loss	Net loss	(4,778)		(997)		(4,561)		(7,979)		Net loss	(5,804)		(2,550)		(10,365)		(10,529)
Net (loss) income attributable to noncontrolling interests	Net (loss) income attributable to noncontrolling interests	(112)		(99)		90		(463)		Net (loss) income attributable to noncontrolling interests	(64)		(88)		26		(551)
Net loss attributable to common stockholders	Net loss attributable to common stockholders	$	(4,666)	$	(898)	$	(4,651)	$	(7,516)	Net loss attributable to common stockholders	$	(5,740)	$	(2,462)	$	(10,391)	$	(9,978)
Net loss attributable to common stockholders per share	Net loss attributable to common stockholders per share	$	(0.13)	$	(0.03)	$	(0.13)	$	(0.21)	Net loss attributable to common stockholders per share	$	(0.16)	$	(0.07)	$	(0.30)	$	(0.28)
Weighted average number of common shares outstanding, basic and diluted	Weighted average number of common shares outstanding, basic and diluted	34,976		35,166		35,020		35,225		Weighted average number of common shares outstanding, basic and diluted	34,976		35,134		35,005		35,188

The accompanying notes are an integral part of these consolidated financial statements.


HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES	HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES																	HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY	CONSOLIDATED STATEMENTS OF EQUITY																	CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, in thousands)	(Unaudited, in thousands)																	(Unaudited, in thousands)

		Preferred Stock			Common Stock														Preferred Stock			Common Stock
		Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests in Subsidiaries		Total Equity			Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests in Subsidiaries		Total Equity
Balance at March 31, 2021		1	$	—	35,316	$	35	$	299,123	$	(145,302)	$	153,856	$	23,771	$	177,627
Balance at June 30, 2021																		Balance at June 30, 2021	1	$	—	35,138	$	35	$	297,560	$	(149,594)	$	148,001	$	23,513	$	171,514

Redemptions of common shares	Redemptions of common shares	—	—		(178)	—		(1,563)		—		(1,563)		—		(1,563)		Redemptions of common shares	—	—		(51)	—		(530)		—		(530)		—		(530)
Dividends and distributions (cash)	Dividends and distributions (cash)	—	—		—	—		—		(3,394)		(3,394)		(159)		(3,553)		Dividends and distributions (cash)	—	—		—	—		—		(3,966)		(3,966)		(232)		(4,198)
Net loss	Net loss	—	—		—	—		—		(898)		(898)		(99)		(997)		Net loss	—	—		—	—		—		(2,462)		(2,462)		(88)		(2,550)
Balance at June 30, 2021		1	$	—	35,138	$	35	$	297,560	$	(149,594)	$	148,001	$	23,513	$	171,514
Balance at September 30, 2021																		Balance at September 30, 2021	1	$	—	35,087	$	35	$	297,030	$	(156,022)	$	141,043	$	23,193	$	164,236

		Preferred Stock			Common Stock														Preferred Stock			Common Stock
		Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Income (Loss)		Total Stockholders' Equity		Noncontrolling Interests in Subsidiaries		Total Equity			Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests in Subsidiaries		Total Equity
Balance at March 31, 2022		1	$	—	34,976	$	35	$	296,156	$	(166,298)	$	129,893	$	22,274	$	152,167
Balance at June 30, 2022																		Balance at June 30, 2022	1	$	—	34,976	$	35	$	296,153	$	(172,483)	$	123,705	$	21,486	$	145,191

Redemptions of common shares		—	—		—	—		(3)		—		(3)		—		(3)
Dividends and distributions (cash)	Dividends and distributions (cash)	—	—		—	—		—		(1,519)		(1,519)		(676)		(2,195)		Dividends and distributions (cash)	—	—		—	—		—		—		—		(77)		(77)
Net loss	Net loss	—	—		—	—		—		(4,666)		(4,666)		(112)		(4,778)		Net loss	—	—		—	—		—		(5,740)		(5,740)		(64)		(5,804)
Balance at June 30, 2022		1	$	—	34,976	$	35	$	296,153	$	(172,483)	$	123,705	$	21,486	$	145,191
Balance at September 30, 2022																		Balance at September 30, 2022	1	$	—	34,976	$	35	$	296,153	$	(178,223)	$	117,965	$	21,345	$	139,310

The accompanying notes are an integral part of these consolidated financial statements.


HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES	HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES																	HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY	CONSOLIDATED STATEMENTS OF EQUITY																	CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, in thousands)	(Unaudited, in thousands)																	(Unaudited, in thousands)

		Preferred Stock			Common Stock														Preferred Stock			Common Stock
		Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests in Subsidiaries		Total Equity			Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests in Subsidiaries		Total Equity
Balance, December 31, 2020	Balance, December 31, 2020	1	$	—	35,318	$	35	$	299,375	$	(135,633)	$	163,777	$	24,365	$	188,142	Balance, December 31, 2020	1	$	—	35,318	$	35	$	299,375	$	(135,633)	$	163,777	$	24,365	$	188,142

Redemptions of common shares	Redemptions of common shares	—	—		(180)	—		(1,815)		—		(1,815)		—		(1,815)		Redemptions of common shares	—	—		(231)			(2,345)		—		(2,345)		—		(2,345)
Dividends and distributions (cash)	Dividends and distributions (cash)	—	—		—	—		—		(6,445)		(6,445)		(389)		(6,834)		Dividends and distributions (cash)	—	—		—	—		—		(10,411)		(10,411)		(621)		(11,032)
Net loss	Net loss	—	—		—	—		—		(7,516)		(7,516)		(463)		(7,979)		Net loss	—	—		—	—		—		(9,978)		(9,978)		(551)		(10,529)
Balance at June 30, 2021		1	$	—	35,138	$	35	$	297,560	$	(149,594)	$	148,001	$	23,513	$	171,514
Balance at September 30, 2021																		Balance at September 30, 2021	1	$	—	35,087	$	35	$	297,030	$	(156,022)	$	141,043	$	23,193	$	164,236

		Preferred Stock			Common Stock														Preferred Stock			Common Stock
		Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests in Subsidiaries		Total Equity			Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests in Subsidiaries		Total Equity
Balance, December 31, 2021	Balance, December 31, 2021	1	$	—	35,111	$	35	$	297,335	$	(162,355)	$	135,015	$	22,303	$	157,318	Balance, December 31, 2021	1	$	—	35,111	$	35	$	297,335	$	(162,355)	$	135,015	$	22,303	$	157,318

Redemptions of common shares	Redemptions of common shares	—	—		(135)	—		(1,182)		—		(1,182)		—		(1,182)		Redemptions of common shares	—	—		(135)	—		(1,182)		—		(1,182)		—		(1,182)
Dividends and distributions (cash)	Dividends and distributions (cash)	—	—		—	—		—		(5,477)		(5,477)		(907)		(6,384)		Dividends and distributions (cash)	—	—		—	—		—		(5,477)		(5,477)		(984)		(6,461)
Net (loss) income	Net (loss) income	—	—		—	—		—		(4,651)		(4,651)		90		(4,561)		Net (loss) income	—	—		—	—		—		(10,391)		(10,391)		26		(10,365)
Balance at June 30, 2022		1	$	—	34,976	$	35	$	296,153	$	(172,483)	$	123,705	$	21,486	$	145,191
Balance at September 30, 2022																		Balance at September 30, 2022	1	$	—	34,976	$	35	$	296,153	$	(178,223)	$	117,965	$	21,345	$	139,310

The accompanying notes are an integral part of these consolidated financial statements.


HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES	HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES					HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS	CONSOLIDATED STATEMENTS OF CASH FLOWS					CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)	(Unaudited, in thousands)					(Unaudited, in thousands)
		Six Months Ended June 30,					Nine Months Ended September 30,
		2022		2021			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(4,561)	$	(7,979)	Net loss	$	(10,365)	$	(10,529)
Adjustments to reconcile net loss to net cash used in (provided by) operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:						Adjustments to reconcile net loss to net cash provided by operating activities:
Stock based compensation	Stock based compensation	299		100		Stock based compensation	298		150
Depreciation and amortization	Depreciation and amortization	13,052		13,115		Depreciation and amortization	19,908		20,033
Deferred loan and lease commission costs amortization	Deferred loan and lease commission costs amortization	1,227		1,224		Deferred loan and lease commission costs amortization	1,850		1,849
Bad debt expense	Bad debt expense	762		309		Bad debt expense	1,685		1,115
Straight-line rent	Straight-line rent	654		(682)		Straight-line rent	776		(976)

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accrued rent and accounts receivable	Accrued rent and accounts receivable	(2,371)		(1,341)		Accrued rent and accounts receivable	(2,470)		(1,812)
Deferred leasing commissions	Deferred leasing commissions	(621)		(728)		Deferred leasing commissions	(787)		(944)
Prepaid expenses and other assets	Prepaid expenses and other assets	(3,335)		(1,796)		Prepaid expenses and other assets	(2,802)		(1,296)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(3,040)		1,449		Accounts payable and accrued expenses	3,611		6,090
Due to/from related parties	Due to/from related parties	(2,619)		(1,125)		Due to/from related parties	(3,666)		(2,126)
Tenants' security deposits	Tenants' security deposits	206		58		Tenants' security deposits	332		217
Net cash provided by (used in) operating activities		(347)		2,604
Net cash provided by operating activities						Net cash provided by operating activities	8,370		11,771
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Additions to real estate	Additions to real estate	(8,159)		(5,611)		Additions to real estate	(12,700)		(9,906)
Net cash used in investing activities	Net cash used in investing activities	(8,159)		(5,611)		Net cash used in investing activities	(12,700)		(9,906)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Distributions to common stockholders	Distributions to common stockholders	(8,458)		(6,328)		Distributions to common stockholders	(8,458)		(9,990)
Distributions to non-controlling interests	Distributions to non-controlling interests	(890)		(389)		Distributions to non-controlling interests	(966)		(621)
Repayments to affiliates	Repayments to affiliates	(1,870)		—		Repayments to affiliates	(2,417)		—
Borrowing from affiliate		14,346		3,563
Borrowings from affiliate						Borrowings from affiliate	15,312		5,163
Repayments under insurance premium finance note	Repayments under insurance premium finance note	(1,252)		(1,909)		Repayments under insurance premium finance note	(1,973)		(2,519)
Borrowings under insurance premium finance note						Borrowings under insurance premium finance note	2,892		3,019
Borrowings under term loan	Borrowings under term loan	2,645		—		Borrowings under term loan	2,645		—
Borrowings under insurance premium finance note		2,892		3,019
Repayments under term loan notes	Repayments under term loan notes	(1,328)		(647)		Repayments under term loan notes	(2,327)		(978)
Redemptions of common stock	Redemptions of common stock	(1,182)		(1,815)		Redemptions of common stock	(1,182)		(2,345)
Payment of deferred loan costs	Payment of deferred loan costs	(772)		—		Payment of deferred loan costs	(43)		(19)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	4,131		(4,506)		Net cash provided by (used in) financing activities	3,483		(8,290)

Net change in cash and cash equivalents and restricted cash	Net change in cash and cash equivalents and restricted cash	(4,375)		(7,513)		Net change in cash and cash equivalents and restricted cash	(846)		(6,425)
Cash and cash equivalents and restricted cash, beginning of period	Cash and cash equivalents and restricted cash, beginning of period	19,257		24,176		Cash and cash equivalents and restricted cash, beginning of period	19,257		24,176
Cash and cash equivalents and restricted cash, end of period	Cash and cash equivalents and restricted cash, end of period	$	14,882	$	16,663	Cash and cash equivalents and restricted cash, end of period	$	18,411	$	17,751
Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Cash paid for interest	Cash paid for interest	$	4,170	$	3,484	Cash paid for interest	$	6,762	$	5,212
Supplemental disclosure of non-cash activities:	Supplemental disclosure of non-cash activities:					Supplemental disclosure of non-cash activities:
Decrease in interest payable from Hartman XXI settlement	Decrease in interest payable from Hartman XXI settlement	$	356	$	—	Decrease in interest payable from Hartman XXI settlement	$	795	$	—
Decrease in due from related parties from Hartman XXI settlement	Decrease in due from related parties from Hartman XXI settlement	$	1,601	$	—	Decrease in due from related parties from Hartman XXI settlement	$	2,535	$	—
Decrease in borrowing from affiliate from Hartman XXI settlement	Decrease in borrowing from affiliate from Hartman XXI settlement	$	1,245	$	—	Decrease in borrowing from affiliate from Hartman XXI settlement	$	1,740	$	—

The accompanying notes are an integral part of these consolidated financial statements.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Organization and Business

Hartman Short Term Income Properties XX, Inc. (the “Company”), is a Maryland corporation formed on February 5, 2009. The Company elected to be treated as a real estate investment trust (“REIT”) beginning with the taxable year ending December 31, 2011. As used herein, the “Company,” “we,” “us,” or “our” refer to Hartman Short Term Income Properties XX, Inc. and its consolidated subsidiaries, including Hartman XX Limited Partnership (the "Operating Partnership"), except where context otherwise requires.

On July 19, 2018, we entered into a limited liability company agreement with our affiliates Hartman Income REIT, Inc. (“HIREIT”), Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”) and Hartman vREIT XXI, Inc. (“vREIT XXI”) to form Hartman SPE, LLC ("SPE LLC" or the "SASB Loan Borrower"), a special purpose entity.

On October 1, 2018, ~~SPE LLC,~~the SASB Loan Borrower, as borrower, and Goldman Sachs Mortgage Company entered into a term loan agreement pursuant to which the lender made a term loan to SPE LLC in the principal amount of $259,000,000.

Contemporaneously therewith and together with our affiliates HIREIT, Hartman XIX and vREIT XXI, we contributed a total of 39 commercial real estate properties ("Properties") to SPE, LLC, subject to the then existing mortgage indebtedness encumbering the Properties, in exchange for membership interests in SPE LLC. Proceeds of the Loan were immediately used to extinguish the existing mortgage indebtedness encumbering the Properties.

Substantially all of our business is conducted through our subsidiaries, the Operating Partnership and SPE LLC. Our wholly-owned subsidiary, Hartman XX REIT GP LLC, a Texas limited liability company, is the sole general partner of the Operating Partnership. Our wholly-owned subsidiary, Hartman SPE Management, LLC ("SPE Management") is the manager of SPE LLC. Our single member interests in our limited liability company subsidiaries are owned by the Operating Partnership or its wholly owned subsidiaries.

On July 21, 2017, the Company and Hartman XIX, entered into an agreement and plan of merger (the “XIX Merger Agreement”). On July 21, 2017, as subsequently modified on May 8, 2018, the Company, the Operating Partnership, HIREIT and Hartman Income REIT Operating Partnership LP, the operating partnership of HIREIT, (“HIROP”), entered into an agreement and plan of merger (the “HIREIT Merger Agreement,” and together with the XIX Merger Agreement, the “Merger Agreements”).

