MacKenzie Realty Capital, Inc. 10-K

Item 9A. CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the 1934 Act) as of the end of the period covered by this report as required by paragraph (b) of Rule 13a-15 or 15d-15 of the 1934 Act. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date and provided reasonable assurance that information required to be disclosed by us in the reports we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rules 13a-15(f) and 15d-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that: 1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and the dispositions of our assets; 47 Table of Contents 2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors; and 3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management’s assessment of the effectiveness of our internal control system as of June 30, 2023, was based on the framework for effective internal control over financial reporting described in Internal Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on management’s assessment, as of June 30, 2023, our system of internal control over financial reporting was effective at the reasonable assurance level. This annual report does not include an attestation report of our independent registered public accounting firm regarding control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to Section 989G of the Dodd-Frank Wall Street and Consumer Protection Act, which exempts non-accelerated filers from the auditor attestation requirement of section 404 (b) of the Sarbanes-Oxley Act. Changes in Internal Control over Financial Reporting There have been no changes to our internal control over financial reporting (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that occurred during the fourth quarter of the Company’s fiscal year ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. OTHER INFORMATION None. Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 48 Table of Contents PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE Board of Directors and Executive Officers Our business and affairs are managed under the direction of our Board of Directors. Accordingly, our Board provides broad supervision over our affairs, including supervision of the duties performed by the Advisers and MacKenzie. Certain employees of MacKenzie are responsible for our day-to-day operations. The names, ages and addresses of our Directors and specified executive officers, together with their principal occupations and other affiliations during the past five years, are set forth below. Each Director and officer holds office for a one-year term to which he or she is elected and until his successor is duly elected and qualifies, or until he resigns or is removed in the manner provided by law. While the Company’s securities currently are not listed for trading on any exchange, our Board consists of a majority of “Independent Directors” as defined under the New York Stock Exchange independence standards. The address for all officers and Directors is 89 Davis Road, Suite 100, Orinda CA 94563. None of our Directors or officers serves as a director for any other company which (i) has a class of securities registered under section 12 of the 1934 Act, (ii) is subject to section 15(d) of the 1934 Act, or (iii) is registered as an investment company under the 1940 Act, and we only have one investment portfolio. There are no understandings or arrangements between us and any officer or director pursuant to which they attained their position, there are no family relationships between any officers or directors other than as set forth below. Board of Directors Name and Age Position(s) Held with Us Term of Office and Length of Time Served Principal Occupation(s) During Past 5 Years Charles “Chip” Patterson†, 52 Chairman of the Board Since 2019 Mr. Chip Patterson, an MRC Executive Officer (as discussed further below) since May of 2012, is managing director, general counsel, and senior vice president of the Advisers and the Manager, and a director of their general partner, and a beneficial owner of all three companies, all since 2005. Mr. Patterson graduated magna cum laude from the University of Michigan Law School with a J. D. degree and with high distinction and Phi Beta Kappa from the University of California at Berkeley with a B. A. degree in Political Science. Prior to joining the Manager in July 2003, he was a securities and corporate finance attorney with the national law firm of Davis Wright Tremaine LLP. Prior to law school, Chip Patterson taught physics, chemistry, and math at the high school level for three years. He also has prior experience in sales, retail, and banking, and is a licensed California Real Estate Broker. Tim Dozois, 61 Director Since 2012 Mr. Dozois was Vice President, Secretary and Corporate Counsel for Pendrell Corporation, a NASDAQ listed company specializing in intellectual property solutions, from June of 2010 until early 2018. He is now sole owner of Conseiller LLC. From January 1996 until March of 2010, Mr. Dozois was an equity partner of Davis Wright Tremaine LLP, a Seattle-based national law firm, where he specialized in private securities work and structured financings, with an emphasis on the acquisition, financing and management of real property assets. He has over 30 years of experience supporting leading corporations in securities law compliance, mergers, acquisitions, and real estate acquisition, financing, and management. Mr. Dozois received his B. S. in Financial Management from Oregon State University and his J. D. from the University of Oregon School of Law, where he was Order of the Coif. Tom Frame, 81 Director Since 2012 Mr. Frame was a co-founder of TransCentury Property Management and solely founded Paradigm Investment Corporation. TransCentury began in May of 1973 and has syndicated and managed over 10,000 residential units. During the last 35 years, Mr. Frame has been a principal in the acquisition, financing, restoration, and sale of over $500,000,000 in residential and commercial real estate. Paradigm was founded in June 1986 to sponsor and manage private, closed end “mutual funds”. The last of the funds successfully liquidated in December of 2000. Mr. Frame received a BA degree from the University of Kansas in Mathematics in June 1964, a Juris Doctor degree from the San Francisco Law School in June 1975, and an MBA with honors from Pepperdine University in April 1986. Mr. Frame is currently managing his own investments which include residential units, commercial property, and a portfolio of securities. †As a principal of both MacKenzie and the Advisers, Mr. Patterson is not an Independent Director. 