UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2017

For the transition period from __________ to __________

Commission File No. 000-50331

REALSOURCE RESIDENTIAL, INC.CalEthos, Inc

.

(Exact name of registrant as specified in its charter)

(801) 601-2700

(714) 352-5315

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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 [X] No[  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [X] No[  ]

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

If an emerging growth company, indicate by check mark if the registrant has elected not 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.[  ]

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange ct)Act): Yes [X] No [  ]

As of October 27, 2017,30, 2019 the registrant had 15,719,64516,634,951 shares of common stock outstanding.

RealSource Residential,CalEthos, Inc.

Quarterly Report on Form 10-Q

Three and Nine Months Ended September 30, 2019

TABLE OF CONTENTS

Cautionary Note Regarding Forward-Looking StatementsCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our business, including many assumptions regarding future events. Such forward-looking statements include statements regarding, among other things:

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors. These statements may be found under the section of our Annual Report on Form 10-K for the fiscal-year ended December 31, 2016 (filed on March 20, 2017) entitled “Risk Factors” as well as in our other public filings.

Particularly in light of our current status as a shell company, there can be no assurance that the forward-looking statements contained herein will in fact occur. Readers should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

RealSource Residential,CalEthos, Inc.

Nine Months Ended September 30, 2017 and 20162019

Index to the Financial Statements

RealSource Residential, Inc.

CalEthos, Inc.

Condensed Balance Sheets

See accompanying notes to the unaudited condensed financial statements.

RealSource Residential, Inc.

CalEthos, Inc.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

See accompanying notes to the financial statements.

RealSource Residential, Inc.

Statement of Changes in Stockholders’ Equity

For the Interim Period Ended September 30, 2017

(Unaudited)

See accompanying notes to theunaudited condensed financial statements.

CalEthos, Inc.

Condensed Statement of Stockholders’ Deficit

(Unaudited)

RealSource Residential, Inc.For the Three and Nine Months Ended September 30, 2019

Statements of Cash Flows

For the Three and Nine Months Ended September 30, 2018

See accompanying notes to the financial statements.

CalEthos, Inc.

Condensed Statements of Cash Flows

For the Nine Months Ended September 30,

(Unaudited)

See accompanying notes to the unaudited condensed financial statements.

RealSource Residential,CalEthos, Inc.

September 30, 2017 and 20162019

Condensed Notes to the Financial Statements

(Unaudited)

Note 1 -– Organization and OperationsAccounting Policies

Upstream Biosciences,CalEthos, Inc.

Upstream Biosciences, (the “Company”) (fka RealSource Residential, Inc. (“Upstream Biosciences”) was incorporated on March 20, 2002 under the laws of the State of Nevada. Upstream Biosciences engagedSince the second quarter of 2016, the Company has been a “shell” company, as defined in developing technology relating to biomarker identification, disease susceptibility and drug response areasRule 12b-2 under the Securities Exchange Act of cancer.1934, as amended.

Change in Control

On May 24, 2013, Charles El-Moussa and Six Capital Limited (“Six Capital”) (collectively, the “Sellers”), as16, 2018, certain majority stockholders of Upstream Biosciences, Inc.,the Company, including certain former directors and officers of the Company, entered into a Nevada corporation, andstock purchase agreement dated May 16, 2018 (the “Control Purchase Agreement”) with RealSource AcquisitionsAcquisition Group, LLC, a Utah limited liability company (“RealSource Acquisition”), whereby RealSource Acquisition agreed to purchase an aggregate of 11,006,356 shares (440,256 shares after giving effect to the Reverse Stock Split (the “Control Shares”) of the Company’s issued and Chesterfield Faring Ltd.outstanding shares of common stock for an aggregate purchase price of $180,000. Immediately prior to the closing under the Control Purchase Agreement on September 12, 2018 (the “Closing Date”), RealSource Acquisition assigned its rights under the Control Purchase Agreement to M1 Advisors, LLC, a New York corporation (collectively,Delaware limited liability company (“M1 Advisors”), pursuant to a purchase agreement and assignment and assumption of contract rights dated as of August 28, 2018 between RealSource Acquisition and M1 Advisors. M1 Advisors paid RealSource Acquisition $80,000 as consideration for such assignment.

Effective on the “Purchasers”),Closing Date, and in accordance with the amended and restated bylaws of the Company and the requirements of the Control Purchase Agreement, (a) each of Michael S. Anderson, Nathan W. Hanks and V. Kelly Randall resigned as directors of the Company, (b) Michael Campbell, the sole member of M1 Advisors, and Piers Cooper were elected to the Company’s board of directors, and (c) Mr. Hanks also resigned as president and chief executive officer of the Company, Mr. Randall also resigned as chief operating office and chief financial officer of the Company, Mr. Campbell was appointed the chief executive officer of the Company and Piers Cooper was appointed president of the Company.