On May 14, 2020, the Merger Agreements were approved by the respective company shareholders. The effective date of the Mergers for financial reporting was July 1, 2020.

Prior to July 1, 2020 and subject to certain restrictions and limitations, Hartman Advisors LLC ("Advisor") was responsible for managing our affairs on a day-to-day basis and for identifying and making acquisitions and investments on our behalf pursuant to an advisory agreement. Management of the Company’s properties and the Properties, is provided pursuant to property management agreements with Hartman Income REIT Management, Inc. (the "Property Manager"), formerly a wholly-owned subsidiary of HIREIT and effective July 1, 2020, our wholly owned subsidiary. Effective with the Mergers and the acquisition of the 70% interest of Advisor not acquired as part of the Mergers, we are a self-advised and self-managed REIT.

As of ~~June~~September 30, 2022 and 2021, respectively, the Company owned 44 commercial properties comprising approximately 6.8 million square feet plus 4four pad sites and 2two land developments, all located in Texas. As of ~~June~~September 30, 2022 and 2021, the Company owned 15 properties located in Richardson, Arlington and Dallas, Texas, 26 properties located in Houston, Texas and 3three properties located in San Antonio, Texas.

~~Previously, the~~The Board of Directors (the "Board") of the Company established a share redemption program (the "Redemption Plan"), which permitted stockholders to sell their shares back to the Company, subject to certain significant conditions and limitations. On July 8, 2022, the Board voted to suspend the Redemption Plan to support the long-term fiscal health of the Company. ~~Refer to Note 16 - Subsequent Events regarding suspension of the Redemption Plan.~~

The Company does not anticipate that there will be any market for its shares of common stock unless they are listed on a national securities exchange. In the event that Company shares of common stock are not listed or traded on an established securities exchange prior to the tenth anniversary of the completion or termination of the Company's initial public offering, which terminated on April 25, 2013, the Company's charter requires that the board of directors must seek the approval of the

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

stockholders of a plan to liquidate assets, unless the board of directors has obtained the approval of the stockholders (1) to defer the liquidation of our assets or (2) of an alternate strategy.

The independent directors of the Company’s board of directors have begun a strategic review process to identify, examine, and consider a range of strategic alternatives available to the Company with the objective of maximizing shareholder value. As a part of its strategic review, the independent directors engaged a third party to serve as a strategic advisor to the Board. On October 14, 2022, the Company’s board of directors formed a new Executive Committee whose duties include, among other items, the continuation of the review of strategic alternatives with the objective of maximizing shareholder value.

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2021 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of ~~June~~September 30, 2022 have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-X, on a basis consistent with the annual audited consolidated financial statements. The consolidated financial statements presented herein reflect all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the financial position of the Company as of ~~June~~September 30, 2022, and the results of consolidated operations, consolidated statements of equity and consolidated statement of cash flows for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and ~~2021,~~2021. The results of the three and ~~six~~nine months ended ~~June~~September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

The consolidated financial statements herein are condensed and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

These unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, the Operating Partnership and its subsidiaries, and Hartman SPE, LLC. All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents on the accompanying consolidated balance sheets include all cash and liquid investments with maturities of three months or less. Cash and cash equivalents as of ~~June~~September 30, 2022 and December 31, 2021 consisted of demand deposits at commercial banks. We maintain accounts which may from time to time exceed federally insured limits. We have not experienced any losses in these accounts and believe that the Company is not exposed to any significant credit risk and regularly monitors the financial stability of these financial institutions. As of ~~June~~September 30, 2022 and December 31, 2021 the Company had a bank overdraft of ~~$3,895,000~~$4,902,000 and $2,710,000, respectively.

Restricted Cash

Restricted cash on the accompanying consolidated balance sheets consists of amounts escrowed for future real estate taxes, insurance, capital expenditures and debt service, as required by certain of our mortgage debt agreements. As of ~~June~~September 30, 2022 and December 31, 2021, the Company had a restricted cash balance of ~~$14,676,000~~$17,949,000 and $18,972,000, respectively.

Financial Instruments

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accrued rent and accounts receivable, accounts payable and accrued expenses and balances due to/due from related parties, as well as related party notes receivable. The Company considers the carrying value, other than notes payable, net, to approximate the fair value of these financial instruments based on the short duration between origination of the

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

instruments and their expected realization. Disclosure about the fair value of financial instruments is based on relevant information available as of ~~June~~September 30, 2022 and December 31, 2021.

Revenue Recognition

The Company's leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purposes of this calculation. The Company's accrued rents are included in accrued rent and accounts receivable, net. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved.

The Company’s revenue is primarily derived from leasing activities, which is specifically excluded from ASC 606, Revenue from Contracts with Customers ("ASC 606"). The Company’s rental revenue is also comprised of tenant reimbursements for real estate taxes, insurance, common area maintenance, and operating expenses. Reimbursements from real estate taxes and certain other expenses are also excluded from ASC 606 and accounted for under ASC 842 - Leases. The Company elected to utilize the practical expedient provided by Accounting Standards Update (“ASU”) 2018-11 related to the separation of lease and non-lease components and as a result, rental revenues related to leases are reported on one line in the presentation within the consolidated statements of operations.

In addition to our rental income, the Company also earns fee revenues by providing certain management and advisory services to related parties. These fees are accounted for within the scope of ASC 606 and are recorded as management and advisory income on the consolidated statements of operations. These services primarily include asset management and advisory, operating and leasing of properties, and construction management. These services are currently provided under various combinations of advisory agreements, property management agreements, and other service agreements (the "Management Agreements"). The wide variety of duties within the Management Agreements makes determining the performance obligations within the contracts a matter of judgment. We have concluded that each of the separately disclosed fee types in the below table represents a separate performance obligation within the Management Agreements.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


Fee	Performance Obligation Satisfied	Timing of Payment	Description
Property Management	Over time	Due monthly	The Company provides property management services on a contractual basis for owners of and investors in office and retail properties. The Company is compensated for our services through a monthly management fee earned based on a ~~fixed fee.~~percentage of effective gross revenue of the managed property. We are also often reimbursed for our administrative and payroll costs directly attributable to the properties under management. Revenue is recognized at the end of each month.
Property Leasing and Property Acquisition Services	Point in time (upon close of a transaction)	Upon completion	The Company provides strategic advice and execution for owners, investors, and occupiers of real estate in connection with the leasing of office and retail space. The Company is compensated for our services in the form of a commission and, in some instances may earn various forms of variable incentive consideration. Commission is paid upon the occurrence of certain contractual event. For leases, the Company typically satisfies its performance obligation at a point in time when control is transferred. Revenue is recognized in an amount equal to the fees charged by unaffiliated persons rendering comparable services. For acquisitions, our commission is typically paid at the closing date of sale, which represents transfer of control of services to the customer.
Asset Management	Over time	Due monthly	The Company earns asset management advisory fees on a recurring, monthly basis for certain properties. The Company is compensated on a monthly basis based on a fixed percentage of respective asset value.
Construction Management	Point in time (upon close of project)	Upon completion	Construction management services are performed on a contractual basis for owners of an investors in office and retail properties. The Company is compensated for its services upon completion of a project, when its performance obligation has been completed.

Due to the nature of the services being provided under our Management Agreements, each performance obligation has a variable component. Therefore, when we determine the transaction price for the contracts, we are required to constrain our estimate to an amount that is not probable of significant revenue reversal. For most of these fee types, such as acquisition fees and leasing commissions, compensation only occurs if a transaction takes place and the amount of compensation is dependent upon the terms of the transaction. For our property and asset management fees, due to the large number and broad range of possible consideration amounts, we calculate the amount earned at the end of each month.

Real Estate

Allocation of Purchase Price of Acquired Assets

Upon the acquisition of real properties, it is the Company’s policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships, based in each case on their fair values. The Company utilizes internal valuation methods to determine the fair values of the tangible assets of an acquired property (which includes land and buildings).

The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

capitalized as intangible lease assets or liabilities and amortized as an adjustment to rental revenues over the remaining expected terms of the respective leases.

The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and management’s consideration of current market costs to execute a similar lease. These direct costs are included in intangible lease assets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These intangibles are included in real estate assets in the consolidated balance sheets and are being amortized to expense over the remaining term of the respective leases.

The determination of the fair values of the assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount rates and other variables. The use of inappropriate estimates would result in an incorrect assessment of the purchase price allocations, which could impact the amount of the Company’s reported net income (loss).

Real Estate Joint Ventures and Partnerships

To determine the method of accounting for partially owned real estate joint ventures and partnerships, management determines whether an entity is a variable interest entity ("VIE") and, if so, determines which party is the primary beneficiary by analyzing whether we have both the power to direct the entity’s significant economic activities and the obligation to absorb potentially significant losses or receive potentially significant benefits. Significant judgments and assumptions inherent in this analysis include the design of the entity structure, the nature of the entity’s operations, future cash flow projections, the entity’s financing and capital structure, and contractual relationships and terms. We consolidate a VIE when we have determined that we are the primary beneficiary.

Primary risks associated with our involvement with our VIEs include the potential funding of the entities’ debt obligations or making additional contributions to fund the entities’ operations or capital activities.

Partially owned, non-variable interest real estate joint ventures and partnerships over which we have a controlling financial interest are consolidated in our consolidated financial statements. In determining if we have a controlling financial interest, we consider factors such as ownership interest, authority to make decisions, kick-out rights and substantive participating rights. Partially owned real estate joint ventures and partnerships where we do not have a controlling financial interest, but have the ability to exercise significant influence, are accounted for using the equity method.

Management continually analyzes and assesses reconsideration events, including changes in the factors mentioned above, to determine if the consolidation or equity method treatment remains appropriate.

Depreciation and amortization

Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 39 years for buildings and improvements. Tenant improvements are depreciated using the straight-line method over the lesser of the life of the improvement or the remaining term of the lease. In-place leases are amortized using the straight-line method over the weighted average years’ remaining calculated on terms of all of the leases in-place when acquired.

Fair Value Measurement

Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Directly or indirectly observable inputs, other than quoted prices in active markets.

Level 3: Unobservable inputs in which there is little or no market data, which require a reporting entity to

develop its own assumptions.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:

Market approach: Prices and other relevant information generated by market transactions involving identical or

comparable assets or liabilities.

Cost approach: Amount required to replace the service capacity of an asset (replacement cost).

Income approach: Techniques used to convert future amounts to a single amount based on market

expectations (including present-value, option-pricing, and excess-earnings models).

The Company’s estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. The Company classifies assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

Recurring fair value measurements:

For our disclosure of debt instrument fair value in Note 7, we use a discounted cash flow analysis based on borrowing rates currently available to the Company for loans with similar terms and maturities, discounting the future contractual interest and principal payments (categorized within Level 2 of the fair value hierarchy).

Nonrecurring fair value measurements:

Property Impairments

The Company reviews its real estate assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. Our estimated fair values are determined by utilizing cash flow models, market capitalization rates and market discount rates, or by obtaining third-party broker valuation estimates or appraisals (categorized within Level 3 of the fair value hierarchy).

Impairment

The Company determines whether an impairment in value may have occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. During the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the Company concluded there were no such events or changes in circumstances requiring review of the Company's real estate assets.

Accrued Rent and Accounts Receivable, net

Accrued rent and accounts receivable includes base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends.

Deferred Leasing Commission Costs

Leasing commissions are amortized using the straight-line method over the term of the related lease agreements.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Goodwill

GAAP requires the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired. The Company applies a one-step quantitative test to determine if the estimated fair value is less than the carrying amount. If the carrying amount exceeds the estimated fair value, the Company will record a goodwill impairment equal to such excess, not to exceed the total amount of goodwill. No goodwill impairment has been recognized in the accompanying consolidated financial statements.

Noncontrolling Interests

Noncontrolling interests is the portion of equity in a subsidiary not attributable to a parent. The ownership interests not held by the parent are considered noncontrolling interests. Accordingly, the Company has reported noncontrolling interests in equity on the consolidated balance sheets but separate from the Company's equity. On the consolidated statements of operations, subsidiaries are reported at the consolidated amount, including both the amount attributable to the Company and noncontrolling interests.

Stock-Based Compensation

The Company follows Accounting Standards Codification ("ASC") 718 - Compensation - Stock Compensation, with regard to issuance of stock in payment of services. ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. The compensation cost is measured based on the estimated grant date fair value, as of the grant date of the Company’s common stock, of the equity or liability instruments issued. Stock-based compensation expense is recorded over the vesting period and is included in general and administrative expense in the accompanying consolidated statements of operations.

Income Taxes

The Company has elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, beginning with its taxable year ended December 31, 2011. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to stockholders; however, the Company believes that it is organized and will continue to operate in such a manner as to qualify for treatment as a REIT.

For the three months ended ~~June~~September 30, 2022 and 2021, the Company incurred net loss of ~~$4,778,000~~$5,804,000 and ~~$997,000,~~$2,550,000, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the Company incurred net loss of ~~$4,561,000~~$10,365,000 and ~~$7,979,000,~~$10,529,000, respectively. The Company formed a taxable REIT subsidiary which may generate future taxable income which may offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the consolidated financial statements.

The Company is required to recognize in its consolidated financial statements the financial effects of a tax position only if it is determined that it is more likely than not that the tax position will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Management has reviewed the Company’s tax positions and is of the opinion that material positions taken by the Company would more likely than not be sustained upon examination. Accordingly, the Company has not recognized a liability related to uncertain tax positions.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Income ~~(loss)~~(Loss) Per Share

The computations of basic and diluted income (loss) per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities. The Company’s potentially dilutive securities include preferred shares that are convertible into the Company’s common stock. As of ~~June~~September 30, 2022 and 2021, there were no shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were excluded from the computations of diluted net loss per share for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 because no shares were issuable.

Concentration of Risk

The geographic concentration of the Company’s real estate assets makes it susceptible to adverse economic developments in the State of Texas. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocation of businesses, increased competition or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Going Concern Evaluation

Pursuant to ASC 205-40, “Presentation of Financial Statements – Going Concern,” management is required to evaluate the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. The Hartman SPE, LLC loan agreement (the “SASB Loan”) had an initial maturity date of October 9, 2020. The SASB Loan provides for 3three successive one-year maturity date extensions. On October 9, ~~2021,~~2022, SPE LLC executed athe third and final maturity date extension agreement to extend the maturity to October 9, ~~2022.~~2023.