49 Table of Contents Executive Officers Our current officers are listed in the chart below. The address for all officers is 89 Davis Road, Suite 100, Orinda, CA 94563. Name and Age Position(s) Held with Us Term of Office and Length of Time Served Principal Occupation(s) During Past 5 Years Robert Dixon, 52 Chief Executive Officer and President Since 2012 Robert E. Dixon has been the senior vice president and chief investment officer of MacKenzie and the Advisers since 2005, and a director of their general partner, and a beneficial owner of all three companies since 2005. Robert Dixon served as an officer and director of Sutter Holding Company, Inc. from March 2002 until 2005. Mr. Dixon has been president of Sutter Capital Management since its founding. Mr. Dixon received his Master of Business Administration degree from Cornell University in 1998 and has held the Chartered Financial Analyst designation since 1996. Mr. Dixon received his bachelor’s degree in economics from the University of California at Los Angeles in 1992. Angche Sherpa, 42 Chief Financial Officer Since 2021 Mr. Sherpa was appointed Chief Financial Officer of the Company in July 2021 after the retirement of his predecessor Mr. Paul Koslosky. He has been employed by MacKenzie since 2012. Prior to being appointed Chief Financial Officer, he was Director of Accounting and Financial Reporting of MacKenzie. Mr. Sherpa graduated from San Francisco State University in 2006 with a Bachelor of Science degree in Business Administration (Accounting) with honors. He obtained his CPA license from the California Board of Accountancy in January 2011. Prior to joining MacKenzie, he worked as staff auditor from 2007 through 2008 and senior auditor from 2009 through 2012 at a national public accounting firm, Moss Adams LLP. During his career at Moss Adams, he led various audit teams involved in auditing financial services companies including private equity, asset management and real estate investment companies. Glen Fuller, 50 Chief Operating Officer Since 2012 Mr. Fuller has been senior vice president and secretary of MacKenzie and the Advisers since 2000, and a director of their general partner, and a beneficial owner of all three companies since 2000. Prior to becoming senior vice president of MacKenzie, he was with MacKenzie for two years as a portfolio manager and research analyst. Prior to joining MacKenzie, Mr. Fuller spent two years running the over the counter trading desk for North Coast Securities Corp. (previously Morgan Fuller Capital Group) with responsibility for both the proprietary and retail trading desks. Mr. Fuller was also the registered options principal and registered municipal bond principal for North Coast Securities Corp., a registered broker-dealer. Mr. Fuller previously held his NASD Series 7, general securities registration. Mr. Fuller has a Bachelor of Arts in Management. Charles “Chip” Patterson, 52 General Counsel and Secretary Since 2012 Mr. Patterson is a managing director and general counsel of the Advisers and our Manager, where he has been employed since 2003. He is a director of their general partner and a beneficial owner of all three companies. Chip Patterson graduated magna cum laude from the University of Michigan Law School with a J. D. degree and with high distinction and Phi Beta Kappa from the University of California at Berkeley with a B. A. degree in Political Science. Prior to joining the Manager in July 2003, he was a securities and corporate finance attorney with the national law firm of Davis Wright Tremaine LLP. Prior to law school, Chip Patterson taught physics, chemistry, and math at the high school level for three years. He also has prior experience in sales, retail, and banking, and is a licensed California Real Estate Broker. Jeri Bluth, 48 Chief Compliance Officer Since 2012 Ms. Bluth has been the Chief Compliance Officer for MacKenzie and the Advisers since 2009. She owns a beneficial interest in each MacKenzie and the Advisers. Mrs. Bluth oversees compliance for all the funds advised by the Advisers, and she oversees our compliance with our Code of Ethics, Bylaws, Charter, and applicable rules and regulations. Mrs. Bluth began her career with MacKenzie Patterson Fuller, Inc. in July of 1996 in the Investor Services Department. During Mrs. Bluth’s career with MacKenzie, she graduated from St. Mary’s College of California in June 2001, with a Bachelor of Arts degree in Business Management. 50 Table of Contents Christine Simpson, 58 Chief Portfolio Manager Since 2012 Mrs. Simpson has been employed by MacKenzie and its affiliates since 1990, and has been the Advisers’ Senior Vice President of Research and Trading since 2005. Mrs. Simpson is responsible for handling the day-to-day operations of The Advisers’ research department. During Mrs. Simpson’s career with MacKenzie, she graduated: with a Bachelor of Arts degree in Business Management from St. Mary’s College of California in October 2004 (with honors), with a Master of Science degree in Financial Analysis and Investment Management in September 2006, and a Master’s in Business Administration in June 2008. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in beneficial ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file. Based solely upon the Company’s review of copies of such reports furnished to it through the date hereof, or written representations that no other reports were required to be filed, the Company believes that during its fiscal year ended June 30, 2023 all officers, directors and ten percent shareholders complied with the filing requirements applicable to them, except for the omission to have filed a Form 3 Initial statement of Beneficial Ownership of Securities for Angche Sherpa, which will be corrected by filing a Form 3 subsequent to fiscal year end. Code of Ethics We have adopted a Code of Ethics which applies to, among others, our senior officers, including our Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged with approving any waivers under our Code of Ethics. A copy of the Code, as amended from time to time, has been posted to the “Corporate Documents” section of our web site at http://www.mackenziecapital.com/sec-filings. Audit Committee The Board of Directors has established an Audit Committee in accordance with 1934 Act §3(a)(58)(A). The Audit Committee operates under a Charter approved by our Board of Directors, which contains the responsibilities of the Audit Committee. A copy of the Audit Committee Charter, as amended from time to time, has been posted to the “Corporate Documents” section of our web site at http://www.mackenziecapital.com/sec-filings. The Audit Committee’s responsibilities include establishing guidelines and making recommendations to our Board of Directors regarding the valuation of our loans and investments, selecting our independent registered public accounting firm, reviewing with such independent registered public accounting firm the planning, scope and results of their audit of our consolidated financial statements, pre‑approving the fees for services performed, reviewing with the independent registered public accounting firm the adequacy of internal control systems, reviewing our annual consolidated financial statements and periodic filings and receiving our audit reports and consolidated financial statements. The Audit Committee is currently composed of Messrs. Dozois and Frame, both of whom are Independent Directors as described under Item 13 below. Mr. Dozois serves as chairman of the Audit Committee. We have determined