On the Closing Date, the Company entered into a Securitiesseries A preferred stock purchase agreement dated as of the Closing Date (the “Preferred Purchase Agreement”) with M1 Advisors, which is an entity controlled by Michael Campbell, the Company’s chief executive officer and a director of the Company at such time, Piers Cooper, the Company’s president and a director of the Company at such time, the members of RealSource Acquisition, and the other investors who were signatories thereto (collectively, the Purchasers”). Pursuant to the Preferred Purchase Agreement, (the “Agreement”) pursuant to which the Sellers agreed to sellCompany sold to the Purchasers an aggregate of 10,778,08115,600,544 shares (representingof the Company’s series A preferred stock, which has since been re-designated as Founder preferred stock (“Founder Preferred Stock”), for an aggregate purchase price of $16,000, or $0.001 per share. Of the Founder Preferred Stock purchased, 9,320,414 shares were purchased by M1 Advisors, 4,674,330 shares were purchased by Mr. Cooper and an aggregate of 1,195,000 shares were purchased by the members of RealSource Acquisition or their assigns.

Immediately following the above transactions, an aggregate of 15,600,544 shares of Founder Preferred Stock and 630,207 shares of common stock was issued and outstanding. At such time, the shares of Founder Preferred Stock and common stock owned by M1 Advisors represented approximately 90%60.14% of the issued and outstanding voting securitiesshares of the Company) of commoncapital stock of the Company (the “Common Stock”) for $175,000 in cash fromon a fully-diluted basis and the personal fundsshares of Founder Preferred Stock owned by Mr. Cooper represented approximately 28.80% of the Purchasers.issued and outstanding shares of capital stock of the Company on a fully-diluted basis. The shares of Founder Preferred Stock acquired by M1 Advisors were purchased with funds that M1 Advisors borrowed from another entity controlled by Mr. Campbell.

On December 20, 2018, all outstanding shares of Founder Preferred Stock was converted in to shares of the Company’s common stock on a one-for-one basis pursuant to the terms of the Founder Preferred Stock.

Business Activity

Following the change in control, as described above, the board of directors determined to establish the Company in the rapidly-growing cannabis industry, initially in the State of California. The primary activity of the Company’s management is to seek and investigate various opportunities in the California cannabis industry, and if such investigation warrants, acquire assets and create a business around them, acquire part or all of an operating cannabis business or invest in a joint venture with other more established companies already in the cannabis industry. The Company will not restrict its search to any specific business, segment of the cannabis industry or geographical location and the Company may participate in a business venture of virtually any kind or nature that the board of directors believe is beneficial to the Company and its shareholders.

RealSource Residential, Inc.

On July 11, 2013, Upstream Biosciences entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Upstream Biosciences merged with its newly formed, wholly owned subsidiary, RealSource Residential, Inc., a Nevada corporation (“Merger Sub” and such merger transaction, the “Merger”) with the Company remaining as the surviving corporation under the name “RealSource Residential, Inc.” (the “Surviving Company” or the “Company”). Upon the consummation of the Merger, the separate existence of Merger Sub ceased and shareholders of the Company became shareholders of the surviving company named RealSource Residential, Inc. The Merger was effective on Monday, July 15, 2013 and was approved by the Financial Industry Regulatory Authority on August 5, 2013.

Note 2 - Significant and Critical Accounting Policies and PracticesStatement Presentation

The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

Basis of presentation

The Company’saccompanying unaudited condensed financial statements have been prepared in accordanceconformity with generally accepted accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-01 of Regulation S-X. Pursuant to these rules of the Securities Exchange Commission.

Use of Estimates and Assumptionsregulations, certain information and Critical Accounting Estimates and Assumptions

The preparation ofnote disclosures, normally included in financial statements prepared in conformityaccordance with accounting principles generally accepted in the United States of AmericaGAAP, have been condensed or omitted. GAAP requires management to make estimates and assumptions that affect the reported amounts and related disclosures. In the opinion of assetsmanagement, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three and liabilitiesnine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019. The balance sheet as of December 31, 2018 has been derived from the audited financial statements at that date but does not include all the information and disclosure of contingent assets and liabilities at the date(s) offootnotes required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto contained in the reported amounts of revenues and expenses duringAnnual Report on Form 10-K for the reporting period(s).

Critical accounting estimates are estimates for which (a) the nature of the estimate is material dueyear ended December 31, 2018. The notes to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting theunaudited condensed financial statements were:

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimatespresented on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form thegoing concern basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.unless otherwise noted.

Fair ValueBasis of Financial InstrumentsPresentation

The Company held no financial instruments as of September 30, 2017 or December 31, 2016.

Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. At September 30, 2017 and December 31, 2016, the Company held only cash deposits at a financial institution.