The October 9, 2023 SASB Loan requires that SPE LLC have a debt yield, as defined, greater than or equal to 12.50%. Debt yield is calculated by dividing annual net operating income by debt. The third and final one-year SASB Loan extensionmaturity date is within one year of the issuance of these consolidated financial statements. Uncertainty as to the Company's ability to ~~exercise~~obtain financing to satisfy the ~~next remaining~~existing SASB Loan ~~extension option, require~~obligation requires management to conclude, in accordance with guidance provided by ASU 2014-15, that there is a substantial doubt about the Company's ability to continue as a going concern within one year of the issuance date of these consolidated financial ~~statements solely on the basis of the uncertainty regarding the loan maturity extension of the SASB Loan.~~statements. Management believes that ~~SPE LLC~~the SASB Loan Borrower will be able to ~~extend~~obtain financing to replace the SASB Loan prior to the October 9, 2023 maturity ~~date for the next one year period which will mitigate the maturity date issue.~~date.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments. The updated guidance requires measurement and recognition of expected credit losses for financial assets, including trade and other receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This is different from the current guidance as this will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. Generally, the pronouncement requires a modified retrospective method of adoption. This guidance is effective for fiscal years and interim periods within those years beginning after January 2023, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on the consolidated financial statements when adopted.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The standard is effective for all entities as of March 12, 2020 through December 31, 2022. An entity can elect to apply the amendments as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to that date that the financial statements are available to be issued. The Company is currently evaluating the impact this guidance will have on the consolidated financial statements when adopted.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Reclassification

An item in the operating activities section of the comparative consolidated statement of cash flows has been reclassified to conform to the presentation adopted in the current period. Straight-line rent totaling ~~$682,000~~$976,000 has been reclassified from the change in accrued rent and accounts receivable line item to a separate line item as an adjustment to reconcile net loss to net cash provided by operating activities.

Note 3 — Real Estate

The Company’s real estate assets consisted of the following, in thousands:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Land	Land	$	146,056	$	146,056	Land	$	146,056	$	146,056
Buildings and improvements	Buildings and improvements	381,027		372,868		Buildings and improvements	385,568		372,868
In-place lease value intangible	In-place lease value intangible	101,661		101,661		In-place lease value intangible	101,661		101,661
		628,744		620,585			633,285		620,585
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(186,092)		(173,040)		Less: accumulated depreciation and amortization	(192,948)		(173,040)
Total real estate assets	Total real estate assets	$	442,652	$	447,545	Total real estate assets	$	440,337	$	447,545

Depreciation expense for the three months ended ~~June~~September 30, 2022 and 2021 was ~~$4,742,000~~$5,063,000 and ~~$4,401,000,~~$4,900,000, respectively. Depreciation expense for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 was ~~$9,455,000~~$14,519,000 and ~~$9,011,000,~~$13,911,000, respectively. Amortization expense of in-place lease value intangible was $1,793,000 and ~~$2,053,000~~$2,018,000 for the three months ended ~~June~~September 30, 2022 and 2021, respectively. Amortization expense of in-place lease value intangible was ~~$3,597,000~~$5,389,000 and ~~$4,104,000~~$6,122,000 for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

The Company identifies and records the value of acquired lease intangibles at the property acquisition date. Such intangibles include the value of acquired in-place leases and above and below-market leases. Acquired lease intangibles are amortized over the leases' remaining terms. With respect to all properties owned by the Company, we consider all of the in-place leases to be market rate leases.

The amount of total in-place lease intangible asset and the respective accumulated amortization are as follows, in thousands:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
In-place lease value intangible	In-place lease value intangible	$	101,661	$	101,661	In-place lease value intangible	$	101,661	$	101,661
In-place leases – accumulated amortization	In-place leases – accumulated amortization	(91,205)		(87,608)		In-place leases – accumulated amortization	(92,997)		(87,608)
Acquired lease intangible assets, net	Acquired lease intangible assets, net	$	10,456	$	14,053	Acquired lease intangible assets, net	$	8,664	$	14,053

As of ~~June~~September 30, 2022 and 2021, respectively, the Company owned 44 commercial properties comprising approximately 6.8 million square feet plus 4four pad sites and 2two land developments, all located in Texas. As of ~~June~~September 30, 2022 and 2021, respectively, the Company owned 15 properties located in Richardson, Arlington and Dallas, Texas, 26 properties located in Houston, Texas and 3three properties located in San Antonio, Texas.

Note 4 - Accrued Rent and Accounts Receivable, net

Accrued rent and accounts receivable, net, consisted of the following, in thousands:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Tenant receivables	Tenant receivables	$	9,029	$	6,652	Tenant receivables	$	9,116	$	6,652
Accrued rent	Accrued rent	10,700		11,355		Accrued rent	10,577		11,355
Allowance for uncollectible accounts	Allowance for uncollectible accounts	(5,536)		(4,769)		Allowance for uncollectible accounts	(6,446)		(4,769)
Accrued rents and accounts receivable, net	Accrued rents and accounts receivable, net	$	14,193	$	13,238	Accrued rents and accounts receivable, net	$	13,247	$	13,238

As of June 30, 2022 and December 31, 2021, the Company had an allowance for uncollectible accounts of $5,536,000 and $4,769,000, respectively. For the three months ended June 30, 2022 and 2021, the Company recorded bad debt expense in the

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of September 30, 2022 and December 31, 2021, the Company had an allowance for uncollectible accounts of $6,446,000 and $4,769,000, respectively. For the three months ended September 30, 2022 and 2021, the Company recorded bad debt expense in the amount of ~~$1,064,000~~$924,000 and ~~$184,000,~~$806,000, respectively, related to tenant receivables that we have specifically identified as potentially uncollectible based on our assessment of each tenant’s credit-worthiness. For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the Company recorded bad debt expense in the amount of ~~$762,000~~$1,685,000 and ~~$309,000,~~$1,115,000, respectively. Bad debt expense and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations.

Note 5 — Deferred Leasing Commission Costs, net

Costs which have been deferred consist of the following, in thousands:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Deferred leasing commissions costs	Deferred leasing commissions costs	$	20,969	$	20,347	Deferred leasing commissions costs	$	21,134	$	20,347
Less: accumulated amortization	Less: accumulated amortization	(10,627)		(9,860)		Less: accumulated amortization	(11,020)		(9,860)
Deferred leasing commission costs, net	Deferred leasing commission costs, net	$	10,342	$	10,487	Deferred leasing commission costs, net	$	10,114	$	10,487

Note 6 — Future Minimum Rents

The Company leases the majority of its properties under noncancellable operating leases which provide for minimum base rentals. A summary of minimum future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancellable operating leases in existence at ~~June~~September 30, 2022 is as follows, in thousands:


June 30,		Minimum Future Rents
September 30,				September 30,	Minimum Future Rents
2022	2022	$	66,737	2022	$	66,991
2023	2023	54,544		2023	54,799
2024	2024	40,414		2024	40,244
2025	2025	27,579		2025	27,545
2026	2026	20,427		2026	20,172
Thereafter	Thereafter	29,014		Thereafter	29,788
Total	Total	$	238,715	Total	$	239,539

Note 7 — Notes Payable

The Operating Partnership is a party to 4,four, cross-collateralized, term loan agreements with an insurance company. The term loans are secured by the Richardson Heights Property, the Cooper Street Property, the Bent Tree Green Property and the Mitchelldale Property. The loans require monthly payments of principal and interest due and payable on the first day of each month. Monthly payments are based on a 27-year loan amortization. Each of the loan agreements are subject to customary covenants, representations and warranties which must be maintained during the term of the loan agreements. Each of the loan agreements provides for a fixed interest rate of 4.61%. Each of the loan agreements are secured by a deed of trust, assignment of licenses, permits and contracts, assignment and subordination of the management agreements and assignment of rents. The terms of the security instruments provide for the cross collateralization/cross default of the each of the loans. The outstanding balance of the 4four loans was ~~$40,045,000~~$39,699,000 and $40,724,000 as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

On October 1, 2018, the Company, through ~~SPE LLC~~the SASB Loan Borrower, and Goldman Sachs Mortgage Company entered into the $259,000,000 SASB Loan ~~agreement.~~agreement (the "SASB Loan"). The Company together with its affiliates HIREIT, Hartman XIX and vREIT XXI, contributed a total of 39 commercial real estate properties to ~~Hartman SPE, LLC~~the SASB Loan Borrower in exchange for membership interests in ~~SPE LLC.~~the SASB Loan Borrower.

The term of the SASB ~~loan~~Loan is ~~five years,~~ comprised of an initial two-year term with 3three one-year extension options. Each extension option ~~shall be~~is subject to certain conditions precedent including (i) no default then outstanding, (ii) 30 days prior written notice, (iii) the properties must have a specified in-place net operating income debt yield and (iv) purchase of an interest rate cap as described below for the exercised option term or terms.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The outstanding principal of the SASB loan bears interest at the one-month LIBOR rate plus 1.8%. The SASB Loan is subject to an interest rate cap arrangement which caps LIBOR at 3.75% during the initial term and any extensions of the SASB Loan.

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

On October 9, ~~2021,~~2022, the ~~Company executed a~~SASB Loan Borrower exercised the third and final one-year maturity date extension agreement to extend the maturity date to October 9, 2022. One option remains to extend for 1 additional one-year term. Notice to exercise the final one-year maturity extension option is due not less than 30 days nor more than 60 days from the current maturity date. The exercise of each extension option is subject to certain compliance and non-default requirements and a minimum debt yield of 12.5%.

2023. The SASB Loan contains various customary covenants, including but not limited to financial covenants, covenants requiring monthly deposits in respect of certain property costs, such as taxes, insurance, tenant improvements, and leasing commissions, covenants imposing restrictions on indebtedness and liens, and restrictions on investments and participation in other asset disposition, merger or business combination or dissolution transactions. The SASB Loan is secured by, among other things, mortgages on the Properties. The Company is the sole guarantor.

On February 10, 2022, the Company executed a $2,645,000 promissory note with East West Bank, resulting in net proceeds of $2,528,000. The promissory note is secured by the Company's 17 acre development site located in Fort Worth, Texas and ~~has a maturity date of February 25, 2023. Payable~~is payable in monthly installments of principal and interest until the maturity ~~date.~~date of February 25, 2023.

Refer to Note 11 (Related Party Transactions) and Note 16 (Subsequent Events) for information regarding the Company's unsecured promissory note with Hartman vREIT XXI, Inc.

The following is a summary of the Company’s notes payable, in thousands:


Property/Facility	Property/Facility	Payment	Maturity Date	Rate		June 30, 2022		December 31, 2021		Property/Facility	Payment	Maturity Date	Rate		September 30, 2022		December 31, 2021
Richardson Heights (1)	Richardson Heights (1)	P&I	July 1, 2041	4.61	%	$	15,858	$	16,144	Richardson Heights (1)	P&I	July 1, 2041	4.61	%	$	15,713	$	16,144
Cooper Street (1)	Cooper Street (1)	P&I	July 1, 2041	4.61	%	6,883		6,995		Cooper Street (1)	P&I	July 1, 2041	4.61	%	6,826		6,995
Bent Tree Green (1)	Bent Tree Green (1)	P&I	July 1, 2041	4.61	%	6,883		6,995		Bent Tree Green (1)	P&I	July 1, 2041	4.61	%	6,826		6,995
Mitchelldale (1)	Mitchelldale (1)	P&I	July 1, 2041	4.61	%	10,421		10,590		Mitchelldale (1)	P&I	July 1, 2041	4.61	%	10,334		10,590
Hartman SPE LLC (2)	Hartman SPE LLC (2)	IO	October 9, 2022	3.13	%	259,000		259,000		Hartman SPE LLC (2)	IO	October 9, 2023	4.94	%	259,000		259,000
Hartman XXI	Hartman XXI	IO	October 31, 2022	10.00	%	17,244		6,012		Hartman XXI	IO	October 31, 2022	10.00	%	17,168		6,012
Fort Worth - EWB	Fort Worth - EWB	P&I	February 25, 2023	4.25	%	1,996		—		Fort Worth - EWB	P&I	February 25, 2023	4.25	%	1,343		—
						$	318,285	$	305,736						$	317,210	$	305,736
Less: unamortized deferred loan costs	Less: unamortized deferred loan costs					(2,271)		(1,959)		Less: unamortized deferred loan costs					(1,313)		(1,959)
						$	316,014	$	303,777						$	315,897	$	303,777

(1) Each promissory note contains a call option wherein the holder of the promissory note may declare the outstanding balance due and payable on either July 1, 2024, July 1, 2029, July 1, 2034, or July 1, 2039.

(2) On October 9, ~~2021,~~2022, the Company ~~signed a~~executed the third and final one-year maturity date extension ~~agreement to extend the maturity date for one additional year~~ to October 9, 2022. Options remain to extend for 1 additional one-year term. Notice to exercise the next one-year maturity extension option is due not less than 30 days nor more than 60 days from the current maturity date. Exercise of each extension option is subject to certain compliance and non-default requirements and a minimum debt yield of 12.5%.2023.

The Company's loan costs are amortized using the straight-line method over the terms of the loans, which approximates the interest method. Costs which have been deferred consist of the following, in thousands:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Deferred loan costs	Deferred loan costs	$	6,171	$	5,399	Deferred loan costs	$	5,443	$	5,399
Less: deferred loan cost accumulated amortization	Less: deferred loan cost accumulated amortization	(3,900)		(3,440)		Less: deferred loan cost accumulated amortization	(4,130)		(3,440)
Total cost, net of accumulated amortization	Total cost, net of accumulated amortization	$	2,271	$	1,959	Total cost, net of accumulated amortization	$	1,313	$	1,959

Interest expense incurred for the three months ended ~~June~~September 30, 2022 and 2021 was ~~$2,655,000~~$3,789,000 and ~~$2,129,000,~~$2,133,000, respectively, which includes amortization expense of deferred loan costs. Interest expense incurred for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 was ~~$4,738,000~~$8,527,000 and ~~$4,163,000,~~$6,296,000, respectively, which includes amortization expense of deferred loan costs. Interest expense of ~~$422,000~~$596,000 and $315,000 was payable as of ~~June~~September 30, 2022 and December 31, 2021, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

Fair Value of Debt

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Fair Value of Debt~~

The fair value of the Company’s fixed rate notes payable, variable rate notes payable and secured revolving credit facilities aggregates to ~~$312,892,000~~$308,358,000 and $310,271,000 as compared to book value of ~~$318,285,000~~$317,210,000 and $305,736,000 as of ~~June~~September 30, 2022 and December 31, 2021, respectively. The fair value of our debt instruments is estimated on a Level 2 basis, as provided by ASC 820, using a discounted cash flow analysis based on the borrowing rates currently available to the Company for loans with similar terms and maturities, discounting the future contractual interest and principal payments. Disclosure about the fair value of notes payable is based on relevant information available as of ~~June~~September 30, 2022 and December 31, 2021.