that Mr. Dozois is a “audit committee financial expert” as defined by SEC rules. Nominating and Corporate Governance Committee The nominating and corporate governance committee operates under a Charter approved by our Board of Directors. A copy of the Nominating and Corporate Governance Committee Charter, as amended from time to time, has been posted to the “Corporate Documents” section of our web site at http://www.mackenziecapital.com/sec-filings.The members of the nominating and corporate governance committee are Messrs. Dozois and Frame, both of whom are Independent Directors. Mr. Frame serves as chairman of the nominating and corporate governance committee. The nominating and corporate governance committee is responsible for selecting, researching and nominating directors for election by our stockholders, selecting nominees to fill vacancies on the Board of Directors or a committee thereof, developing and recommending to the Board of Directors a set of corporate governance principles and overseeing the evaluation of the Board of Directors and our management. The nominating and corporate governance committee currently does not consider nominees recommended by our stockholders. 51 Table of Contents The nominating and corporate governance committee seeks candidates who possess the background, skills and expertise to make a significant contribution to the Board of Directors, our operations, and our stockholders. In considering possible candidates for election as a director, the nominating committee takes into account, in addition to such other factors as it deems relevant, the desirability of selecting directors who: • are of high character and integrity; • are accomplished in their respective fields, with superior credentials and recognition; • have relevant expertise and experience upon which to be able to offer advice and guidance to management; • have sufficient time available to devote to our affairs; • are able to work with the other members of the Board of Directors and contribute to our success; • can represent the long‑term interests of our stockholders as a whole; and • are selected such that the Board of Directors represents a range of backgrounds and experience. The nominating and corporate governance committee has not adopted a formal policy with regard to the consideration of diversity in identifying director nominees. In determining whether to recommend a director nominee, the nominating and corporate governance committee considers and discusses diversity, among other factors, with a view toward the needs of the Board of Directors as a whole. The nominating and corporate governance committee generally conceptualizes diversity expansively to include, without limitation, concepts such as race, gender, national origin, differences of viewpoint, professional experience, education, skill and other qualities that contribute to the Board of Directors, when identifying and recommending director nominees. The nominating and corporate governance committee believes that the inclusion of diversity as one of many factors considered in selecting director nominees is consistent with the nominating and corporate governance committee’s goal of creating a Board of Directors that best serves our needs and the interests of our stockholders. Compensation Committee We do not have a compensation committee because our executive officers do not receive any direct compensation from us. Item 11. EXECUTIVE COMPENSATION We do not have a compensation committee because our executive officers do not receive any direct compensation from us. Compensation of Directors Our Independent Directors received an annual retainer of $28,000 for fiscal years up to June 30, 2021; the annual retainer was increased to $48,000 per year beginning July 1, 2021, because the directors approved of our discontinuing directors’ liability insurance due to the exorbitant cost. They also receive $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting in person and $500 for each telephonic meeting, and also receive $500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each committee meeting. In addition, the chairman of the Audit Committee receives an annual fee of $1,000 and each chairman of any other committee receives an annual fee of $1,000 for their additional services, if any, in these capacities. No compensation is expected to be paid to directors who are non-independent directors. The following table details the compensation accrued to Directors fees during Fiscal 2023. We maintain no pension, equity participation, or retirement plans for our Directors. Name & Position Fees Earned or Paid in Cash (1) All Other Compensation Total Chip Patterson (Chairman of the Board of Directors) $ - $ - $ - Tim Dozois (Independent Director) 53,000 - 53,000 Tom Frame (Independent Director) 53,000 - 53,000 Total Fees $ 106,000 $ - $ 106,000 (1) Consists only of directors’ fees and does not include reimbursed expenses. 52 Table of Contents Compensation of Executive Officers None of our officers receives direct compensation from us. We have not compensated our executive officers in any of the last two fiscal years. We do not provide any bonus, stock options, stock appreciation rights, non-equity incentive plans, non-qualified deferred compensation or pension benefits to our executive officers. Further, we have no agreements with any officer pertaining to change in control payments. All of our officers and staff are employed by MacKenzie or the Advisers, which pay all of their cash compensation. Compensation Committee Interlocks and Insider Participation We do not have a separate compensation committee utilized to determine the appropriate compensation payable to our executive officers and Directors. The Audit Committee, however, is responsible for, among other things, annually reviewing and approving the compensation policies for our Directors. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS As of September 28, 2023, to our knowledge, there were no persons that beneficially owned more than five percent of our voting securities. The following table shows the amount of our common and preferred stocks beneficially owned and based on a total of 13,305,608.63 shares of our common stock and 727,506.11 shares of our preferred stock outstanding on September 28, 2023, as of that date, by (1) each of our directors and nominees for director, (2) our executive officers and (3) all directors and executive officers as a group. To our knowledge, no other person owns more than 5% of our common stock. The number of shares beneficially owned by each entity, person, director or executive officer is determined under the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has the sole or shared voting power or investment power and also any shares that the individual has the right to acquire within 60 days of September 28, 2023, through the exercise of any instrument. Unless otherwise indicated, each person has the sole investment and voting power, or shares such powers with his spouse, with respect to the shares set forth in the table. Unless known otherwise by