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the related parties include (a.) affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); (b.) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; (c.) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d.) principal owners of the Company; (e.) management of the Company; (f.) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g.) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: (a.) the nature of the relationship(s) involved; (b.) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c.) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d.) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Commitments and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Revenue Recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Deferred Tax Assets and Income Taxes Provision

The Company adopted the provisions of paragraph 740-10-25-13 of the FASB Accounting Standards Codification. Paragraph 740-10-25-13 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Tax years that remain subject to examination by major tax jurisdictions

The Company discloses tax years that remain subject to examination by major tax jurisdictions pursuant to the ASC Paragraph 740-10-50-15. Major tax jurisdictions generally have the right to examine and audit the previous three years of tax returns filed.

Earnings Per Share

Earnings per share (“EPS”) is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

Pursuant to ASC Paragraphs 260-10-45-21 through 260-10-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260–10–55–23). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: (a.) Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. (b.) The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) (c.) The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation.

The Company’s contingent shares issuance arrangement, stock options or warrants were as follows:

There were no incremental common shares under the Treasury Stock Method for the reporting periods shown above.

Cash Flows Reporting

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, which classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (the “Indirect Method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments

Subsequent Events

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

Note 3 – Going Concern

The Company’scondensed financial statements have been prepared assuming that itthe Company will continue as a going concern. The Company has no established operations. The Company incurred a net loss of approximately $1,216,000 for the nine months ended September 30, 2019 and had an accumulated deficit of approximately $9,043,000 as of September 30, 2019. The Company has financed its activities principally through debt and equity financing and shareholder contributions. Management expects to incur additional losses and cash outflows in the foreseeable future in connection with its operating activities.

The Company’s condensed financial statements have been presented on a going concern basis, which contemplates continuity of operations,the realization of assets and liquidationthe satisfaction of liabilities in the normal course of business.

As reflectedThe Company is subject to a number of risks similar to those of other similar stage companies, including dependence on key individuals; successful development, marketing and branding of products; uncertainty of product development and generation of revenues; dependence on outside sources of financing; risks associated with research and development; dependence on third-party suppliers and collaborators; protection of intellectual property; and competition with larger, better-capitalized companies. Ultimately, the attainment of profitable operations is dependent on future events, including obtaining adequate financing to fund its operations and generating a level of revenues adequate to support the Company’s cost structure.

The Company will need to raise debt or equity financing in the future in order to continue its operations and achieve its growth targets. However, there can be no assurance that such financing will be available in sufficient amounts and on acceptable terms, when and if needed, or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including market demand for the Company’s products and services, the success of product development efforts, the timing of receipts for customer deposits, the management of working capital, and the continuation of normal payment terms and conditions for purchase of goods and services. The Company believes its cash balances and cash flow from operations will not be sufficient to fund its operations and growth for the next twelve months from the issuance date of these financial statements,statements. If the Company had an accumulated deficit at September 30, 2017 and a net loss foris unable to substantially increase revenues, reduce expenditures, or otherwise generate cash flows from operations, then the reporting period then ended. These factorsCompany will likely need to raise substantial doubt about the Company’s abilityadditional funding from investors or through other avenues to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon the Company’s ability to implement its business plan and generate sufficient revenue and its ability to execute a business strategy and raise additional funds.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.Debt Discounts

Note 4 – InvestmentsThe Company accounts for debt discounts originating in connection with conversion features that remain embedded in the related notes in accordance with ASC 470-20,Debt with Conversion and Other Options. These costs are classified on the consolidated balance sheet as a direct deduction from the debt liability. The Company amortizes these costs over the term of its debt agreements as interest expense-debt discount in the consolidated statement of operations.

On June 10, 2014,

Warrants

In connection with financing arrangements, the Company invested $375,000 (approximately 18.8%) into newly formed RS Bakken One, LLC (“RSB1”),has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date.

Stock-Based Compensation

We account for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that acquired two propertiesare based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

We use the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant (measurement date) and is recognized over the vesting periods.

Recently Adopted Pronouncements

Leases

The Company adopted Accounting Standards Update (ASU) No. 2016-02,Leases on January 1, 2019 using the modified retrospective method. For its operating leases in North Dakota, one near Willistonexcess of 12 months, the Company recognizes a right-of-use asset and one in Watford City. These propertiesa lease liability on its balance sheet. The lease liability is determined as the present value of future lease payments using an estimated rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis at the adoption date for the existing lease and at lease commencement date for new leases. The right-of-use asset is based on the liability adjusted for any prepaid or deferred rent, and lease incentives, as applicable. The lease term at the commencement date is determined by considering whether renewal options and termination options are locatedreasonably assured of exercise. The Company has no long-term leases and such adoption had no impact.