Note 8 — Income (Loss) Per Share

Basic income (loss) per share is computed using net income (loss) attributable to common stockholders and the weighted average number of common shares outstanding. Diluted weighted average shares outstanding reflect common shares issuable from the assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic earnings per share are included in the diluted earnings per share.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Numerator:	Numerator:									Numerator:
Net loss attributable to common stockholders (in thousands)	Net loss attributable to common stockholders (in thousands)	$	(4,666)	$	(898)	$	(4,651)	$	(7,516)	Net loss attributable to common stockholders (in thousands)	$	(5,740)	$	(2,462)	$	(10,391)	$	(9,978)
Denominator:	Denominator:									Denominator:
Weighted average number of common shares outstanding, basic and diluted (in thousands)	Weighted average number of common shares outstanding, basic and diluted (in thousands)	34,976		35,166		35,020		35,225		Weighted average number of common shares outstanding, basic and diluted (in thousands)	34,976		35,134		35,005		35,188
Basic and diluted loss per common share:	Basic and diluted loss per common share:									Basic and diluted loss per common share:
Net loss attributable to common stockholders per share	Net loss attributable to common stockholders per share	$	(0.13)	$	(0.03)	$	(0.13)	$	(0.21)	Net loss attributable to common stockholders per share	$	(0.16)	$	(0.07)	$	(0.30)	$	(0.28)

Note 9 — Income Taxes

Federal income taxes are not provided for because we qualify as a REIT under the provisions of the Internal Revenue Code and because we have distributed and intend to continue to distribute all of our taxable income to our stockholders. Our stockholders include their proportionate taxable income in their individual tax returns. As a REIT, we must distribute at least 90% of our real estate investment trust taxable income to our stockholders and meet certain income sources and investment restriction requirements. In addition, REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates. The Company’s federal income tax returns for the years ended December 31, 2016, 2017, 2018, 2019, and 2020 have not been examined by the Internal Revenue Service. The Company’s federal income tax return for the year ended December 31, 2016 may be examined on or before September 15, 2022.

The Company has formed a taxable REIT subsidiary which may generate future taxable income, which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the accompanying consolidated financial statements.

Taxable income (loss) differs from net income (loss) for financial reporting purposes principally due to differences in the timing of recognition of interest, real estate taxes, depreciation and amortization and rental revenue.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 10 — Real Estate Held for Development

The Company’s investment in real estate assets held for development consists of (i) an approximately 17-acre land parcel located in Fort Worth, Texas, ~~currently being developed,~~ (ii) a 10-acre land development located in Grand Prairie, Texas, ~~to be developed~~ and which was previously held for disposition by Hartman XIX, and (iii) 1one pad site development ~~in progress~~ acquired from HIREIT.

Note 11 — Related Party Transactions

Hartman Advisors LLC ("Advisor"), is a Texas limited liability company. Advisor is the sole member of Hartman vREIT XXI Advisor, LLC ("XXI Advisor"), which is the advisor for ~~Hartman~~ vREIT ~~XXI, Inc. ("vREIT XXI").~~XXI. vREIT XXI pays acquisition fees and asset management fees to the XXI Advisor in connection with the acquisition of properties and management of the Company. vREIT XXI pays property management and leasing commissions to the Property Manager in connection with the management and leasing of vREIT XXI's properties.

The table below shows the related party balances the Company owes to and is owed by, in thousands:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Due to vREIT XXI	Due to vREIT XXI	$	(7)	$	—	Due to vREIT XXI	$	(11)	$	—
Due from other related parties	Due from other related parties	1,140		115		Due from other related parties	1,257		115
Total due from related parties, net	Total due from related parties, net	$	1,133	$	115	Total due from related parties, net	$	1,246	$	115

During the fourth quarter of 2019, the Company borrowed under an unsecured promissory note payable to vREIT XXI in the face amount of $10,000,000 with an interest rate of 10% annually. This unsecured promissory note had an outstanding balance of $10,000,000 and $6,012,000 as of ~~June~~September 30, 2022 and December 31, 2021, respectively. In addition to the balance due under this note, the Company received advances from vREIT XXI totaling ~~$7,244,000~~$7,168,000 which were outstanding as of ~~June~~September 30, 2022 and which were not covered by the unsecured promissory note referred to herein. The total balance of ~~$17,244,000~~$17,168,000 as of as of ~~June~~September 30, 2022 has been included in Notes Payable - related party on the accompanying balance sheets. The Company recognized interest expense on the affiliate balance in the amount of ~~$225,000~~$439,000 and ~~$141,000~~$262,000 for the three months ended ~~June~~September 30, 2022 and 2021, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the Company recognized interest expense on the affiliate balance in the amount of ~~$356,000~~$795,000 and ~~$210,000,~~$400,000, respectively which is included in interest expense in the accompanying consolidated statements of operations. Refer to Note 16 (Subsequent Events) regarding the lapsed maturity of the unsecured promissory note.

In May 2016, the Company, through its taxable REIT subsidiary, Hartman TRS, Inc. (“TRS”), loaned $7,231,000 pursuant to a promissory note in the face amount of up to $8,820,000 to Hartman Retail II Holdings Company, Inc. (“Retail II Holdings”), an affiliate of the Company, in connection with the acquisition of a retail shopping center by Hartman Retail II DST, a Delaware statutory trust sponsored by the Property Manager. Pursuant to the terms of the promissory note, TRS received a two percent (2%) origination fee of amounts advanced under the promissory note, and interest at ten percent (10%) per annum on the outstanding principal balance. The outstanding principal balance of the promissory note will be repaid as investor funds are raised by Hartman Retail II DST. The maturity date of the promissory note, as amended, is December 31, 2022. This note receivable had an outstanding balance of $1,726,000 as of ~~June~~September 30, 2022 and December 31, 2021, respectively, which is included in notes receivable – related party in the accompanying consolidated balance sheets. For the three months ended ~~June~~September 30, 2022 and 2021, the Company recognized interest income on this affiliate note in the amounts of $44,000. For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the Company recognized interest income on this affiliate note in the amounts of ~~$87,000.~~$130,000.

VIEs are defined as entities with a level of invested equity that is not sufficient to fund future operations on a stand-alone basis, or whose equity holders lack certain characteristics of a controlling financial interest. For identified VIEs, an assessment must be made to determine which party to the VIE, if any, has both the power to direct the activities of the VIE that most significantly impacts the performance of the VIE and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company is not deemed to be the primary beneficiary of Retail II Holdings, Retail III Holdings, or Ashford Bayou, each of which qualifies as a VIE. Accordingly, the assets and liabilities and revenues and expenses of Retail II Holdings, Retail III Holdings and Ashford Bayou have not been included in the accompanying consolidated financial statements. The Company is a covenant guarantor for the secured mortgage indebtedness of each of the VIEs in the total amount of $24,587,000 as of

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~is a~~September 30, 2022. There have been no claims on the covenants and management does not expect any claims or financial obligations with respect to the covenant ~~guarantor for the secured mortgage indebtedness of each of the VIEs in the total amount of $24,639,000 as of June 30, 2022.~~guarantees.

On March 29, 2021, Hartman Income REIT Property Holdings, LLC, a wholly owned subsidiary of Hartman XX Operating Partnership, LP, was added, by means of a joinder agreement, to a master credit facility agreement where vREIT XXI is the guarantor. The Company’s Atrium II office property was added to the collateral security for the master credit facility agreement where the borrowing base of the facility increased by $1,625,000.

vREIT XXI owns 1,198,228 shares of the Company's common stock and a 2.47% ownership interest in Hartman SPE, LLC.

For the nine months ended September 30, 2022, the Company, the Advisor, and the Property Manager (collectively the "Settlement Parties") settled amounts owed to Hartman vREIT XXI with amounts owed by Hartman vREIT XXI to the Settlement Parties. The settlement resulted in the reduction of $795,000 of interest payable and reduction of $1,740,000 in principal of the unsecured promissory note from Hartman vREIT XXI in exchange for the reduction of $2,535,000 in unpaid advisory and management fees owed from Hartman vREIT XXI.

Note 12 - Stockholders’ Equity

Under the Company’s articles of incorporation, the Company has authority to issue 750,000,000 shares of common stock, $0.001 par value per share, and 200,000,000 shares of preferred stock, $0.001 par value per share.

Common Stock

Shares of common stock entitle the holders to 1one vote per share on all matters which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights.

Preferred Stock

Under the Company’s articles of incorporation, the Company’s board of directors has the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such stock, the board of directors has the power to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights, and privileges of such shares. As of ~~June~~September 30, 2022 and December 31, 2021, respectively, the Company has 1,000 shares of convertible preferred stock issued and outstanding.

Common Stock Issuable Upon Conversion of Convertible Preferred Stock

The convertible preferred stock issued to the Advisor will convert to shares of the Company’s common stock if (1) the Company has made total distributions on then outstanding shares of the Company’s common stock equal to the issue price of those shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares, (2) the Company lists its common stock for trading on a national securities exchange if the sum of prior distributions on then outstanding shares of the Company’s common stock plus the aggregate market value of the Company’s common stock (based on the 30-day average) closing meets the same 6% performance threshold, or (3) the Company’s advisory agreement with the Advisor expires without renewal or is terminated (other than because of a material breach by the Advisor), and at the time of such expiration or termination the Company is deemed to have met the foregoing 6% performance threshold based on the Company’s enterprise value and prior distributions and, at or subsequent to the expiration or termination, the stockholders actually realize such level of performance upon listing or through total distributions. In general, the convertible stock will convert into shares of common stock with a value equal to 15% of the excess of the Company’s enterprise value plus the aggregate value of distributions paid to date on then outstanding shares of common stock over the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares. With respect to conversion in connection with the termination of the advisory agreement, this calculation is made at the time of termination even though the actual conversion may occur later, or not at all.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Stock-Based Compensation

On July 26, 2022, the ~~Company~~Board approved of cash payments totaling $400,000 in lieu of unissued shares due to non-employee directors under the non-employee director's compensation plan. The Incentive Plan that provides for the issuance of the restricted common stock awards to non-employee director has expired and requires stockholder approval for modification or reinstatement. All non-employee director compensation will be cash based until incentive stock is available.

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

The Company previously awarded shares of restricted common stock to non-employee directors as compensation in part for their service as members of the board of directors of the Company. These shares were fully vested when granted. These shares may not be sold while an independent director is serving on the board of directors. For the three months ended June 30, 2022 and 2021, respectively, the Company had granted, but not yet issued, 4,472 and 6,927 shares of restricted common stock to independent directors as compensation for services and recognized $50,000 and $78,000 as stock-based compensation expense for each period. For the six months ended June 30, 2022 and 2021, the Company granted, but not yet issued, 8,945 and 8,881 shares of restricted common stock to non-employee directors as compensation for services and recognized $100,000 and $100,000 as stock-based compensation expense for each period. Share based compensation expense is based upon the estimated fair value per share. Stock-based compensation expense is included in general and administrative expenses in the accompanying consolidated statements of operations.

Distributions

The following table reflects the total distributions the Company has paid in cash (in thousands, except per share amounts) and the amount paid per common share, in each indicated quarter:


Quarter Paid	Quarter Paid	Distributions per Common Share		Total Distributions		Quarter Paid	Distributions per Common Share		Total Distributions
2022	2022					2022
1st Quarter	1st Quarter	$	0.112	$	3,958	1st Quarter	$	0.112	$	3,958
2nd Quarter	2nd Quarter	0.128		4,500		2nd Quarter	0.128		4,500
3rd Quarter						3rd Quarter	—		—
Total 2022 year to date	Total 2022 year to date	$	0.240	$	8,458	Total 2022 year to date	$	0.240	$	8,458

2021	2021					2021
4th Quarter	4th Quarter	$	0.112	$	3,927	4th Quarter	$	0.112	$	3,927
3rd Quarter	3rd Quarter	0.104		3,662		3rd Quarter	0.104		3,662
2nd Quarter	2nd Quarter	0.092		3,246		2nd Quarter	0.092		3,246
1st Quarter	1st Quarter	0.087		3,082		1st Quarter	0.087		3,082
Total 2021	Total 2021	$	0.395	$	13,917	Total 2021	$	0.395	$	13,917

On July 8, 2022, the board of directors approved the suspension of the payment of distributions to the Company's stockholders.

Note 13 - Incentive Award Plan

The Company previously adopted an incentive plan, called the Omnibus Stock Incentive Plan, (the “Incentive Plan”) that provided for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock awards, dividend equivalent rights and other stock-based awards within the meaning of Internal Revenue Code Section 422, or any combination of the foregoing. The Incentive Plan has expired pursuant to its terms and requires stockholder approval for modification or reinstatement. The ~~Company elected to pay~~Board approved the payment of accrued director's fees in cash, as stock compensation was not available.

Note 14 - Commitments and Contingencies

Litigation

During February 2021, the state of Texas experienced a severe winter storm, unofficially referred to as Winter Storm Uri, which resulted in power outages and electrical grid failures across the state. Wholesale prices for electricity increased significantly during this period. As a result, the Company experienced a substantial increase in electricity billings for a number of our properties during the month of and after the storm.

On May 26, 2021, Summer Energy LLC (“Summer”) filed a lawsuit against Hartman Income REIT Management, Inc. (the “Property Manager”), a wholly owned subsidiary of the Company that manages our properties, in state court in Harris County, Texas. In this lawsuit, Summer seeks to collect approximately $8,400,000 from the Property Manager that Summer claims that the Property Manager owes Summer under one or more electricity sales agreements (“Agreements”) related to Winter Storm Uri. Of the approximately $8,400,000 claimed in the lawsuit, approximately $7,600,000 relates to wholly owned properties of the Company. Under the Agreements, Summer provided electricity to buildings managed by the Property Manager at indexed prices.

On March 24, 2022, the court entered a judgment in favor of Summer against the Property Manager in the amount of $7,871,000 plus customary pre- and post-judgment interest and attorney's fees. The Property Manager continues to dispute the amount of liability to Summer and has appealed the judgment. The outcome of the appeal is subject to significant uncertainty and we cannot provide any assurance that the Property Manager will ultimately prevail. Even if the Property Manager is ultimately successful in its appeal, it may take considerable time to resolve the matter. The Company had recognized the share of the judgment amount applicable to wholly owned properties of the Company, approximately $6,731,000, within the Company's consolidated statement of operations for fiscal year 2021. The Company has also recognized $370,000 of pre-judgment interest and attorney fees. Many of the Company’s leases contain provisions that require tenants to pay their allocable share of operating expenses, including utilities. At this time, the Company is unable to reasonably estimate an amount expected to be recovered from our tenants.