us, the beneficial ownership information is based on each beneficial owner’s most recent Form 3, Form 4, Form 5, Schedule 13D or Schedule 13G, as applicable. With respect to the Executive Officers listed below, they are limited partners of MPF Successors, LP, as well as officers of its general partner, which owns 53,862.36 shares in us. In addition, Mr. Sherpa directly owns 1,549.03 shares of common stock and Mr. Dixon directly owns 4,134.45 shares of Series A preferred stock. Mr. C. E. Patterson, the father of Chip Patterson and his spouse are the sole beneficial owners of 10,753 shares of common stock owned in a personal holdings limited partnership, and the executive officers below are also in control of its general partner. Thus, they are all deemed to have voting and dispositive control over such shares and the number of shares owned below is the number of shares owned by MPF Successors, LP and the personal holding partnership. The address of each beneficial owner is 89 Davis Road, Orinda, CA 94563. Name and address of Beneficial Owner Nature of Beneficial Ownership Number of Common Shares Beneficially Owned Percent of Class Number of Preferred Shares Owned Percent of Class Independent Directors: Tim Dozois Directly held 5,086.08 * 4,774.61 * Tom Frame Directly held 5,778.98 * 469.63 * Interested Director: Charles “Chip” Patterson Indirectly held 64,615.36 * Executive Officers Robert Dixon Directly and Indirectly held 64,615.36 * 4,134.45 * Glen Fuller Indirectly held 64,615.36 * Chip Patterson Indirectly held 64,615.36 * Angche Sherpa 66,164.39 * Directors and Officers as a group (6 person) Indirectly held 77,029.45 * * Represents less than 1% of the number of shares outstanding. 53 Table of Contents Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE We are managed by MacKenzie, which is owned by three sub-partnerships that are owned in varying percentages by MacKenzie and the Advisers employees and the extended family of Messrs. C. E. Patterson, Chip Patterson, Glen Fuller and Robert Dixon. The general partner of MacKenzie is MCM-GP, Inc., a California corporation owned by the same individuals. The majority of the beneficial interests of MacKenzie are owned by C. E. Patterson, Berniece A. Patterson, Robert Dixon, Glen Fuller, and Chip Patterson, in addition to other family members. All of the ownership interests are owned by either executive officers of the Company or related persons, and thus all of the amounts paid by the Company to MacKenzie benefit such related persons. Certain non-family employees of MacKenzie own non-controlling interests in MacKenzie that represent in the aggregate less than 10% of the equity in MacKenzie. MacKenzie manages all of our affairs except for providing investment advice. We are advised by the Investment Adviser, whose investment team members have an average of nearly 20 years of experience investing in real estate-related securities. The Investment Adviser is registered with the SEC and is owned by the same beneficial owners and in the same proportions as MacKenzie. The Investment Adviser is led by its investment team: Glen W. Fuller, who serves as Chief Operating Officer and Managing Director of the General Partner of MacKenzie and the Investment Adviser; Chip Patterson, who serves as Managing Director and General Counsel, and Director of the General Partner of MacKenzie and the Investment Adviser; Robert E. Dixon, who serves as Chief Investment Officer and Managing Director of the General Partner of MacKenzie and the Investment Adviser; and Christine E. Simpson, who serves as Chief Portfolio Manager and Senior Vice President of Research for the General Partner of MacKenzie and the Investment Adviser. We also are advised by the Real Estate Adviser, about 93% of which is owned by the executive officers and related persons of the Company and the remainder of which is owned by certain employees of the Real Estate Adviser or their affiliates. Thus, 93% of the ownership interests are owned by either executive officers of the Company or related persons, and thus 93% of the amounts paid by the Company to MacKenzie benefit such related persons. We have entered into three affiliated contracts — the Advisory Management Agreement, under which the Real Estate Adviser serves as our real estate investment adviser, the Amended and Restated Investment Advisory Agreement, under which the Investment Adviser serves as our securities portfolio adviser and the Administration Agreement, under which MacKenzie furnishes us with certain non-investment management services and administrative services necessary to conduct our day-to-day operations. Each of these agreements is terminable by either party upon proper notice. In Fiscal 2023 and 2022, Management fees accrued to the Real Estate Adviser under the Advisory Management Agreement were $3,004,725 and $2,725,588, respectively. Administration fees accrued and payable under the Administration Agreement for Fiscal 2023 and 2022, were $726,000 and $609,600, respectively. Administration Agreement fees occur on an ongoing basis as expenses are incurred on our behalf by MacKenzie. However, if MacKenzie withdraws as our administrator, it is liable for any expenses we incur as a result of such withdrawal. For additional information concerning the terms of these agreements and related fees paid, see Note 8 – Related Party Transactions in the consolidated financial statements included in this report. Related Party Transaction Approval In order to ensure that we did not engage in any transactions with any persons affiliated with us that are prohibited by the 1940 Act, we implemented certain written policies and procedures whereby our executive officers screen each of our transactions for any possible affiliations between the issuer in which we invest, us, companies controlled by us and our executive officers and directors. We do not enter into any agreements unless and until we are satisfied that doing so does not violate our Charter or raise concerns under the 1940 Act or, if such concerns existed, we took appropriate actions to seek board review and exemptive or other relief for such transaction. Our Board of Directors reviews these on an annual basis. In addition, our Board of Directors approves all our advisory and administrative agreements. We have also adopted a Code of Ethics which applies to, among others, our senior officers, including our Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged with approving any waivers under our Code of Ethics. 54 Table of Contents Director Independence We have determined that both Messrs. Dozois and Frame are Independent Directors. In addition, although our shares are not listed for trading on any national securities exchange, a majority of our directors, and all of the members of the Audit Committee and the Conflicts Committee, are “independent” as defined by the New York Stock Exchange. The New York Stock Exchange standards provide that to qualify as an independent director, in addition to satisfying certain bright-line criteria, our Board of Directors must affirmatively determine that a director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us). Our Board of Directors has affirmatively determined that Messrs. Dozois and Frame each satisfies the New York Stock Exchange independence standards. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The following table presents fees incurred for professional services rendered by Moss Adams LLP, our independent registered public accounting firm, with Public Company Accounting Oversight Board ID Number 659, for Fiscal 2023 and Fiscal 2022: Fee Category Fiscal 2023 Fiscal 2022 Audit Fees $ 268,608 $ 214,400 Audit-Related Fees - - Tax Fees - - All Other Fees 8,000 - Total Fees $ 276,608 $ 214,400 Audit Fees were for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Moss Adams in connection with statutory and regulatory filings or engagements and include quarterly reviews and security counts. Audit-Related Fees were for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees”. These services include accounting consultations in connection with acquisitions, consultations concerning financial accounting and reporting standards. Tax Fees were for professional services for federal, state and international tax compliance, tax advice and tax planning and include preparation of federal and state income tax returns, and other tax research, consultation, correspondence and advice. All Other Fees are for services other than the services reported above. These fees were incurred for their review of our registration statements and Regulation A offering statement. The Audit Committee has concluded the provision of the non-audit services listed above is compatible with maintaining the independence of Moss Adams LLP. Moss Adams LLP did not bill the Advisers or MacKenzie, for any non-audit services in Fiscal 2023 and 2022. Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. 55 Table of Contents PART IV Item 15. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES The following documents are filed as part of this Annual Report on Form 10-K: 1. The Consolidated Financial Statements listed in the Index to Consolidated Financial Statements on Page F-1 . 2. Consolidated Financial Statement Schedule: Schedule III- Real Estate Operating Properties and Accumulated Depreciation is set forth beginning on page S-1 hereof. 3. The Exhibits listed in the Exhibit Index below. Exhibit No. Description of Document 2.1 Contribution Agreement by and between MacKenzie Realty Operating Partnership, LP and the Addison Group, dated June 8, 2020 (incorporated by reference to the Registrant’s Form 8-K (File No. 814-00961), filed on June 9, 2020) 2.2 Membership Interest Purchase Agreement with The Wiseman Company, LLC, dated April 12, 2022 (incorporated by reference to the Registrant’s Form 8-K (File No. 000-55006), filed on April 18, 2022) 3.1(i) Articles of Amendment and Restatement (incorporated by reference to Registrant’s Post-Effective Amendment No. 3 to Registrant’s Registration Statement on Form N-2 (File No. 333-181853), filed on May 14, 2014) 3.1(ii) Series A Preferred Articles Supplementary (incorporated by reference to Registrant’s Form 1-A (File No. 000-55006), filed on April 12, 2021) 3.2 Second Amended & Restated Bylaws (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on January 12, 2021) 4.1 Description of Securities (incorporated by reference to Registrant’s Form 10-K (File No. 000-55006), filed on September 28, 2022) 4.2 Partnership Unit Designation of the Series A Preferred Limited Partnership Units of MacKenzie Realty Operating Partnership, LP (incorporated by reference to Registrant’s Form 10-K (File No. 000-55006), filed on September 28, 2022) 10.1(i) Amended and Restated Investment Advisory Agreement with MCM Advisers, LP dated as of October 1, 2017 (incorporated by reference to Registrant’s Post-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-212804), filed on November 9, 2017) 10.1(ii) Amendment to the Amended and Restated Investment Advisory Agreement dated as of October 1, 2018 (incorporated by reference to Registrant’s Post-Effective Amendment No. 5 to the Registration Statement on Form N-2 (File No. 333-212804), filed on October 29, 2018) 10.2 Agreement of Limited Partnership of MacKenzie Realty Operating Partnership, LP, Dated May 20, 2020 (incorporated by reference to the Registrant’s Form 8-K (File No. 814-00961 filed on June 9, 2020)) 10.3 Operating Agreement of PVT-Madison Partners LLC (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on March 11, 2021) 10.4 Operating Agreement of Madison-PVT Partners LLC (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on March 11, 2021) 56 Table of Contents 10.5 Form of Investment Adviser Introducing Agreement (pre-December 2016) (incorporated by reference to the Registration Statement on Form N-2 (File No. 333-212804) filed on August 1, 2016) 10.6 Amended Administration Agreement with MacKenzie Capital Management, LP (incorporated by reference to Registrant’s Form 10-K (File No. 000-55006), filed on September 28, 2021) 10.7 Form of Investor Services Agreement with MacKenzie Capital Management, LP dated November 1, 2018 (incorporated by reference to Post-Effective Amendment No. 6 to the Registration Statement on Form N-2 (File No. 333-212804), filed on May 10, 2019) 10.8 Advisory Management Agreement (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on January 27, 2021) 10.9 Amended And Restated Investment Advisory Agreement (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on January 27, 2021) 10.10 Operating Agreement by and between MacKenzie Realty Operating Partnership, LP and the Hollywood Hillview Owner LLC, dated October 4, 2021 (incorporated by reference to the Registrant’s Form 8-K (File No. 000-55006 filed on October 5, 2021)) 10.11 Dividend Reinvestment Plan (incorporated by reference to Registrant’s Form S-3 (File No. 000-55006), filed on December 22, 2021) 10.12 Operating Agreement by and between MacKenzie Realty Operating Partnership, LP and the MacKenzie BAA IG Shoreline LLC, dated January 25, 2022 (incorporated by reference to the Registrant’s Form 8-K (File No. 000-55006 filed on May 20, 2022)) 10.13 Operating Agreement of MacKenzie Satellite Place Corp (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on June 3, 2022) 21.1 List of Subsidiaries of the Registrant 31.1 Section 302 Certification of Robert Dixon (President and Chief Executive Officer) 31.2 Section 302 Certification of Angche Sherpa (Treasurer and Chief Financial Officer) 32.1 Section 1350 Certification of Robert Dixon (President and Chief Executive Officer) 32.2 Section 1350 Certification of Angche Sherpa (Treasurer and Chief Financial Officer) 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)* 101.SCH Inline XBRL Taxonomy Extension Schema Documents* 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document* 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document* 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document* 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document* 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) * Filed Herewith All other exhibits for which