Note 2 – Convertible Promissory Notes

In February, March and June 2019, the Company issued convertible promissory notes in the heartamounts of $110,000, $132,000 and $110,000, respectively (the “Notes”). The total proceeds were approximately $320,000, due to approximately $32,000 for an original issue discount. The Notes are non-interest bearing with the principal due and payable in February 2020 and June 2020. Any amount of unpaid principal on the date of maturity will accrue interest at rate of 10% per annum (default interest). The principal amount and all accrued interest are convertible into shares of the Bakken oil development and hadCompany’s common stock, as of the date of issuance, at a combined acquisition pricerate of $5,700,000. Additionally,$1.00 per share (“Conversion Rate”). The conversion rate is adjustable if, at any time when any principal amount of the Notes remains unpaid or unconverted, the Company purchasedissues or sells any shares of the Company’s common stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith), which is less than the Conversion Rate in effect on the date of such issuance (or deemed issuance) of such shares of common stock (a “Dilutive Issuance”). Immediately upon a Dilutive Issuance, the Conversion Rate will be reduced to the amount of the consideration per share received by the Company in such Dilutive Issuance. Events of default include failure to issue conversion shares, the occurrence of a breach or default under any other agreement, instrument or document involving any indebtedness for borrowed money of more than $100,000 in the aggregate, bankruptcy filing, application for the appointment of a custodian, trustee or receiver, insolvency, the Company’s common stock delisted, or dissolution, winding up, or termination of the business of the Company.

In connection with the issuance of the Notes, the Company issued to the purchasers of the Notes stock purchase warrants to purchase an option (Option) for $25,000 that will allow it to acquire 100%aggregate of these two properties after one year176,000 shares of the Company’s common stock for a purchase price of not less than $7,000,000 or more than $8,000,000.$1.00 per share, subject to adjustments.

On October 24, 2014In accordance with ASC 470 -Debt, the Company invested $100,000 (approximately a 3.876% interest) into newly formed RS Heron Walk Apartments, LLC (RSHWA), an entity that acquiredhas allocated the Heron Walk Apartments in Jacksonville, Florida. Heron Walk apartments is a value-add opportunity and the investment in RSHWA carries an 8% preferred return and with higher expected average cash-on-cash and internal rates of return.

Pursuant to paragraph 323-10-05-5 the equity method tends to be most appropriate if an investment enables the investor to influence the operating or financial policies of the investee. Although the Company owns less than 20 percent of the voting units in both of the above entities, the COO/CFO of the Company is the Vice President of RSB1 and RSHWA and the Chairman of the Company is the Manager of both these entities which enables the Company to influence the operating or financial policies of RSB1 and RSHWA. Thus, the Company accounts for its investment in these investments using the equity method of accounting and reports such in the balance sheets as investment.

Under terms of an amendment to the Note and Warrant (see Note 5-Convertible Notes) in February 2016, the Noteholders formed RSRT Holdings, LLC and agreed to accept an assignment of ownership in RSHWA and RSB1 and the Option in partial settlementcash proceeds amounts of the Notes and accrued interest. The lenders onamong the two properties must be notified ofNotes, the assignment of owner interests and may be required to approve such transfers based on the terms of the loan documents. The assignment of the interest in RSHWA was effective April 1, 2016. The assignment of RSB1warrants and the Option was effective on June 1, 2016.

Investment consisted of the following:

The Company estimated the relative fair value of the warrants onissued totaled approximately $151,000 and of the beneficial conversion totaled approximately $169,000, which amounts are being amortized and expensed over the term of the Notes. For the three and nine months ended September 30, 2019, the amortization expense was approximately $88,000 and $176,000, respectively.

The Company determined that the conversion feature of the Notes would not be an embedded feature to be bifurcated and accounted for as a derivative in accordance with ASC 818-15Derivatives and Hedging.

As of September 30, 2019, convertible promissory notes consisted of the following:

The discounts of $176,000, as of September 30, 2019, will be amortized and expensed over the remaining contractual life of the convertible promissory notes. The amortization expense will be approximately $98,000 and $78,000 for the remaining three months of 2019 and for the year ending December 31, 2020, respectively.

Note 3 – Stockholders’ Deficit

Issuance of Series A Preferred Stock

In January 2019, the Company issued and sold an aggregate of 50,000 shares of Series A Preferred Stock for an aggregate purchase price of $69,000, or $1.38 per share.

Issuance of Stock Options

The Company entered into three separate consulting agreements with provisions for the issuance of options under the Company’s 2019 Stock Options Plan to purchase 685,000, 250,000 and 15,000 shares of the Company’s common stock. The Options will have a life of three years from the vesting date and an exercise price of grant using the Black-Scholes option-pricing model$0.001 per share with the following weighted-average assumptions:vesting terms:

Option to purchase 685,000 shares

Option to purchase 250,000

Option to purchase 15,000 shares

The estimated relativeoptions to be granted to the consultants will be performance-based awards to be vested once the individuals are considered to be employees of the Company. Each of the consultants has the option to become a full-time employee when the Company has received a minimum of $5,000,000 in debt or equity financing for the Company’s operations (the “Financing”). This is the time that the Company would begin to operate and use the services of the three option holders. Until the Financing occurs, the Company will be in the predevelopment stage of its intended business model.