On April 25, 2022, the Property Manager filed its supersedeas surety bond totaling $2,197,000 in order to suspend enforcement the judgment for the duration of the Property Manager's appeal. The share of the supersedeas surety bond applicable to wholly owned properties of the Company totaled $2,001,000 and is recorded in prepaid expenses and other assets on the Company's consolidated balance sheets.

Contingencies

Events related to the COVID-19 pandemic and the actions taken to contain it have created substantial uncertainty for all businesses, including the Company. The Company’s consolidated financial statements as of and for the three and ~~six~~nine months ended ~~June~~September 30, 2022 have been prepared in light of these circumstances.

Proposed merger with Hartman XXI

~~On July 8, 2022, management recommended~~The Company is continuing to evaluate the ~~board of directors of the Company to delay the pursuit of the~~timing for a proposed merger ~~transaction. As discussed in Note 16 (Subsequent Events),~~with vREIT XXI. The Company believes that the ~~Company suspended distributions~~achievable synergy resulting from the merger is compelling and intends to ~~stockholders and suspended~~pursue the ~~Company's Redemption Plan.~~merger at the appropriate time.

Charter provision regarding liquidity or liquidation

The independent directors of the Company’s board of directors have begun a strategic review process to identify, examine, and consider a range of strategic alternatives available to the Company with the objective of maximizing shareholder value. On October 14, 2022, the Company’s board of directors formed a new Executive Committee to continue the review of strategic alternatives with the objective of maximizing shareholder value.

Note 15 - Defined Contribution Plan

The Company sponsors a defined contribution pension plan, the Hartman 401(k) Profit Sharing Plan, covering substantially all of its full-time employees who are at least 21 years of age. Participants may annually contribute up to 100% of pretax annual compensation and any applicable catch-up contributions, as defined in the plan and subject to deferral limitations as set forth in Section 401(k) of the Internal Revenue Code. Participants may also contribute amounts representing distributions from other qualified benefit or defined contribution plans. The Company may make discretionary matching contributions. For the three months ended ~~June~~September 30, 2022 and 2021, the Company matched ~~$100,000~~$99,000 and $98,000, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the Company matched ~~$199,000~~$298,000 and $199,000, respectively. The Company had a stock match plan liability of ~~$1,812,000~~$1,911,000 and $1,613,000 as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

Note 16 - Subsequent Events

On ~~July 8,~~October 19, 2022, the ~~board of directors approved~~SASB Loan Borrower received a notice from the ~~following actions:~~

•~~the suspension~~loan servicer of the ~~payment~~SASB Loan in connection with an event of ~~distributions~~default due to the ~~Company's stockholders;~~noncompliance with the loan agreement's insurance requirements relating to a single property. The event of default was previously waived for the sole purpose of exercising the option to extend the SASB Loan term. The event of default triggers the cash management provisions under the SASB Loan agreement, however, cash management has not yet been implemented. Management is working to obtain coverage that is acceptable to the lender and cure the event of default.

•~~the suspension~~The Company's unsecured promissory note payable to Hartman vREIT XXI, Inc., which has a maturity date of October 31, 2022, remains unpaid and is currently in maturity default. Management intends to pursue a waiver of the ~~Company's Redemption Plan; and~~

•maturity date. The loan parties are in negotiations to address the ~~delay of the proposed merger with Hartman XXI.~~

unsecured promissory note. It is uncertain when an agreement will be reached.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, all references in this report to the “Company,” “we,” “us” or “our” are to Hartman Short Term Income Properties XX, Inc.

Forward-Looking Statements

Certain statements included in this quarterly report on Form 10-Q (this “Quarterly Report”) that are not historical facts (including statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions, or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events on our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential,” or the negative of such terms and other comparable terminology.

Forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements.

Among the most significant factor that could cause actual outcomes to differ materially from those expressed or implied in our forward-looking statements continues to be the adverse effect of the pandemic of a novel strain of coronavirus which causes the disease known as COVID-19 (“COVID-19”), including variants thereof, on our business, financial performance and condition, operating results and cash flows, the commercial real estate market and the global economy and financial markets generally. The extent and duration of the continued impacts caused by the COVID-19 pandemic on our company will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including without limitation the scope, severity and duration of the pandemic, the extent and effectiveness of the actions taken to contain the pandemic or mitigate its impact, the speed of the development and distribution of vaccines for COVID-19 and variants thereof and the efficacy and availability of such vaccines, the willingness of the general population to be vaccinated, the duration of associated immunity and efficacy of the currently available vaccines against emerging variants of COVID-19, the potential for business closures that may be mandated or advisable, whether based on increased COVID-19 cases, the continued spread of

~~more contagious variants or other factors, the reduction or reversal of containment measures in certain communities, and the direct and indirect economic effects of the pandemic.~~

~~In addition to COVID-19, other factors~~Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:


•			the fact that we have had a net loss for each annual period since our inception;
•			the imposition of federal taxes if we fail to qualify as a REIT in any taxable year or forego an opportunity to ensure REIT status;
•			the extent to which the ongoing COVID-19 pandemic impacts our financial condition, results of operations and cash flows depends on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic and its impact on the U.S. economy and potential changes in customer behavior that could adversely affect the use of and demand for office space;
•			the financial condition of our customers could deteriorate or further worsen, which could be further exacerbated by the COVID-19 pandemic;
•			our assumptions regarding potential losses related to customer financial difficulties due to the COVID-19 pandemic or otherwise could prove incorrect;
•			uncertainties related to the national economy, the real estate industry in general and in our specific markets;
•			changes in global, national, regional or local economic, demographic or capital market conditions, including volatility as a result of the current ongoing conflict between Russia and Ukraine and the rapidly evolving measures in response;
•			legislative or regulatory changes, including changes to laws governing REITS;
•			construction costs that may exceed estimates or construction delays;
•			increases in interest rates;
•			our ability to obtain financing on acceptable terms, satisfy our existing debt service obligations and negotiate maturity date extensions or other modifications to the terms of our existing financing arrangements to the extent necessary (see Note 2 - Summary of Significant Accounting Policies - Going Concern Evaluation, to the consolidated financial statements included in this Quarterly Report;
•			foreclosure or other actions initiated by lenders in response to defaults on loans secured by our assets;
•			availability of credit or significant disruption in the credit markets;
•			litigation risks, including without limitation the outcome of our appeal related to the pricing of electricity provided to certain of our properties during the severe winter weather experienced in Texas (see Part II- Item 1.Legal Proceedings and Note 14 - Commitments and Contingencies, to the consolidated financial statements included in this Quarterly Report);


•			risks inherent to the real estate business, including tenant defaults, potential liability related to environmental matters and the lack of liquidity of real estate investments;
•			inability to obtain new tenants upon the expiration of existing leases at our properties;


•			inability to generate sufficient cash flows due to market conditions, competition, uninsured losses, changes in tax or other applicable laws;
•			the potential need to fund tenant improvements or other capital expenditures out of operating cash flow;
•			our ability to generate sufficient cash flows to pay distributions to our stockholders;
•			our ability to retain our executive officers and other key ~~personnel~~personnel; and
•			changes to generally accepted accounting principles in the United States of America (GAAP).

The forward-looking statements should be read in light of these factors and the factors identified in the “Risk Factors” section of our Annual Report on Form 10-K (referred to herein as our Annual Report) for the year ended December 31, 2021.

The following discussion and analysis should be read in conjunction with the accompanying interim consolidated financial information.

Overview

We were formed as a Maryland corporation on February 5, 2009 to invest in and operate real estate and real estate-related assets on an opportunistic basis. We may acquire a wide variety of commercial properties, including office, industrial, retail, and other real properties. These properties may be existing, income-producing properties, newly constructed properties or properties under development or construction. In particular, we focus on acquiring properties with significant possibilities for short-term capital appreciation, such as those requiring development, redevelopment or repositioning or those located in markets with high growth potential. We also may invest in real estate-related securities and, to the extent that we determine that it is advantageous, we may invest in mortgage loans.

On February 9, 2010, we commenced our initial public offering of up to $250,000,000 in shares of our common stock to the public at a price of $10 per share and up to $23,750,000 in shares of common stock to our stockholders pursuant to our distribution reinvestment plan at a price of $9.50 per share. On April 25, 2013, we terminated our initial public offering. As of the termination of our initial public offering on April 25, 2013, we had accepted subscriptions for and issued shares of our common stock, including shares of our common stock issued pursuant to our distribution reinvestment plan, resulting in aggregate gross offering proceeds of $43,943,731.

On July 16, 2013, we commenced our follow-on public offering, or our “follow-on offering,” of up to $200,000,000 in shares of our common stock to the public at a price of $10.00 per share and up to $19,000,000 in shares of our common stock to our stockholders pursuant to our distribution reinvestment plan at a price of $9.50 per share. Effective March 31, 2016, we terminated the offer and sale of our common shares to the public in our follow-on offering. Effective July 16, 2016, we terminated the sale of additional shares of our common stock to our stockholders pursuant to our distribution reinvestment plan. We accepted subscriptions for, and issued shares of our common stock in our follow-on offering, including shares of our common stock issued pursuant to our distribution reinvestment plan, resulting in aggregate gross proceeds of $181,800,895.

As of ~~June~~September 30, 2022 we owned 44 commercial real properties comprising approximately 6.8 million square feet plus four pad sites and two land developments, all located in Texas.

The SASB Loan outstanding as of ~~June~~September 30, 2022 has a final extended maturity date of October 9, ~~2022,~~2023, which is within one year of the date that this Quarterly Report was available to be issued. Management has considered whether there is substantial doubt about the Company's ability to continue as a going concern within one year of the issuance date of these consolidated financial statement due to the uncertainty regarding the SASB Loan maturity, as set forth in Accounting Standards Codification (ASC) 205-40, “Presentation of Financial Statements – Going Concern.”

Without limiting the foregoing, we believe that we will have sufficient capital to meet our existing debt service and other operating obligations for the next year and that we have adequate resources to fund our cash needs. However, ourOur operations are subject to a variety of risks, including, but not limited to, changes in national economic conditions, the restricted availability of financing, changes in demographic trends and interest rates and declining real estate valuations. As a result of these uncertainties, there can be no assurance that we will meet our investment objectives or that the risks described above will not have an adverse effect on our properties or results of operations.

The current economic slowdown, rising interest rate environment, and inflation, have had a negative impact on the office real estate market and our Company. See Liquidity and Capital Resource section below.

On July 8, 2022, our board of directors approved the suspension of the payment of distributions to our stockholders, effective immediately. Our board of directors, in consultation with management, will continue to monitor our operations and

intends to resume distributions at a time and level determined to be prudent in relation to our other cash requirements or in order to maintain our REIT status for federal income tax purposes. However, it is impossible to predict if or when we will be able to resume the payment of distributions.

We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders. We are internally managed by our subsidiary, Hartman Income REIT Management, Inc. Our property manager is responsible for operating, leasing and maintaining our properties.

Impact of the COVID-19 Pandemic

Since the first quarter of 2020, the COVID-19 pandemic has significantly impacted the global and U.S. economies. The Company’s properties are all located in Texas in the metropolitan areas of Houston, Dallas and San Antonio. The ~~operation of tenant businesses is subject~~COVID-19 pandemic continues to ~~the business judgement of tenant business owners and the direction of government authorities and public health officials. In accordance with the advice~~be one of the ~~CDC due~~most significant risks and uncertainties facing the real estate industry generally, and in particular REITs like ours that own office property. We cannot predict to what extent economic activity, including the ~~threat presented by~~use of and demand for office space, will return to pre-pandemic levels. During 2021 and for the ~~ongoing COVID-19~~first three quarters of 2022, the physical occupancy of our office properties remained lower than pre-pandemic levels. Even after the pandemic ~~some of the Company's office property tenants adopted remote working for their office employees. The Company's retail property tenants have been affected~~has ceased to ~~the extent that they have been required to close or limit hours of operations~~be active, potential changes in ~~the case of experiential businesses~~customer behavior, such as ~~movie theaters, restaurants~~the continued social acceptance, desirability and ~~specialty event operations. While all~~perceived economic benefits of our markets have embarked upon reopening of businesses, many of our retail tenants have moved activities towards carry-out and delivery sales and service. The rental obligations under our leases have not been materially affected by the pandemic to date, and any requests for rent adjustments are addressed on a case-by-case basis.

~~With the increased availability of vaccines, we have begun to see increases in physical occupancy at our properties, which we expect to continue. However, we cannot predict how~~work-from-home arrangements, resulting from the COVID-19 pandemic, ~~(including~~could materially and negatively impact the ~~spread of variant strains) may~~future demand for office space, resulting in slower overall leasing and an adverse impact ~~our operations in the future. Although the impact of the COVID-19 pandemic on our business has not been severe~~ to ~~date, the long-term impact of the pandemic on~~ our tenants or prospective tenants and the world-wide economy is uncertain and will depend on the scope, severity, and duration of the pandemic. A prolonged economic downturn resulting from the pandemic could adversely affect many of our tenants or prospective tenants, which could, in turn, adversely impact our business, financial condition, and results of operations. See ~~“Item 1A.~~previously disclosed Risk ~~Factors”~~Factors for a discussion of the potential adverse impact of COVID-19 on our business, results of operations and financial condition.

~~Impact of Winter Storm Uri~~

During February 2021, the state of Texas experienced a severe winter storm, Winter Storm Uri, which resulted in power outages and electrical grid failures across the state. Wholesale prices for electricity increased significantly during this period. As a result, we experienced a substantial increase in electricity billings for a number of our properties during the month of and after the storm. For the six months ended June 30, 2022, we have incurred $3,759,000 of electricity expense compared to $11,337,000 for the six months ended June 30, 2021. See Part II - Item 1. Legal Proceedings for additional information.

Investment Objectives and ~~Strategy: Hartman Advantage~~

~~Our primary investment objectives are to:~~


•			~~realize growth in the value of our investments;~~
•			~~preserve, protect and return stockholders’ capital contributions; and~~
•			~~grow net cash from operations and pay regular cash distributions to our stockholders.~~

Strategy

We ~~cannot assure~~have invested in a diverse portfolio of real estate investments. As of September 30, 2022, we owned 29 office properties, 12 retail properties, and 3 industrial/flex properties. Historically, we have relied on a value add acquisition and development strategy, focused specifically properties located in Texas, to realize growth in the value of our ~~stockholders that we will achieve these objectives.~~investments, grow net cash from operations, and pay regular cash distributions to our stockholders.