provision is made in the applicable regulations of the Securities and Exchange Commission are not required under the related instruction or are inapplicable and therefore have been omitted. Item 16. FORM 10-K SUMMARY None. 57 Table of Contents TABLE OF CONTENTS Index to Audited Consolidated Financial Statements Consolidated Financial Statements Reports of Independent Registered Public Accounting Firm (PCAOB ID: 659 ) F-2 Consolidated Balance Sheets as of June 30, 2023 and 2022 F-5 Consolidated Statements of Operations for the years ended June 30, 2023 and 2022 F-6 Consolidated Statements of Changes in Equity for the years ended June 30, 2023 and 2022 F-7 Consolidated Statements of Cash Flows for the years ended June 30, 2023 and 2022 F-8 Notes to Consolidated Financial Statements F-9 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors MacKenzie Realty Capital, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Mackenzie Realty Capital, Inc. (the “Company”), as of June 30, 2023 and 2022, the related consolidated statements of operations, changes in equity, and cash flows for the years then ended, and the related notes and financial statement schedule (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2023 and 2022, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. F-2 Table of Contents Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Purchase Price Allocation for Acquisitions As described in Notes 2 and 3 to the consolidated financial statements, the Company acquired certain real estate properties during the year ended June 30, 2023, that were accounted for as asset acquisitions. For each asset acquisition, the Company assesses the acquisition-date fair values of all tangible assets, identifiable intangible assets, and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash-flow analysis) that utilize appropriate discount and/or capitalization rates and other available market information to allocate the purchase price to land, buildings, and identified intangible assets and liabilities. Estimates of the fair values of the tangible assets, identifiable intangibles, and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The principal consideration for our determination that the fair value measurements used in the purchase price allocation of real estate acquisitions is a critical audit matter are (i) the significant judgment by management to determine the fair value measurements of tangible and intangible assets and liabilities to allocate the purchase price; (ii) significant auditor judgment, subjectivity and effort in evaluating audit evidence related to the significant assumptions used in the fair value measurement; (iii) the sensitivity of the respective fair values to the significant underlying assumptions; and (iv) use of professionals with specialized skill and knowledge to assist in performing the procedures and evaluating the audit evidence obtained. The primary procedures we performed to address this critical audit matter included: • With the assistance of our valuation specialists, we evaluated the reasonableness of certain significant fair value inputs used in the purchase price allocations related to acquired real estate properties such as market lease rates, carrying costs during lease-up periods, capitalization rates, discount rates, market absorption periods, and prevailing interest rates. The evaluation included comparison of Company assumptions to independently developed ranges using market data from industry transaction databases and published industry reports. • We evaluated the mathematical accuracy of the valuation models and performed procedures over the completeness and accuracy of the data provided by management. F-3 Table of Contents Fair Value Measurements of Investments As disclosed in Notes 2 and 4 to the consolidated financial statements, investments held by the Company have been classified as Level III investments as pricing inputs for these are unobservable and there is little, if any, market activity for such investments. Establishing fair values of investments is inherently subjective and is often dependent upon significant estimates and modeling assumptions that are unobservable and generally requires the Company to establish the use of internal assumptions about future cash flows, including the cash flows of underlying real property, and appropriate risk-adjusted discount rates. Fair values inputs for investments classified as Level III are estimated by management using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, and local market conditions. Management uses a valuation model that includes critical inputs such as cap rates, discount rates, and consideration of the market where the property is located. The inputs into the determination of fair value require significant judgment by management. The principal consideration in our determination that the Level III fair value inputs used in the valuation of investments is a critical audit matter are (i) the significant judgment by management to determine the fair value measurements; (ii) significant auditor judgment, subjectivity, and effort in evaluating audit evidence related to the significant assumptions used in the fair value measurement; (iii) the sensitivity of the respective fair values to the significant underlying assumptions; and (iv) use of professionals with specialized skill and knowledge to assist in performing the procedures and evaluating the audit evidence obtained. The primary procedures we performed to address this critical audit matter included: • With the assistance of valuation specialists, we evaluated the reasonableness of the valuation methodology and significant assumptions used in management’s valuation models such as future cash flows, including the cash flows of underlying real property, risk-adjusted discount rates, cap rates, nature of the investment, and local market conditions. The evaluation included comparison of the Company’s assumptions to market data from industry transaction databases and published industry reports. • For investments sold during the year or subsequent to year end, we evaluated management’s ability to reasonably estimate fair value by comparing management’s historical estimates to actual results from those sales. • We evaluated the mathematical accuracy of the valuation models and performed procedures over the completeness and accuracy of the data provided by management. /s/ Moss Adams LLP Campbell, California September 28, 2023 We have served as the Company’s auditor since 2012. F-4 Table of Contents MacKenzie Realty Capital, Inc. Consolidated Balance Sheets June 30, 2023 June 30, 2022 Assets Real estate assets Land $ 37,163,127 $ 32,117,072 Building, fixtures and improvements 132,484,670 64,182,548 Intangible lease assets 8,180,089 2,889,828 Less: accumulated depreciation and amortization ( 7,112,574 ) ( 1,768,130 ) Total real estate assets, net 170,715,312 97,421,318 Cash and cash equivalents 17,242,781 7,400,163 Restricted cash 898,238 1,092,816 Investments, at fair value 13,432,480 19,748,208 Unconsolidated investment (non-security), at fair value 8,716,500 37,845,036 Investments income, rents and other receivables 1,205,858 1,499,214 Investment acquisition advance 100,000 - Prepaid expenses and other assets 846,424 67,625 Assets held for sale, net - 17,490,581 Total assets $ 213,157,593 $ 182,564,961 Liabilities Mortgage notes payable, net $ 91,247,384 $ 68,370,415 Notes payable 1,653,937 - Deferred rent and other liabilities 1,158,809 443,014 Finance lease liabilities 628,420 - Dividend payable 2,016,855 1,419,913 Accounts payable and accrued liabilities 1,387,129 2,938,689 Stock redemption payable 444,999 348,051 Below-market lease liabilities, net 1,410,090 1,063,579 Due to related entities 156,364 214,094 Contingent liability 1,503,000 2,715,000 Capital pending acceptance 538,600 85,000 Liabilities held for sale - 744,989 Total liabilities 102,145,587 78,342,744 Equity Common stock, $ 0.0001 par value, 80,000,000 shares authorized; 13,243,279.96 and 13,253,571.98 shares issued and outstanding as of June 30, 2023 and June 30, 2022, respectively. 