An option to purchase 385,000 shares of the Company’s common stock was granted and vested on April 1, 2019. For the three and nine months ended September 30, 2019, the compensation expense, classified as professional fees in the statement of operations, was $577,000, which was calculated using the Black-Scholes fair value option-pricing model with key input variables provided by management, as of the date of issuance: volatility of 324%, fair value of the warrants was de minimus at the datecommon stock $1.50, term of issuance using the Black-Scholes Option Pricing Model.

Note 6 – Related Party Transactionsoption 3 years, risk free rate of 2.29% and dividend rate of $0.

Related Parties

Related parties with whom the Company had transactions are:

Note 7 – Stockholders’ Equity (Deficit)

Shares Authorized

Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is Two Hundred Million (200,000,000) shares of which One Hundred Million (100,000,000) shares shall be Preferred Stock, par value $0.001 per share, and One Hundred Million (100,000,000) shares shall be Common Stock, par value $0.001 per share.

Common Stock

Warrants

Summary of the Company’s Warrants Activities

reporting period ended September 30, 2017:

As of the filing of this Report, our management has not yet determined our corporate structure and Recent Developmentsthe initial business in which we plan to engage, and we are still in the process of refining and finalizing the course of action needed to implement our proposed new business operations. As a result, management has not determined our actual short-term or long-term cash requirements, which management expects to be substantial.

We were incorporated pursuantwill require substantial financing to commence meaningful business operations and to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development plans, any commercialization efforts or other operations. We may not be able to secure financing on favorable terms, or at all, to meet our future capital needs. In addition, even if we are able to obtain sufficient funding to commence our business operations, we may need to pursue additional financing in the lawsfuture to make expenditures and/or investments to support the growth of the State of Nevadaour business and may require additional capital to pursue our business objectives and respond to new competitive pressures, pay extraordinary expenses or fund our growth, including through acquisitions. Additional funds, however, may not be available when we need them on March 20, 2002 under the name Integrated Brand Solutions Inc.,terms that are acceptable to us, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to commence our proposed business operations, to continue to grow and on February 6, 2006, we changedsupport our namebusiness and to Upstream Biosciences Inc. From 2006respond to December 2009, our company operated as a biotechnology company, and from 2010 until May 2013, our company had no operating business.business challenges could be significantly limited.

On May 24, 2013,Until we finalize our then majority stockholders sold their interests inplans and raise capital to execute our company (consisting of 10,778,081 sharesbusiness plan, our operations will be minimal, so our operating expenses will be similarly limited. Our pre-operational expenses have been and will continue to be funded by private placements of our common stock, representing approximately 90% of the issueddebt and outstanding votingequity securities ofand loans from our company) to RealSource Acquisition Group, LLC, a Utah limited liability company (“RSAG”), and Chesterfield Faring Ltd., a New York corporation in consideration of an aggregate of $175,000 in cash. RSAG is affiliated with The RealSource Group, a group of affiliated real estate brokerage and management companies based in Salt Lake City, Utah. On July 11, 2013, we changed our corporate name by merging with our newly formed, wholly owned subsidiary called RealSource Residential, Inc., a Nevada corporation, and we remained as the surviving corporation under the name “RealSource Residential, Inc.” The merger was effective on July 15, 2013 and was approved by the Financial Industry Regulatory Authority on August 5, 2013.

Our initial business strategy in 2013 was to build our company into a publicly held and traded real estate investment trust (a “REIT”) REIT by combining a portfolio of multi-family properties owned by RealSource Properties, LLC and its clients into one operating entity in a traditional UPREIT structure and leveraging the experience of our management team and The RealSource Group. Based on recommendations of our investment advisors we determined in 2016 that a more optimal capital raising and operational structure for such properties is to combine the target properties into a privately held portfolio and perhaps form a private REIT. Since we disposed of our assets during 2016 as described below, at present we have no meaningful assets or operations, and we are thus currently a “shell company.”

We may engage in efforts to identify and merge with or otherwise acquire an unaffiliated operating company or business of any kind, although we retain the ability to utilize our company as a public vehicle for real estate-related activities.

On December 9, 2013, we consummated the closing of a private placement offering (the “2013 Private Placement”) of 231 units (or “Units”) for $10,000 per Unit, for aggregate gross proceeds of $2,310,000. Each Unit consisted of: (i) a $10,000 face value 12% Series A Senior Unsecured Convertible Promissory Note (collectively, the “Notes”), and (ii) one detachable Common Stock Purchase Warrant (collectively, the “Warrants”), each to purchase 10,000 shares (the “Warrant Shares”) of our common stock. The Notes accrued interest at 12% per year and had a maturity date of December 9, 2015.

The Notes were convertible into shares of our common stock at $0.50 per share (subject to customary adjustments for stock splits and similar transactions), and would automatically convert into shares of our common stock at the then applicable conversion price in the event that the 90-day trading volume weighted average price per share of the common stock exceeds $1.50 per share at any time during the term of the Notes.