The ~~cornerstone~~current economic slowdown, rising interest rate environment, inflation, and the COVID-19 pandemic have had a negative impact on our Company. Effective July 8, 2022, we have suspended the payment of ~~our investment strategy is our discipline in acquiring a portfolio of real estate properties, specifically properties that are located in Texas, which offer a blend of current~~distributions and ~~potential income based~~seek to preserve capital to secure the Company's financial health on in place occupancy plus relatively significant potential for growth in income and value from re-tenanting; repositioning or redevelopment. We refer to this strategy as “value add” or the “Hartman Advantage.”an ongoing basis.

We ~~rely upon the value add or Hartman Advantage~~have changed our investment objectives and strategy to ~~evaluate numerous potential commercial real estate acquisitions~~preserve the long-term health of the Company, and ~~investment opportunities per completed acquisition or investment.~~we do not anticipate acquiring any properties in the near future. Management and the Executive Committee of our Board of Directors are in the process of identifying, examining, and evaluating a range of strategic alternatives with the objective of maximizing shareholder value.

Our board of directors continually evaluates potential liquidity events to maximize the total potential return to our stockholders, including, but not limited to, a listing of our shares of common stock on a national securities exchange. However, our board of directors has not made a decision to pursue any specific liquidity event, and there can be no assurance that we will complete a liquidity event on the terms described above, or at all.

We do not anticipate that there will be any market for our shares of common stock unless they are listed on a national securities exchange. In the event that our shares of common stock are not listed or traded on an established securities exchange prior to the tenth anniversary of the termination of our initial public offering, which terminated on April 25, 2013, our charter requires that the board of directors must seek the approval of our stockholders of a plan to liquidate our assets, unless the BOD agenda has obtained the approval of our stockholders (1) to defer the liquidation of our assets or (2) of an alternate strategy.

We believe that we have sufficient capital to meet our existing debt service and other operating obligations for the next year and that we have adequate resources to fund our cash needs. However, our operations are subject to a variety of risks, including, but not limited to, changes in national economic conditions, the restricted availability of financing, changes in demographic trends and interest rates and declining real estate valuations. As a result of these uncertainties, there can be no assurance that we will meet our investment objectives or that the risks described above will not have an adverse effect on our properties or results of operations.

We elected to be taxed as a REIT under the Internal Revenue Code beginning with the taxable year ending December 31, 2011. As a REIT we generally are not subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year after the year in which we initially elected to be treated as a REIT, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income. However, we believe that we are organized and will operate in a manner that will enable us to qualify for treatment as a REIT for federal income tax purposes and we intend to operate so as to remain qualified as a REIT for federal income tax purposes.

2726

Our Real Estate Portfolio

As of ~~June~~September 30, 2022, we owned 44 commercial properties listed below.


Property Name	Property Name	Location	Gross Leasable Area SF	Percent Occupied		Annualized Base Rental Revenue (in thousand)		Average Base Rental Revenue per Occupied SF		Average Net Effective Annual Base Rent per Occupied SF		Property Name	Location	Gross Leasable Area SF	Percent Occupied		Annualized Base Rental Revenue (in thousand)		Average Base Rental Revenue per Occupied SF		Average Net Effective Annual Base Rent per Occupied SF
Retail:	Retail:											Retail:
Promenade	Promenade	Dallas	176,585	76	%	$	1,510	$	11.27	$	11.28	Promenade	Dallas	176,585	75	%	$	1,560	$	11.81	$	11.79
Prestonwood Park	Prestonwood Park	Dallas	105,783	76	%	$	1,732	$	21.50	$	21.00	Prestonwood Park	Dallas	105,783	84	%	$	1,779	$	19.96	$	19.57
Richardson Heights	Richardson Heights	Dallas	201,433	73	%	$	2,704	$	18.30	$	18.37	Richardson Heights	Dallas	201,433	76	%	$	2,696	$	17.56	$	17.56
Cooper Street	Cooper Street	Dallas	127,696	100	%	$	1,622	$	12.70	$	12.72	Cooper Street	Dallas	127,696	100	%	$	1,625	$	12.73	$	12.75
One Mason SC	One Mason SC	Houston	75,183	90	%	$	1,044	$	15.51	$	15.43	One Mason SC	Houston	75,183	91	%	$	1,047	$	15.24	$	15.26
Chelsea Square SC	Chelsea Square SC	Houston	70,275	77	%	$	576	$	10.65	$	10.64	Chelsea Square SC	Houston	70,275	66	%	$	534	$	11.49	$	12.00
Mission Center SC	Mission Center SC	Houston	112,971	91	%	$	949	$	9.23	$	9.29	Mission Center SC	Houston	112,971	90	%	$	953	$	9.38	$	9.43
Garden Oaks SC	Garden Oaks SC	Houston	106,858	99	%	$	1,835	$	17.30	$	17.32	Garden Oaks SC	Houston	106,858	99	%	$	1,835	$	17.30	$	17.33
Harwin	Harwin	Houston	38,813	93	%	$	354	$	9.85	$	9.66	Harwin	Houston	38,813	99	%	$	384	$	9.95	$	9.52
Fondren	Fondren	Houston	93,196	92	%	$	904	$	10.58	$	10.71	Fondren	Houston	93,196	92	%	$	911	$	10.66	$	10.75
Northeast Square SC	Northeast Square SC	Houston	40,525	81	%	$	452	$	13.74	$	13.76	Northeast Square SC	Houston	40,525	85	%	$	469	$	13.68	$	13.52
Walzem Plaza SC	Walzem Plaza SC	San Antonio	182,713	72	%	$	1,579	$	11.92	$	11.91	Walzem Plaza SC	San Antonio	182,713	72	%	$	1,589	$	12.00	$	12.00
Total - Retail	Total - Retail		1,332,031	83	%	$	15,261	$	13.79	$	13.77	Total - Retail		1,332,031	84	%	$	15,382	$	13.78	$	13.77
Office:	Office:											Office:
North Central Plaza	North Central Plaza	Dallas	198,374	73	%	$	2,160	$	14.96	$	14.90	North Central Plaza	Dallas	198,374	69	%	$	2,038	$	14.95	$	14.96
Gateway Tower	Gateway Tower	Dallas	266,412	60	%	$	2,145	$	13.40	$	13.34	Gateway Tower	Dallas	266,412	60	%	$	2,103	$	13.20	$	13.32
Bent Tree Green	Bent Tree Green	Dallas	139,609	75	%	$	2,146	$	20.58	$	20.86	Bent Tree Green	Dallas	139,609	70	%	$	2,024	$	20.58	$	20.47
Parkway Plaza I&II	Parkway Plaza I&II	Dallas	136,506	80	%	$	1,720	$	15.76	$	15.77	Parkway Plaza I&II	Dallas	136,506	79	%	$	1,678	$	15.55	$	15.45
Hillcrest	Hillcrest	Dallas	203,688	79	%	$	2,292	$	14.19	$	14.32	Hillcrest	Dallas	203,688	81	%	$	2,265	$	13.69	$	13.71
Skymark	Skymark	Dallas	115,700	85	%	$	1,859	$	18.83	$	18.84	Skymark	Dallas	115,700	88	%	$	1,863	$	18.23	$	18.20
Corporate Park Place	Corporate Park Place	Dallas	113,429	74	%	$	1,105	$	13.18	$	12.91	Corporate Park Place	Dallas	113,429	80	%	$	1,096	$	12.01	$	11.81
Westway One	Westway One	Dallas	165,982	65	%	$	2,183	$	20.15	$	20.38	Westway One	Dallas	165,982	72	%	$	2,183	$	18.34	$	18.20
Three Forest Plaza	Three Forest Plaza	Dallas	366,549	80	%	$	5,192	$	17.77	$	17.72	Three Forest Plaza	Dallas	366,549	78	%	$	5,070	$	17.76	$	17.60
Spring Valley	Spring Valley	Dallas	94,304	68	%	$	888	$	13.93	$	14.10	Spring Valley	Dallas	94,304	72	%	$	905	$	13.36	$	13.50
Tower Pavilion	Tower Pavilion	Houston	87,589	91	%	$	881	$	11.03	$	10.92	Tower Pavilion	Houston	87,589	88	%	$	730	$	9.44	$	9.34
The Preserve	The Preserve	Houston	218,689	90	%	$	2,833	$	14.32	$	14.23	The Preserve	Houston	218,689	91	%	$	2,792	$	13.99	$	13.94
Westheimer Central	Westheimer Central	Houston	182,506	76	%	$	1,582	$	11.45	$	12.26	Westheimer Central	Houston	182,506	82	%	$	1,624	$	10.90	$	11.28
11811 N Freeway	11811 N Freeway	Houston	156,362	74	%	$	1,677	$	14.41	$	14.32	11811 N Freeway	Houston	156,362	75	%	$	1,719	$	14.63	$	14.65
Atrium I	Atrium I	Houston	118,461	87	%	$	1,400	$	13.66	$	13.73	Atrium I	Houston	118,461	85	%	$	1,417	$	14.02	$	14.21
Atrium II	Atrium II	Houston	111,853	96	%	$	1,187	$	11.16	$	11.48	Atrium II	Houston	111,853	96	%	$	1,212	$	11.16	$	11.48
3100 Timmons	3100 Timmons	Houston	111,265	84	%	$	1,533	$	16.31	$	16.30	3100 Timmons	Houston	111,265	86	%	$	1,576	$	16.48	$	16.52
Cornerstone	Cornerstone	Houston	71,008	70	%	$	636	$	12.76	$	12.44	Cornerstone	Houston	71,008	65	%	$	550	$	11.84	$	11.76
Northchase	Northchase	Houston	128,981	64	%	$	1,049	$	12.71	$	12.76	Northchase	Houston	128,981	65	%	$	1,057	$	12.55	$	12.67
616 FM 1960	616 FM 1960	Houston	142,194	63	%	$	1,209	$	13.42	$	13.39	616 FM 1960	Houston	142,194	63	%	$	1,158	$	12.90	$	12.88
601 Sawyer	601 Sawyer	Houston	88,258	92	%	$	1,345	$	16.60	$	16.48	601 Sawyer	Houston	88,258	90	%	$	1,326	$	16.70	$	16.53
Gulf Plaza	Gulf Plaza	Houston	120,651	77	%	$	1,952	$	20.97	$	21.36	Gulf Plaza	Houston	120,651	82	%	$	1,966	$	19.89	$	20.29
Timbercreek Atrium	Timbercreek Atrium	Houston	51,035	80	%	$	461	$	11.28	$	11.07	Timbercreek Atrium	Houston	51,035	79	%	$	476	$	11.85	$	11.75
Copperfield	Copperfield	Houston	42,621	91	%	$	647	$	16.66	$	16.61	Copperfield	Houston	42,621	99	%	$	626	$	14.76	$	14.56
400 N. Belt	400 N. Belt	Houston	230,872	44	%	$	1,166	$	11.50	$	11.71	400 N. Belt	Houston	230,872	41	%	$	1,120	$	11.89	$	12.20
Ashford Crossing	Ashford Crossing	Houston	158,451	86	%	$	1,869	$	13.76	$	13.46	Ashford Crossing	Houston	158,451	87	%	$	2,070	$	15.03	$	15.14
Regency Square	Regency Square	Houston	64,063	89	%	$	569	$	9.95	$	10.02	Regency Square	Houston	64,063	94	%	$	572	$	9.52	$	9.51
Energy Plaza	Energy Plaza	San Antonio	180,119	90	%	$	3,255	$	20.02	$	20.03	Energy Plaza	San Antonio	180,119	94	%	$	3,523	$	20.89	$	20.86
One Technology Ctr	One Technology Ctr	San Antonio	196,348	90	%	$	4,500	$	25.34	$	25.35	One Technology Ctr	San Antonio	196,348	89	%	$	4,468	$	25.46	$	25.50
Total -office	Total -office		4,261,879	77	%	51,441		15.72		15.82		Total -office		4,261,879	77	%	51,207		15.52		15.54
Industrial/Flex	Industrial/Flex											Industrial/Flex
Central Park	Central Park	Dallas	73,099	97	%	$	609	$	8.59	$	8.61	Central Park	Dallas	73,099	91	%	$	573	$	8.61	$	9.83
Quitman	Quitman	Houston	736,957	88	%	$	1,283	$	1.97	$	1.98	Quitman	Houston	736,957	88	%	$	1,353	$	2.08	$	2.08
Mitchelldale	Mitchelldale	Houston	377,752	100	%	$	2,498	$	6.61	$	6.60	Mitchelldale	Houston	377,752	95	%	$	2,434	$	6.79	$	6.84
Total -Industrial/Flex	Total -Industrial/Flex		1,187,808	92	%	$	4,390	$	4.00	$	4.00	Total -Industrial/Flex		1,187,808	91	%	$	4,360	$	4.06	$	4.15

Grand Total	Grand Total		6,781,718	81	%	$	71,092	$	12.98	$	12.95	Grand Total		6,781,718	81	%	$	70,949	$	12.92	$	12.95

2827

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our results of operations and financial condition, as reflected in the accompanying consolidated financial statements and related notes, require us to make estimates and assumptions that are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions, and other factors related to the ongoing viability of our customers. With different estimates or assumptions, materially different amounts could be reported in our consolidated financial statements. A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 31, 2022 in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations." There have been no significant changes to these policies during the ~~three~~nine months ended ~~June~~September 30, 2022. See also Note 2 (Summary of Significant Accounting Policies) to our consolidated financial statements in this Quarterly Report on Form 10-Q for a discussion of our significant accounting policies.

RESULTS OF OPERATIONS

Comparison of the three and ~~six~~nine months ended ~~June~~September 30, 2022 versus ~~June~~September 30, 2021.

As of ~~June~~September 30, 2022 and 2021, respectively, ~~the Company~~we owned 44 commercial properties comprising approximately 6.8 million square feet plus four pad sites and two land developments, all located in Texas. As of ~~June~~September 30, 2022 and 2021, respectively, ~~the Company~~we owned 15 properties located in Richardson, Arlington and Dallas, Texas, 26 properties located in Houston, Texas and three properties located in San Antonio, Texas.

Revenues - The primary source of our revenue is rental revenues. For the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, we had total revenues of ~~$22,440,000~~$23,481,000 and ~~$22,905,000,~~$23,128,000, and ~~$46,521,000~~$70,002,000 and ~~$47,030,000,~~$70,158,000, respectively. Revenue was consistent period over period with an ~~The decrease is attributable~~increase in overall occupancy from 79% to 81% offset with a decrease in average net effective base rent per occupied square foot from ~~$13.33~~$13.10 to ~~$12.95, offset by an increase in overall occupancy from 78% to 81%.~~$12.95.