1,324 1,325 Preferred stock, $ 0.0001 par value, 20,000,000 shares authorized, 671,340.45 and 119,416.91 shares issued and outstanding as of June 30, 2023 and June 30, 2022, respectively. 67 12 Capital in excess of par value 133,762,999 121,961,699 Accumulated deficit ( 34,856,258 ) ( 24,108,723 ) Total stockholders’ equity 98,908,132 97,854,313 Non-controlling interests 12,103,874 6,367,904 Total equity 111,012,006 104,222,217 Total liabilities and equity $ 213,157,593 $ 182,564,961 The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. F-5 Table of Contents MacKenzie Realty Capital, Inc. Consolidated Statement of Operations Year Ended June 30, 2023 2022 Revenue Rental and reimbursements $ 15,107,219 $ 10,369,174 Expenses Property operating and maintenance 9,028,493 6,155,774 Interest expense 7,099,968 2,354,442 Depreciation and amortization 5,273,793 4,544,343 Asset management fees to related party (Note 8) 3,004,725 2,725,588 General and administrative 913,258 560,521 Administrative cost reimbursements to related party (Note 8) 726,000 609,600 Professional fees 615,132 686,064 Directors’ fees 106,000 107,000 Transfer agent cost reimbursements to related party (Note 8) 92,000 106,401 Impairment loss on assets held for sale 8,121,090 9,126,461 Total operating expenses 34,980,459 26,976,194 Operating loss ( 19,873,240 ) ( 16,607,020 ) Other income (loss) Dividend and distribution income from equity securities at fair value 535,199 2,388,788 Net unrealized gain (loss) on equity securities at fair value ( 2,079,093 ) 1,435,073 Net income from equity method investments at fair value 2,580,035 9,960,895 Net realized gain from investments 656,984 7,349,159 Net loss on disposal of fixed assets - ( 247,303 ) Net loss on disposal of real estate ( 352,540 ) - Gain on extinguishment of debt 14,840,728 - Net income (loss) ( 3,691,927 ) 4,279,592 Net (income) loss attributable to non-controlling interests ( 405,478 ) 285,294 Net income attributable to preferred stockholders ( 695,601 ) ( 56,929 ) Net income (loss) attributable to common stockholders $ ( 4,793,006 ) $ 4,507,957 Net income (loss) per share attributable to common stockholders $ ( 0.36 ) $ 0.34 Weighted average common shares outstanding 13,282,928 13,340,164 The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. F-6 Table of Contents MacKenzie Realty Capital, Inc. Consolidated Statement of Changes in Equity Common Stock Preferred Stock Additional Paid- in Capital Accumulated Deficit Total Stockholders’ Equity Non- controlling Interests Total Equity Number of Shares Par Value Number of Shares Par Value Year Ended June 30, 2023 Balance, June 30, 2022 13,253,571.98 $ 1,325 119,416.91 $ 12 $ 121,961,699 $ ( 24,108,723 ) $ 97,854,313 $ 6,367,904 $ 104,222,217 Contributions by non-controlling interest holders - - - - - - - 1,333 1,333 Distributions to non-controlling interest holders - - - - - - - ( 630,281 ) ( 630,281 ) Operating Partnership Preferred Units issued - - - - - - - 5,953,935 5,953,935 Dividends to common stockholders - - - - - ( 5,954,529 ) ( 5,954,529 ) - ( 5,954,529 ) Dividends to preferred stockholders - - - - - ( 695,601 ) ( 695,601 ) - ( 695,601 ) Net income (loss) - - - - - ( 4,097,405 ) ( 4,097,405 ) 405,478 ( 3,691,927 ) Operating Partnership Class A conversion to common stock 4,478.84 - * - - 45,908 - 45,908 ( 45,908 ) - Issuance of preferred stock - 552,587.88 55 13,408,034 - 13,408,089 - 13,408,089 Issuance of common stock through reinvestment of dividends 189,289.44 19 - - 1,638,720 - 1,638,739 - 1,638,739 Issuance of preferred stock through reinvestment of dividends - - 735.66 - * 75,379 - 75,379 - 75,379 Issuance Operating Partnership Preferred Units through reinvestment of dividends - - - - - - 51,413 51,413 Payment of selling commissions and fees - - - - ( 1,652,903 ) - ( 1,652,903 ) - ( 1,652,903 ) Redemptions of common stock ( 204,060.30 ) ( 20 ) - - ( 1,681,988 ) - ( 1,682,008 ) - ( 1,682,008 ) Redemptions of preferred stock - - ( 1,400.00 ) - * ( 31,850 ) - ( 31,850 ) - ( 31,850 ) Balance, June 30, 2023 13,243,279.96 $ 1,324 671,340.45 $ 67 $ 133,762,999 $ ( 34,856,258 ) $ 98,908,132 $ 12,103,874 $ 111,012,006 Common stock Preferred stock Additional Paid- in Capital Accumulated Deficit Total Stockholders’ Equ ity Non- controlling Interests Total Equity Number of Shares Par Value Number of Shares Par Value Year Ended June 30, 2022 Balance, June 30, 2021 13,316,426.79 $ 1,332 - $ - $ 120,408,505 $ ( 23,298,857 ) $ 97,110,980 $ 251,840 $ 97,362,820 Contributions by non-controlling interest holders - - - - - - - 1,071,584 1,071,584 Distributions to non-controlling interest holders - - - - - - - ( 68,051 ) ( 68,051 ) Operating Partnership Class A units issued - - - - - - - 750,000 750,000 Operating Partnership Preferred Units issued - - - - - - - 4,650,000 4,650,000 Dividends to common stockholders - - - - - ( 5,317,823 ) ( 5,317,823 ) - ( 5,317,823 ) Dividends to preferred stockholders - - - - - ( 56,929 ) ( 56,929 ) - ( 56,929 ) Net income (loss) - - - - - 4,564,886 4,564,886 ( 285,294 ) 4,279,592 Operating Partnership Class A conversion to common stock 212.19 - * - - 2,175 - 2,175 ( 2,175 ) - Issuance of common stock 3,172.39 - * - - 27,503 - 27,503 - 27,503 Issuance of preferred stock - - 119,380.21 12 2,957,518 - 2,957,530 - 2,957,530 Issuance of common stock through reinvestment of dividends 128,740.66 12 - - 1,187,618 - 1,187,630 - 1,187,630 Issuance of preferred stock through reinvestment of dividends - - 36.70 - * 826 - 826 - 826 Payment of selling commissions and fees - - - - ( 847,167 ) - ( 847,167 ) - ( 847,167 ) Redemptions of common stock ( 194,980.05 ) ( 19 ) - - ( 1,775,279 ) - ( 1,775,298 ) - ( 1,775,298 ) Balance, June 30, 2022 13,253,571.98 $ 1,325 119,416.91 $ 12 $ 121,961,699 $ ( 24,108,723 ) $ 97,854,313 $ 6,367,904 $ 104,222,217 * Amount is less than $1. The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. F-7 Table of Contents MacKenzie Realty Capital, Inc. Consolidated Statement of Cash Flows Year Ended June 30, 2023 2022 Cash flows from operating activities: Net income (loss) $ ( 