Each Warrant included within each Unit granted to each investor the right, for a period of five (5) years from the closing of the 2013 Private Placement to subscribe for 10,000 shares of our common stock (i.e. 50% warrant coverage) at an exercise price equal to $2.00 per share. The exercise price of the Warrants is subject to adjust on the same terms as provided for in the Notes. As of the date of this report, an aggregate of 2,310,000 shares of our common stock are available for issuance assuming full exercise of the Warrants.

In connection with the closing of the 2013 Private Placement, we entered into definitive subscription agreements (the “Subscription Agreements”) with twenty-nine (29) accredited investors (the “Holders”). The Subscription Agreements contained customary representations, warranties and covenants.

Proceeds from the 2013 Private Placement were used to (i) acquire, on December 10, 2013 a $2.85 million face value subordinated mortgage note secured by the Cambridge Apartments in Gulfport, Mississippi (“Cambridge”) for approximately $1,073,000 (the “B Note”) and (ii) fund (in the amount of approximately $465,000) certain costs associated with a refinancing of the senior mortgage indebtedness encumbering Cambridge (which refinancing occurred concurrently with our acquisition of the B Note). Immediately upon our acquisition of the B Note, we entered into a Right of First Refusal and Option Agreement with RS Cambridge Apartments, LLC (“RS Cambridge”), owners of Cambridge (the “Option Agreement”), pursuant to which we converted the B Note into a right of first refusal and option (the “Option”) in the amount of approximately $1,538,000 (the “Option Payment”). The Option afforded us the right to acquire Cambridge within five (5) years after the closing of the 2013 Private Placement at the fair value of Cambridge as we negotiated with RS Cambridge. Under the Option, if RS Cambridge received an offer to purchase Cambridge during the option period, we would have had a right of first refusal to purchase Cambridge on the same terms as the offer. Had we elected not to match the offer, the Option Payment was required to be repaid upon the sale of Cambridge to the other buyer. In February 2016, RS Cambridge sold Cambridge. We elected not to exercise our right of first refusal and the cost of the Option plus accrued interest was paid to us.

On June 10, 2014, we invested $375,000 to acquire an approximate 19% interest in RS Bakken One, LLC, a newly-formed affiliated entity, which in turn acquired two properties in North Dakota, one near Williston and one in Watford City and had a combined acquisition price of $5,700,000. Concurrently, we purchased an option for $25,000 that allows us to acquire 100% of these two properties after one year for a purchase price of not less than $7,000,000, or not more than $8,000,000. Under terms of the Amendment discussed below, effective June 1, 2016 the ownership in RS Bakken One was transferred to RSRT Holdings, LLC, which is owned by the Holders.

On October 24, 2014, we invested $100,000 to become an approximate 3.876% member in a newly formed entity called RS Heron Walk Apartments, LLC (“RSHWA”), an affiliated entity which acquired the Heron Walk Apartments in Jacksonville, Florida (“Heron Walk”). Our investment in the Heron Walk apartments, through our ownership in RSHWA, carries an 8% cumulative preferred return under the terms of the RSHWA operating agreement, with projected higher expected average cash-on-cash and internal rates of return. Under terms of the Amendment discussed above, effective April 1, 2016 the ownership in RSHWA was transferred to RSRT Holdings, LLC, which is owned by the Holders as described below.

On January 15, 2016, each of the Holders entered into a separate Amendment to Note and Warrant (the “Amendment”) to modify certain terms and provisions of the Notes and Warrants, such Amendment being effective as of December 9, 2015, the original maturity date of the Notes. The Amendment was entered into given the maturity of the Notes to memorialize the agreements of the Company and each Holder with respect to the Notes and the Warrants held by such Holder.

Pursuant to the Amendment, the term of the Notes was extended by six months to June 9, 2016 (the “Maturity Date”). The Amendment also provided for the mandatory conversion of a portion of the interest accrued under the Note as of December 9, 2015 into shares of our common stock (the “Mandatory Conversion”). The number of shares of common stock to be issued upon the Mandatory Conversion to each Holder equaled each Holder’s pro rata portion of interest owed on such Holder’s Note converted at $0.10 per share. A total of 3,744,000 shares of our common stock were issued in February 2016.

On December 31, 2015, we held an asset consisting of a deposit (the “Cambridge Deposit”) on the Cambridge property. Cambridge was owned by RS Cambridge, an entity controlled and partially owned by the Chairman, President and CEO of our company. The Amendment further provided that in the event that, prior to the Maturity Date, RS Cambridge sold Cambridge, thus generating a return of the Cambridge Deposit to the Company, we would, within thirty (30) days of such sale, prepay, without penalty, a portion of each Note equal to each Holder’s pro rata portion of the Cambridge Deposit. Cambridge was sold to a third party in February 2016 and the Cambridge Deposit plus accrued interest was paid to us. With the proceeds, we then redeemed the Notes plus a portion of the accrued interest as required under the Amendment.