Property operating expenses - Property operating expenses consist of contract services, repairs and maintenance, utilities and management fees and property level administrative expenses including bad debt expense. For the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, we incurred property operating expenses of ~~$7,525,000~~$7,748,000 and ~~$6,717,000,~~$7,046,000, and ~~$13,049,000~~$20,797,000 and ~~$19,437,000,~~$26,483,000, respectively. The decrease in property operating expenses over the ~~six~~nine month period is primarily due to the increase in electricity expenses as a direct result of the severe winter storm during February 2021, also known as Winter Storm Uri. See Part II - Item 1. Legal Proceedings and Note 14 - (Commitments and Contingencies) for additional information regarding Winter Storm Uri. Electric utility expense for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$3,759,000~~$6,666,000 compared to ~~$11,337,000~~$13,221,000 for the ~~six~~nine months ended ~~June~~September 30, 2021. The increase in property operating expenses over the three month period is primarily due to increase in ba~~d debt expense from~~ ~~$184,000~~ ~~during~~electricity expenses as a result of inflation creating upward pressure on energy costs. Electricity costs for the three months ended ~~June~~September 30, ~~2021~~2022 was $2,907,000 compared to $1,883,000 for the ~~$1,064,000 during the~~ three months ended ~~June~~September 30, ~~2022.~~2021.

Real estate taxes and insurance - Real estate taxes and insurance for the three months ended ~~June~~September 30, 2022 and 2021 were ~~$3,633,000~~$3,589,000 and ~~$3,498,000,~~$3,008,000, and ~~$6,966,000~~$10,555,000 and ~~$7,061,000,~~$10,069,000, for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, ~~and~~ respectively. The ~~decrease~~increase in real estate taxes and insurance ~~over~~is primarily due to higher insurance premiums on our annual renewal during the ~~six month period is attributable to lower property tax assessments as a result~~second quarter of ~~successful property tax protests and litigation.~~2022.

Depreciation and amortization - Depreciation and amortization expense for the three months ended ~~June~~September 30, 2022 and 2021 was ~~$6,535,000~~$6,856,000 and ~~$6,454,000,~~$6,918,000, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, depreciation and amortization expense was ~~$13,052,000~~$19,908,000 and ~~$13,115,000,~~$20,033,000, respectively. ~~The increase over~~

Debt issuance costs write off - During the ~~three month period is primarily related to increase in additions to real estate. For~~ second and third quarters of 2022, the Company undertook refinancing efforts which were not successful. Professional fees incurred associated with the refinancing efforts totaled $1,018,000 and were expensed during the three months ended ~~June~~September 30, ~~2022 and 2021, the Company invested $5,045,000 and $2,740,000 in real estate additions, respectively.~~2022.

General and administrative expenses - General and administrative expenses consist primarily of audit fees, transfer agent fees, other professional fees, and independent director compensation. General and administrative expenses for the three months ended ~~June~~September 30, 2022 and 2021 were ~~$3,280,000~~$3,413,000 and ~~$2,722,000,~~$2,524,000, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, General and administrative expenses were ~~$6,503,000~~$9,916,000 and ~~$5,854,000,~~$8,378,000, respectively. ~~The increase is primarily due to~~We incurred additional legal expenses ~~incurred resulting~~ from Summer Energy litigation. Legal fees totaled $550,000 for nine months ended September 30, 2022 compared to $140,000 for the nine months ended September 30, 2021.

Interest expense - Interest expense for the three months ended ~~June~~September 30, 2022 and 2021, was ~~$2,655,000~~$3,789,000 and ~~$2,129,000,~~$2,133,000, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, interest expense was ~~$4,738,000~~$8,527,000 and ~~$4,163,000,~~$6,296,000, respectively. The increase is due to overall increase in ~~Notes Payable, net~~notes payable from ~~$304,375,000~~$305,859,000 to ~~$316,014,000~~$315,897,000 during the comparative periods. Further, the interest rate on the Company's variable rate debt increased from 1.95% to ~~3.13%~~4.94% as of ~~June~~September 30, 2021 and 2022, respectively.

Net loss - We generated a net loss of ~~$4,778,000~~$5,804,000 and ~~$997,000~~$2,550,000 for the three months ended ~~June~~September 30, 2022 and 2021, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, we generated net loss ~~$4,561,000~~$10,365,000 and ~~$7,979,000. The main driver was an increase in property operating expenses in March of 2021 as a result of Winter Storm Uri, as explained in the property operating expenses section above.~~$10,529,000.

Funds From Operations and Modified Funds From Operations

Funds From Operations, or FFO, is a non-GAAP financial measure defined by the National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, which we believe is an appropriate supplemental measure to reflect the operating performance of a real estate investment trust, or REIT in conjunction with net income. FFO is used by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income or loss as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property and asset impairment write-downs, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Our FFO calculation complies with NAREIT’s policy described above.

We define Modified Funds From Operations, or MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses. We do not currently exclude amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us, and therefore such funds will not be available to distribute to investors. All paid and accrued acquisition fees and expenses negatively impact our operating performance during the period in which properties are acquired and will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. Accordingly, MFFO may not be an accurate indicator of our operating performance, especially during periods in which properties are being acquired. MFFO that excludes such costs and expenses would only be comparable to non-listed REITs that have completed their acquisition activities and have similar operating characteristics to us. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance. The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our business plan to generate operational income and cash flows in order to make distributions to investors.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way, so comparisons with other REITs may not be meaningful. FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations

as an indication of our performance, as an alternative to cash flows from operations as an indication of its liquidity, or indicative of funds available to fund its cash needs including its ability to make distributions to its stockholders. FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. FFO and MFFO are not useful measures in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO or MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT, or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and as a result we may have to adjust our calculation and characterization of FFO or MFFO.

The table below summarizes our calculation of FFO and MFFO for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, including a reconciliation of such non-GAAP financial performance measures to our net loss, in thousands.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Net loss	Net loss	$	(4,778)	$	(997)	$	(4,561)	$	(7,979)	Net loss	$	(5,804)	$	(2,550)	$	(10,365)	$	(10,529)
Depreciation and amortization of real estate assets	Depreciation and amortization of real estate assets	6,535		6,454		13,052		13,115		Depreciation and amortization of real estate assets	6,856		6,918		19,908		20,033
Funds from operations (FFO)	Funds from operations (FFO)	1,757		5,457		8,491		5,136		Funds from operations (FFO)	1,052		4,368		9,543		9,504
Organization and offering costs	Organization and offering costs	14		25		23		29		Organization and offering costs	6		27		29		56

Modified funds from operations (MFFO)	Modified funds from operations (MFFO)	$	1,771	$	5,482	$	8,514	$	5,165	Modified funds from operations (MFFO)	$	1,058	$	4,395	$	9,572	$	9,560

Distributions

The following table summarizes the distributions we paid in cash and pursuant to our distribution reinvestment plan for the period from January 2011 (the month we first paid distributions) through ~~June~~September 30, 2022, in thousands:


Period	Period	Cash (1)		DRIP (2)(3)		Total		Period	Cash (1)		DRIP (2)(3)		Total
Year ended December 31, 2011	Year ended December 31, 2011	$	255	$	242	$	497	Year ended December 31, 2011	$	255	$	242	$	497
Year ended December 31, 2012	Year ended December 31, 2012	891		869		1,760		Year ended December 31, 2012	891		869		1,760
Year ended December 31, 2013	Year ended December 31, 2013	1,681		1,594		3,275		Year ended December 31, 2013	1,681		1,594		3,275
Year ended December 31, 2014	Year ended December 31, 2014	2,479		2,358		4,837		Year ended December 31, 2014	2,479		2,358		4,837
Year ended December 31, 2015	Year ended December 31, 2015	3,475		3,718		7,193		Year ended December 31, 2015	3,475		3,718		7,193
Year ended December 31, 2016	Year ended December 31, 2016	8,918		2,988		11,906		Year ended December 31, 2016	8,918		2,988		11,906
Year ended December 31, 2017	Year ended December 31, 2017	12,650		—		12,650		Year ended December 31, 2017	12,650		—		12,650
Year ended December 31, 2018	Year ended December 31, 2018	12,555		—		12,555		Year ended December 31, 2018	12,555		—		12,555
Year ended December 31, 2019	Year ended December 31, 2019	12,811		—		12,811		Year ended December 31, 2019	12,811		—		12,811
Year ended December 31, 2020	Year ended December 31, 2020	15,797		—		15,797		Year ended December 31, 2020	15,797		—		15,797
Year ended December 31, 2021	Year ended December 31, 2021	13,668		—		13,668		Year ended December 31, 2021	13,668		—		13,668
Quarter ended March 31, 2022	Quarter ended March 31, 2022	3,958		—		3,958		Quarter ended March 31, 2022	3,958		—		3,958
Quarter ended June 30, 2022	Quarter ended June 30, 2022	4,500		—		4,500		Quarter ended June 30, 2022	4,500		—		4,500
Quarter ended September 30, 2022								Quarter ended September 30, 2022	—		—		—
Total	Total	$	93,638	$	11,769	$	105,407	Total	$	93,638	$	11,769	$	105,407

(1)Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately 40

days following the end of such month.

(2)Distributions accrued for the period from December 27, 2010 through December 31, 2010 were paid on January 20, 2011, the date we first paid a distribution.

(3)Amount of distributions paid in shares of common stock pursuant to our distribution reinvestment plan. Effective July 16, 2016, we terminated the sale of additional shares of our common stock to our stockholders pursuant to our distribution reinvestment plan.

Distributions to non-controlling interests were ~~$676,000~~$77,000 and ~~$159,000~~$232,000 for the three months ended ~~June~~September 30, 2022 and 2021, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, distributions to non-controlling interests were ~~$907,000~~$984,000 and ~~$389,000,~~$621,000, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2022, we paid aggregate distributions of $8,458,000 in cash to common stockholders. During the same period, cash provided by operating activities was ~~$347,000~~$8,370,000 and our FFO was ~~$8,491,000.~~$9,543,000.

On July 8, 2022, the board of directors approved the suspension of the payment of distributions to the Company's stockholders.

Liquidity and Capital Resources

Our principal demands for funds during the short and long-term are and will ~~continue to~~ be ~~for real estate and real estate-related acquisitions,~~ for the payment of operating expenses, for payments under our debt obligations, and, to the extent we elect to resume the payment of ~~interest on our outstanding indebtedness, and~~distributions, for the payment of distributions. Generally, we expect to meet cash needs for items ~~other than acquisitions~~ from our cash flow from ~~operations;~~our real estate and real estate-related investments, debt financing, and proceeds from the sale of our real estate properties and real estate-related investments; provided, that some or all of our distributions have been and may continue to be paid from sources other than cash from operations (as discussed below).

~~Some or all of~~The current economic slowdown, rising interest rate environment, inflation, and the COVID-19 pandemic have had a negative impact on our ~~distributions~~Company, as discussed in the cash flows section below. We have ~~been~~experienced higher operating and ~~may continue~~financing costs which has resulted in working capital constraints and negatively impacted our free cash flow. In response to ~~be paid from sources other than~~these market conditions, we have implemented cost saving measures to reduce discretionary spending and preserve capital. As a result, we believe that our cash flow from operations, ~~including~~anticipated proceeds offrom asset sales, and anticipated financing activities are sufficient to meet our ~~public offerings, cash advances to us by affiliates and borrowings secured by our assets in anticipation of future operating cash flow. To~~liquidity needs for the extent our investments are in development or redevelopment projects or in properties that have significant capital requirements, our ability to make distributions may be negatively impacted, especially during our early periods of operation.foreseeable future.

We use, and intend to use in the future, secured and unsecured debt to acquire properties and make other investments. As of ~~June~~September 30, 2022, our outstanding secured debt is ~~$301,041,000.~~$300,042,000. There is no limitation on the amount we may invest in any single property or other asset or on the amount we can borrow for the purchase of any individual property or other investment. Under our charter, we are prohibited from borrowing in excess of 300% of our “net assets” (as defined by our charter) as of the date of any borrowing; however, we may exceed that limit if approved by a majority of our independent directors and if such excess is disclosed to the stockholders in the next quarterly report along with the explanation for such excess borrowings. Our board of directors has adopted a policy to limit our aggregate borrowings to approximately 50% of the aggregate value of our assets unless substantial justification exists that borrowing a greater amount is in our best interests. Such limitation, however, does not apply to individual real estate assets. We may borrow more than 50% of the contract purchase price of a real estate asset we acquire to the extent our board of directors determines that borrowing these amounts is prudent.

Pursuant to ASC 205-40, “Presentation of Financial Statements – Going Concern,” management is required to evaluate the Company’s ability to continue as a going concern within one year after the date that ~~these~~the consolidated financial statements included in the Quarterly Report are issued. The SASB Loan has a currently extended maturity date of October 9, ~~2022. The SASB Loan provides for one remaining one-year~~2023. On October 9, 2022, SPE LLC executed the third and final maturity date ~~extension. In order to exercise each successive one-year~~ extension ~~options, SPE LLC must meet five conditions in order~~agreement to extend the maturity ~~date without any further qualification. One of the five conditions is that Hartman SPE must have a debt yield, as defined, of 12.5% or greater as of June 30, 2022.~~to October 9, 2023.

~~Management has concluded~~The October 9, 2023 SASB Loan maturity date is within one year of the issuance of these consolidated financial statements. Uncertainty as to the Company's ability to obtain financing to satisfy the existing SASB Loan obligation, requires require management to conclude, in accordance with guidance provided by ASU 2014-15, that there is a substantial doubt about the Company's ability to continue as a going concern within one year of the issuance date of ~~these~~the consolidated financial statements ~~due to~~included in the ~~fact of the uncertainty regarding the loan maturity of the SASB Loan.~~Quarterly Report. Management believes that ~~Hartman~~ SPE LLC will be able to ~~extend~~obtain financing to replace the SASB Loan prior to the October 9, 2023 maturity ~~date for one year which~~date.

Increases in the cost of financing due to higher interest rates will ~~mitigate~~prevent us from refinancing debt obligations at terms as favorable as the ~~maturity date issue within one year~~terms of existing indebtedness. Further, increases in interest rates would increase the ~~issuance date of these consolidated financial statement.~~

~~Potential future sources of capital include proceeds from additional private or public offerings~~amount of our ~~securities, secured or unsecured financings from banks or other lenders, proceeds from~~debt payments on our variable rate debt to the ~~sale~~extent the interest rates on such debt are not limited through interest rate cap

agreements. Increases in interest rates will have an adverse effect on our financial condition and results of ~~properties~~operations and ~~undistributed funds from operations. If necessary, we may use financings or other sources~~will impair our ability to resume the payment of ~~capital in the event of unforeseen significant capital expenditures.~~distributions.