Also pursuant to the Amendment, we agreed with each Holder that, by no later than February 15, 2016, we would establish a new limited liability company (“Newco 1”) and assign to Newco 1: (a) a $100,000 equity investment (the “Heron Equity”) previously made by us in RSHWA and (b) a $400,000 equity investment (“Bakken Equity”) previously made by us in the two properties in North Dakota described above. This investment consisted of a $375,000 investment in RS Bakken One Investors, LLC and a $25,000 option to acquire the two properties within a specific range of a purchase prices. The Amendment provides that each Holder will be given a pro rata portion (based on the aggregate principal of the Notes held by such Holder) of the equity in Newco 1, entitling each Holder to a pro rata portion of all cash flows, profits and losses generated by Newco 1’s holdings of the Bakken Equity and the Heron Equity. Each Holder similarly agreed that such Holder shall have no voting, management, consent or approval rights whatsoever over the business or operations of Newco 1 (save as required by law), and all such rights are vested in us or our affiliates as the sole managing member of Newco 1. Each Holder agreed to enter into a customary limited liability company operating agreement relating to Newco1 to memorialize the foregoing. We formed Newco 1 on February 5, 2016 with the name RSRT Holdings, LLC and each Holder signed the operating agreement.

Finally, the Amendment provides that the Warrants held by such Holder were amended to (i) reduce the exercise price of the Warrants from $2.00 to $0.50 per Warrant Share and (ii) to extend the expiration time of the Warrants from December 9, 2018 to December 9, 2020.

majority shareholder.

Critical Accounting Policies

Our financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (US GAAP). Our fiscal year ends December 31.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses for the reporting periods. On an ongoing basis, we evaluate such estimates and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ (perhaps significantly) from these estimates under different assumptions or conditions.

While all the accounting policies impact the financial statements, certain policies may be viewed to be critical. Our management believessignificant accounting policies are as follows:

Debt Discounts

The Company accounts for debt discounts originating in connection with conversion features that remain embedded in the related notes in accordance with ASC 470-20,Debt with Conversion and Other Options. These costs are classified on the consolidated balance sheet as a direct deduction from the debt liability. The Company amortizes these costs over the term of its debt agreements as interest expense-debt discount in the consolidated statement of operations.

Warrants

In connection with financing arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date.

Stock-Based Compensation

We account for our stock-based compensation under ASC 718 "Compensation – Stock Compensation" using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting policiesfor transactions in which involve more significant judgmentsan entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments.

We use the fair value method for equity instruments granted to non-employees and estimates used inuse the preparationBlack-Scholes model for measuring the fair value of our consolidated financial statement include derivative liability, stock-basedoptions. The stock based fair value compensation capitalizationis determined as of coststhe date of the grant (measurement date) and useful lives of assets:

is recognized over the vesting periods.

Results of Operations

For the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016:

Revenues

We had no revenues for the three and nine months ended September 30, 2017 compared to $3,666 in revenue for that same period in 2016. The 2016 revenue from equity investments in real estate resulted from investments transferred to the Holders during the first quarter of 2016.2019 and 2018.

Expenses

Operating costsexpenses for the three and nine months ended September 30, 20172019 were $14,442,$130,000 and $1,040,000, respectively, compared to $44,882$41,000 and $53,000 for the three and nine months ended September 30, 2016. The decrease results from reduced operating activities as a shell company.2018, respectively. The expenses in 20172019 primarily includeincluded audit, filing, legal and transfer agent fees.

Other incomefees and expense

Otherconsulting fees paid to outside third parties, including a one time expense of $577,000 for the nine months ended September 30, 2016 of $4,740 is the cost of interest expense on the Notes of $32,210 offset by interest income on the Deposit of $27,470. Other income for the nine months ended September 30, 2017 consisted of interest on our cash deposits.stock options issued to a consultant.

Net loss

Net loss for the nine-month periodnine months ended September 30, 20172019 and 2018 was $14,420 compared to $45,956 for the same period in 2016. The reduction in net loss is a combination$1,216,000 and $53,000, respectively, consisting primarily of lower revenuefiling fees, transfer agent costs, and higher expenses in the first quarter of 2017 as explained above.

Plan of Operationslegal and Cash Requirements for the Next 12 Months

Anticipated Cash Requirements

Over the next 12 months, we estimate our minimum operating cash requirements to be as follows:

As our operations are currently minimal, our operating expenses are similarly limited.

At September 30, 2017, we had working capital of $14,545. For the next 12 months, we expect our minimum cash requirements to be approximately $22,500. Based on cash available, we will need to raise approximately $8,000 to meet our 12 months of operating expenses and we expect to secure such cash from our officers, directors or affiliates.accounting expenses.