The consolidated financial statements as of ~~June~~September 30, 2022 include the accounts of the Company, our operating partnership and its subsidiaries, Hartman SPE, LLC, HIREIT, Advisor and Hartman XIX. Prior to October 1, 2018, our consolidated financial statements did not include Hartman SPE, LLC. Prior to July 1, 2020, our consolidated financial statements did not include HIREIT, Advisor or Hartman XIX.

Cash Flows from Operating Activities

For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, net cash provided by operating activities was ~~$347,000~~$8,370,000 versus ~~$2,604,000,~~$11,771,000, respectively. The decrease in cash is primarily due to payment of supersedeas surety bond totaling $2,001,000 and recorded in prepaid expenses and other current assets. Further, we have has incurred higher property operating costs and interest expense during the nine months ended September 30, 2022 as described in the Results of Operations section above.

Cash Flows from Investing Activities

For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, net cash used in investing activities was ~~$8,159,000~~$12,700,000 versus ~~$5,611,000,~~$9,906,000, respectively. All cash used in investing activities is applicable to ~~the Company's~~our investment in real estate related to tenant improvements and other capital expenditures.

Cash Flows from Financing Activities

For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, net cash provided by (used in) financing activities was ~~$4,131,000~~$3,483,000 and ~~$(4,506,000)~~$(8,290,000), respectively. The increase in cash provided by financing activities is primarily due to an increase in net borrowing from affiliate. ~~The Company's~~Net cash provided under our note payable to related party affiliate increased by ~~$11,232,000~~$12,895,000 over the ~~six~~nine months ended ~~June~~September 30, 2022. The capital provided by related party financing was used to aid funding of capital expenditures of $5,045,000 during the ~~three months ended June 30,~~second quarter of 2022, the share of the supersedeas surety bond applicable to wholly owned properties of ~~the Company~~our company totaling $2,001,000, insurance premium payments of $1,252,000, and loan fees of $772,000.

Contractual Commitments and Contingencies

We use, and intend to use in the future, secured and unsecured debt, as a means of providing additional funds for the acquisition of our properties and our real estate-related assets. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. Under our charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets. We may borrow in excess of this amount if such excess is approved by a majority of the independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of ~~June~~September 30, 2022, our borrowings were not in excess of 300% of the value of our net assets.

As of ~~June~~September 30, 2022, we had notes payable totaling an aggregate principal amount of ~~$318,285,000.~~$317,210,000. For more information on our outstanding indebtedness, see Note 7 (Notes Payable) to the consolidated financial statements included in this report.

Off-Balance Sheet Arrangements

As of ~~June~~September 30, 2022 and December 31, 2021, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

~~The Company is~~We are a covenant guarantor for the secured mortgage indebtedness of VIEs in the total amount of ~~$24,639,000~~$24,587,000 and $24,748,000 as of ~~June~~September 30, 2022 and December 31, 2021, respectively. ~~The Company~~We are is not deemed to be the primary beneficiary of the VIEs. See Note 11 (Related Party Transactions).

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying consolidated financial statements. See Note 2 (Summary of Significant Accounting Policies) to the notes to the accompanying consolidated financial statements included in this quarterly report.

Related-Party Transactions and Agreements

We have entered into management and advisory agreements with our affiliates. See Item 13, “Certain Relationships and Related Transactions and Director Independence” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022 and Note 11 (Related Party Transactions) to the consolidated financial statements included in this Quarterly Report for a discussion of the various related-party transactions, agreements and fees.

Subsequent Events

Refer to Note 16 (Subsequent Events) to the consolidated financial statements included in this Quarterly Report for information regarding subsequent events.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We will be exposed to interest rate changes primarily as a result of long-term debt used to acquire properties and make loans and other permitted investments. Our interest rate risk management objectives will be to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we expect to borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates. With regard to variable rate financing, we will assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Form 10-Q, as of ~~June~~September 30, 2022, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). In performing this evaluation, management reviewed the selection, application and monitoring of our historical accounting policies. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of ~~June~~September 30, 2022, these disclosure controls and procedures were effective and designed to ensure that the information required to be disclosed in our reports filed with the SEC under the Exchange Act is recorded, processed, summarized and reported as and when required.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended ~~June~~September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

During February 2021, the state of Texas experienced a severe winter storm, unofficially referred to as Winter Storm Uri, which resulted in power outages and electrical grid failures across the state. Wholesale prices for electricity increased significantly during this period. As a result, we experienced a substantial increase in electricity billings for a number of our properties during the month of and after the storm.

On May 26, 2021, Summer Energy LLC (“Summer”) filed a lawsuit against Hartman Income REIT Management, Inc. (the “Property Manager”), a wholly owned subsidiary of the Company that manages our properties, in state court in Harris County, Texas. In this lawsuit, Summer seeks to collect approximately $8.4 million from the Property Manager that Summer claims that the Property Manager owes Summer under one or more electricity sales agreements (“Agreements”) related to Winter Storm Uri. Of the approximately $8.4 million claimed in the lawsuit, approximately $7.6 million relates to wholly owned properties of the Company. Under the Agreements, Summer provided electricity to buildings managed by the Property Manager at indexed prices.

Item 1A. Risk Factors

The ~~outbreak of the novel coronavirus, COVID-19,~~ongoing conflict between Russia and Ukraine has caused ~~and could continue to cause~~ severe disruptions in the ~~United States as well as Texas state~~U.S. and ~~local economies~~global economy and ~~could~~may have ~~a material~~an adverse ~~effect~~impact on our ~~business,~~ financial ~~condition and results of operations.~~performance.

~~The COVID-19 pandemic has caused significant disruptions to~~On February 24, 2022, Russian troops began a full-scale invasion of Ukraine and the countries remain in active armed conflict. Around the same time, the United States, the United Kingdom, the European Union, and several other nations announced a broad array of new or expanded sanctions, export controls, and other measures against Russia, Russia-backed separatist regions in Ukraine, and certain banks, companies, government officials, and other individuals in Russia and Belarus. The ongoing conflict and the rapidly evolving measures in response could be expected to have a negative impact on the economy ~~as well as~~and business activity globally (including the ~~economies~~United States), and therefore could adversely affect the performance of our investments. The severity and duration of the ~~State of Texas~~conflict and ~~major Texas communities~~its impact on global economic and ~~has contributed~~market conditions are impossible to ~~significant volatility and negative pressure in financial markets. The global impact of the outbreak is continually evolving~~predict, and as ~~additional cases~~a result, could present material uncertainty and risk with respect to us and the performance of ~~the virus are identified, many countries, including the United States, have reacted by instituting quarantines, restrictions on travel~~our investments and ~~mandatory closures~~operations, and our ability of businesses. Certain cities where we own properties and/or have development sites, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue. Although in many cases these measures have been modified or lifted entirely, they may be reinstated in whole or in part and additional, more restrictive measures may be implemented in the future. The COVID-19 pandemic has adversely impacted numerous industries, including transportation and hospitality, and triggered a global economic slowdown.

Although a number of vaccines for COVID-19 are currently available to the general public in the United States and in many countries around the world, the ultimate effectiveness of the vaccination effort is subject to significant uncertainty. The length and severity of the pandemicachieve our investment objectives. Similar risks will ~~be worsened~~exist to the extent that ~~a significant portion~~any investments, service providers, vendors or certain other parties have material operations or assets in Russia, Ukraine, Belarus, or the immediate surrounding areas.

We may not have sufficient funds to pay interest payments if interest rates increase significantly.

Mortgage loans we have or may in the future obtain may have variable interest rates. In response to the last global economic recession, extraordinary monetary policy actions of the ~~population,~~U.S. Federal Reserve and other central banking institutions, including the utilization of quantitative easing, were taken to create and maintain a low interest rate environment. However, the U.S. Federal Reserve raised its benchmark interest rate nine times between December 2015 and the end of 2020, including four times in 2018, each time by a quarter of a percentage point, before reducing interest rates three times in 2019 and twice in 2020. The U.S. Federal Reserve reduced its benchmark interest rate to 0% in March 2020 before voting in November 2020 to keep short-term interest rates anchored in a range between 0% and 0.25%. Further, the United States and globally, is reluctant to be vaccinated, fails to complete required multi-step vaccination protocol or is unable to become vaccinated due to shortages in vaccine supply or suspensions in the distribution of vaccines due to safety concerns or other issues. The length of the pandemic is also dependent upon the degree to which more contagious variants of the virus continue to spread, particularly among areas of the country in which overall full vaccination rates are relatively low, and overall rates of new COVID-19 cases continue to rise. Further, new and worsening outbreaks of COVID-19 in other countries mayU.S. Federal Reserve has signaled that it will

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~~impact global vaccine supplies~~raise interest rates in 2022 and ~~lead to~~increased rates 0.25% in March 2022, 0.5% in May 2022, 0.75% in June 2022, 0.75% in July 2022 and 0.75% in September 2022. Any change in the ~~emergence of new variants~~fiscal policies or stated target interest rates of the ~~virus which~~U.S. Federal Reserve or other central banking institutions, or market expectations of such change, are ~~more contagious, more deadly~~ difficult to predict and may result in significantly higher long-term interest rates. Such a transition may be abrupt and may, among other things, reduce the availability and/or ~~against which currently available vaccines are less effective. As a result~~increase the costs of ~~the foregoing factors, the COVID-19 pandemic is expected to have a continued adverse impact on economic~~obtaining new debt and ~~market conditions despite the ongoing distribution of vaccines.~~refinancing existing indebtedness.

~~The COVID-19 pandemic~~In the event that the interest rate on any mortgage loan increases significantly, we may ~~adversely affect~~not have sufficient funds to pay the required interest payments. In such event, our ~~business, financial condition and results of operations, and may have the effect of heightening many~~continued ownership of the ~~risks described~~applicable property that secures such loan may be threatened. Further, an increase in ~~the “Risk Factors” section of~~interest rates and adverse changes in fiscal policy or credit market conditions could have an adverse effect on consumer spending, which could impact our ~~Annual Report on Form 10-K for the year ended December 31, 2021, including:~~revenues.

•~~failure of our tenants to perform tenant obligations under our leases including but not limited to timely payment of rent and other charges;~~

•the disruptive impact on tenant personnel resources, which could hinder our ability to renew expiring leases, initiate or complete tenant build-out and construction projects and otherwise interfere with our tenant relationships;

•~~disruptions in the supply of materials or products or the inability of contractors to perform on timely basis tenant improvement construction or other construction and development;~~

•~~a general decline in business activity and demand for real estate transactions, which could adversely affect our ability or desire to continue growing our portfolio of properties;~~

•the likelihood that the impact of COVID-19 could result in an event or change in circumstances that results in an impairment charge in the value of one or more of our properties, which would result in an immediately negative adjustment to our earnings and could have a material adverse effect on our business, financial conditions and results of operations in the period in which the charge takes place;

•uncertainty as to whether business interruption, loss of rental income and/or other associated expenses related to our operations across our portfolio will be covered by our insurance policies, which may increase unreimbursed liabilities; and

•the potential negative impact on the health of our personnel, including our senior management team, particularly if a significant number of our employees or key members of our senior management are impacted, which could result in a deterioration in our ability to ensure business continuity during a disruption.Distributions

~~The COVID-19 pandemic is~~We have suspended the payment of distributions to our stockholders indefinitely. While our board of directors, in consultation with management, will continue to identify a continually evolving situation that presents material uncertainty and risk. The extent and duration of the impacts of COVID-19 on our business, financial condition, results of operations and cash flows is dependent on future developments that are highly uncertain and cannot be accurately predicted at this time, including without limitation the scope, severity and duration of the pandemic, the extent and effectiveness of the actions taken to contain the pandemic or mitigate its impact, the speed of the development and distribution of vaccines for COVID-19 and the efficacy and availability of such vaccines, the extent to which the general population is willing to be vaccinated, the efficacy of currently available vaccines against current and any newly emerging variants of COVID-19, the potential for business closures that may be mandated or advisable, whether based on increased COVID-19 cases, the spread of more infectious or deadly variants or other factors, the reduction or reversal of previously implemented containment measures in certain states and cities, and the direct and indirect economic effects of the pandemic. As a result, we cannot provide an estimate of the overall impact of COVID-19 on our business, financial condition, results of operations and cash flows.

~~Pending litigation related to electricity services during Winter Storm Uri.~~

During February 2021, the state of Texas experienced a severe winter storm, unofficially referred to as Winter Storm Uri, which resulted in power outages and electrical grid failures across the state. Wholesale prices for electricity increased significantly during this period. As a result, we experienced a substantial increase in electricity billings for a number of our properties during the month of and after the storm.

On May 26, 2021, Summer Energy LLC (“Summer”) filed a lawsuit against Hartman Income REIT Management, Inc. (the “Property Manager”), a wholly owned subsidiary of the Company that manages our properties, in state court in Harris County, Texas. In this lawsuit, Summer seeks to collect approximately $8.4 million from the Property Manager that Summer claims that the Property Manager owes Summer under one or more electricity sales agreements (“Agreements”) related to Winter Storm Uri. Of the approximately $8.4 million claimed in the lawsuit, approximately $7.6 million relates to wholly owned properties of the Company. Under the Agreements, Summer provided electricity to buildings managed by the Property Manager at indexed prices.

payment of distributions.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

~~None.~~Refer to Note 16 (Subsequent Events) for a description of an occurrence of an event of default related to the SASB Loan.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit						Description
3.1						First Articles of Amendment to Third Amended and Restated Articles of Incorporation of Hartman Short Term Income Properties XX, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K filed on April 12, 2012)
3.2						Third Amended and Restated Articles of Incorporation of Hartman Short Term Income Properties XX, Inc. (incorporated by reference to Exhibit 1 to the Company’s registration statement on Form 8-A (SEC File No. 000-53912) filed on March 22, 2010)
3.3						Certificate of Correction - Hartman Short Term Income Properties XX, Inc. (incorporated by reference to Exhibit 3.3 to the Company's form 10-Q filed on May 11, 2018
3.4						Bylaws of Hartman Short Term Income Properties XX, Inc. (incorporated by reference to Exhibit 2 to the Company’s registration statement on Form 8-A (SEC File No. 000-53912) filed on March 22, 2010)
31.1*						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*						XBRL Instance Document
101.SCH*						XBRL Taxonomy Extension Schema Document
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*						XBRL Taxonomy Extension Label Linkbase Document
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC.

Date: ~~August 15,~~November 14, 2022

By: /s/ ~~Allen R. Hartman~~Mark T. Torok

~~Allen R. Hartman,~~Mark T. Torok

~~Chairman of the Board and~~ Chief Executive Officer

(Principal Executive Officer)

Date: ~~August 15,~~November 14, 2022

By: /s/ Louis T. Fox, III

Louis T. Fox, III,

Chief Financial Officer,

(Principal Financial and Principal Accounting Officer)

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