Liquidity and Capital Resources

Our financial position atas of September 30, 20172019 and December 31, 2016 and the changes for the three months then ended are2018 were as follows:

Working Capital

As ofAt September 30, 2017,2019, we had $15,120cash of approximately $97,000 and prepaid expenses of approximately $2,000. Working capital deficit increased by approximately $252,000 from December 31, 2018 to September 30, 2019. The change in our working capital deficit was primarily due to an increase in cash and cash equivalents. Working capital decreasedequivalents of $97,000 and an increase in accounts payable of $145,000 and increase in convertible promissory notes, net of $176,000. The cash balance was due primarily to the issuance of our series A convertible preferred stock for total proceeds of approximately $69,000 and the sale of convertible promissory notes for net proceeds of approximately $320,000. The increase in cash was offset by $14,420 from December 31, 2016 to September 30, 2017, becauseour cash used in operations of the nine-month period operating expenses.

approximately $304,000 and an increase in our accounts payable and accrued expense of approximately $145,000.

Cash Flows

Our net cash used in operating activities was $13,520$304,000 and $7,000 for nine-monthnine month period ended September 30, 20172019 and 2018, respectively, resulting from operating expenses.

The increase in net cash from financing activity of $389,000 was due to the sale and issuance of our convertible promissory notes in the principal amount of $320,000 and our series A convertible preferred stock for gross proceeds of $69,000.

Plan of Operations and Cash Requirements

Following the Change of Control Transactions, as described above, our board of directors determined to establish our company in the rapidly-growing legal cannabis industry. As of the filing of this Report, our new management has not yet determined our corporate structure and the initial business in which we plan to engage, and we are still in the process of refining and finalizing the course of action needed to implement our proposed new business operations. As a result, management has not determined our actual short-term or long-term cash requirements, which management expects to be substantial.

We will require substantial financing to commence meaningful business operations and to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development plans, any commercialization efforts or other operations. We may not be able to secure financing on favorable terms, or at all, to meet our future capital needs. In addition, even if we are able to obtain sufficient funding to commence our business operations, we may need to pursue additional financing in the future to make expenditures and/or investments to support the growth of our business and may require additional capital to pursue our business objectives and respond to new competitive pressures, pay extraordinary expenses or fund our growth, including through acquisitions. Additional funds, however, may not be available when we need them on terms that are acceptable to us, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to commence our proposed business operations, to continue to grow and support our business and to respond to business challenges could be significantly limited.

Until we finalize our plans and raise capital to execute our business plan, our operations will be minimal, so our operating expenses. The nine monthsexpenses will be similarly limited. Our pre-operational expenses have been and will continue to be funded by private placements of 2016 included the receipt of interest receivable on the Depositour debt and equity securities or by loans from RS Cambridge Apartments, LLC. The cash provided from investing activities was related to the repayment of this Deposit. The cash used in financing activities reflects the cash payment towards the Notes. The balance of the Notes was paid through the issuance of common stock.our majority shareholder.

Off-Balance Sheet Arrangements

As of September 30, 2017,2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company and therefore are not required to provide the information for this item for Form 10-Q.item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Report, our Chief Executive Officer and Chief Financial Officer (our Certifying Officers)“Certifying Officers”), conducted evaluations of our disclosure controls and procedures. As defined under Sections 13a – 15(e) and 15d – 15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosures.

Based on their evaluation, the Certifying Officers concluded that, as of September 30, 2017,2019, our disclosure controls and procedures were not effective.

The material weakness which relaterelated to internal control over financial reporting that was identified at September 30, 20172019 was that we did not have sufficient personnel staffing in our accounting and financial reporting department. As a result, we were not able to achieve adequate segregation of duties and were not able to provide for adequate review of the financial statements.

This control deficiency could result in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis. However, our management believes that the material weakness identified does not result in the restatement of any previously reported financial statements or any other related financial disclosure, and management does not believe that the material weakness had any effect on the accuracy of our financial statements included as part of this Quarterly Report.

We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking action and implementing additional enhancements or improvements, as necessary and as funds allow.

Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 20172019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II- OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Not applicableWe are a small reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to smaller reporting companies.provide the information under this item.

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

None.On October 3, 2019 and November 1, 2019, we sold OID Convertible Promissory Notes in the principal amounts of $110,000 and $44,000, respectively, for purchase prices of $100,000 and 40,000, respectively,  Such promissory notes bear interest at the rate of 10% per annum only if not paid at maturity on February 28, 2020, and convert into shares of our common stock, par value $0.001 per share, at the option of the holders at a conversion price of $1.00 per share, subject to adjustment for issuances of common stock below the conversion price and for stock splits, stock combinations and the like.  In connection with the issuance of such promissory notes, we issued to the purchasers on October 3, 2019 and November 1, 2019 for no additional consideration warrants to purchase 55,000 and 22,000 shares of our common stock for a purchase price of $1.50 per share, subject to adjustment for stock splits, stock combinations and the like, that expire on February 28, 2022.  If such warrants are exercised for cash, the holders will receive a new three-year warrant to purchase the number of shares of common stock purchased upon such exercise at a purchase price of $1.50 per share, subject to adjustment for stock splits, stock combinations and the like.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

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 hereunto duly authorized.