3,691,927 ) $ 4,279,592 Adjustments to reconcile net income (loss) to net cash from operating activities: Net unrealized (gain) loss on equity securities at fair value 2,079,093 ( 1,435,073 ) Net income from equity method investments at fair value ( 1,216,922 ) ( 7,436,483 ) Net realized gain on investments ( 656,984 ) ( 7,349,159 ) Net loss on disposal of fixed assets - 247,303 Net loss on disposal of real estate 352,540 - Impairment loss on assets held for sale 8,121,090 9,126,461 Gain on extinguishment of debt ( 14,840,728 ) - Straight - line rent ( 63,543 ) ( 19,166 ) Depreciation and amortization 5,273,793 4,544,343 Amortization of deferred financing costs and debt mark-to-market 948,554 23,146 Accretion of above (below) market lease, net ( 474,185 ) ( 164,695 ) Changes in assets and liabilities: Investments income, rent and other receivables 1,416,972 15,038 Prepaid expenses and other assets ( 622,948 ) 250,345 Due from related entities 401 - Deferred rent and other liabilities ( 796,083 ) 115,744 Accounts payable and accrued liabilities ( 1,945,377 ) 2,354,321 Due to related entities ( 504,520 ) 70,359 Net cash from operating activities ( 6,620,774 ) 4,622,076 Cash flows from investing activities: Proceeds from sale of and sales distribution from investments 15,236,124 33,694,869 Investment acquisition advance ( 100,000 ) - Net proceeds from sale of real estate 8,695,764 - Investments in real estate assets ( 18,700,523 ) ( 63,241,731 ) Purchase of investments ( 1,621,948 ) ( 24,867,765 ) Return of capital distributions 12,957,338 22,250,314 Payment on contingent liability ( 1,154,125 ) - Net cash from investing activities 15,312,630 ( 32,164,313 ) Cash flows from financing activities: Proceeds from mortgage notes payable 3,221,375 34,454,689 Payments on mortgage notes payable ( 8,855,266 ) ( 3,963,948 ) Proceeds from notes payable 10,111 - Payments on notes payable ( 17,005 ) - Payment of deferred financing cost - ( 836,802 ) Dividend to stockholders ( 4,468,846 ) ( 2,824,426 ) Proceeds from issuance of preferred stock 13,408,089 2,943,778 Payment of finance lease liabilities ( 30,276 ) - Payment of selling commissions and fees ( 1,206,115 ) ( 705,770 ) Contributions by non-controlling interests holders 1,333 1,071,584 Distributions to non-controlling interests holders ( 449,092 ) ( 12,183 ) Redemption of common stock, net of stock redemption payable ( 1,585,060 ) ( 1,425,073 ) Redemption of preferred stock ( 31,850 ) - Capital pending acceptance 453,600 85,000 Net cash from financing activities 450,998 28,786,849 Net increase in cash, cash equivalents and restricted cash 9,142,854 1,244,612 Cash, cash equivalents and restricted cash at beginning of the year 8,998,165 7,753,553 Cash, cash equivalents and restricted cash at end of the year $ 18,141,019 $ 8,998,165 Cash and cash equivalents at end of the year $ 17,242,781 $ 7,400,163 Restricted cash at end of the year 898,238 1,092,816 Cash and restricted cash at end of the year classified as assets held for sale - 505,186 Total cash, cash equivalents, restricted cash and cash classified as held for sale at end of the year $ 18,141,019 $ 8,998,165 Supplemental disclosure of non-cash financing activities and other cash flow information Issuance of the Operating Partnership Preferred units for the purchase of First & Main, LP (Note 1) $ 2,711,378 $ - Issuance of the Operating Partnership Preferred units for the purchase of Main Street West, LP (Note 1) $ 3,242,557 $ - Fair value of assets acquired from consolidation of First & Main, LP $ 18,507,861 $ - Fair value of liabilities assumed from consolidation of First & Main, LP $ 13,559,483 $ - Fair value of assets acquired from consolidation of 1300 Main, LP $ 10,546,464 $ - Fair value of liabilities assumed from consolidation of 1300 Main, LP $ 8,753,242 $ - Fair value of assets acquired from consolidation of Main Street West, LP $ 20,699,145 $ - Fair value of liabilities assumed from consolidation of Main Street West, LP $ 16,119,679 $ - Fair value of assets acquired from consolidation of Woodland Corporate Center Two, LP $ 11,538,400 $ - Fair value of liabilities assumed from consolidation of Woodland Corporate Center Two, LP $ 8,295,843 $ - Issuance of the Operating Partnership Class A units for the purchase of real estate assets (Note 5) $ - $ 750,000 Issuance of the Operating Partnership Preferred units for the purchase of investments (Note 5) $ - $ 4,650,000 Issuance of common stock for merger of FSP Satellite Place Corp. (Note 1) $ - $ 27,503 Issuance of preferred stocks for merger of FSP Satellite Place Corp. (Note 1) $ - $ 13,752 Fair value of subsidiary’s units owned prior to the merger date $ - $ 5,424,296 Issuance of common stock through reinvestment of dividends $ 1,638,739 $ 1,187,630 Issuance of preferred stock through reinvestment of dividends $ 75,379 $ 826 Reduction in contingent consideration estimate $ 57,875 $ - Cash paid for interest $ 5,743,630 $ 2,248,232 The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. F-8 Table of Contents MacKenzie Realty Capital, Inc. Notes to Consolidated Financial Statements June 30, 2023 NOTE 1 – PRINCIPAL BUSINESS AND ORGANIZATION MacKenzie Realty Capital, Inc. (the “Parent Company” together with its subsidiaries as discussed below, collectively, the “Company,” “we,” “us,” or “our”) was incorporated under the general corporation laws of the State of Maryland on January 25, 2012. We have elected to be treated as a real estate investment trust (“REIT”) as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). We are authorized to issue 100,000,000 shares, of which (i) 80,000,000 are designated as common stock, with a $ 0.0001 par value per share; and (ii) 20,000,000 are designated as preferred stock, with a $ 0.0001 par value per share. We commenced our operations on February 28, 2013, and our fiscal year-end is June 30. We filed our initial registration statement in June 2012 with the Securities and Exchange Commission (“SEC”) to register the initial public offering of 5,000,000 shares of our common stock. The initial public offering commenced in January 2014 and concluded in October 2016. We filed a second registration statement with the SEC to register a subsequent public offering of 15,000,000 shares of our common stock. The second offering commenced in December 2016 and concluded on October 28, 2019. We filed a third registration statement with the SEC to register a public offering of 15,000,000 shares of our common stock that was declared effective by the SEC on October 31, 2019. The third offering commenced shortly thereafter and expired on October 31, 2020. The Parent Company’s wholly owned subsidiary, MRC TRS, Inc., (“TRS”) was incorporated under the general corporation laws of the State of California on February 22, 2016 and operates as a taxable REIT subsidiary. MacKenzie NY Real Estate 2 Corp., (“MacKenzie NY 2”), a wholly owned subsidiary of TRS, was formed for the purpose of making certain limited investments in New York companies. We terminated TRS effective December 31, 2022, after the sale of its sole investment and transferred the ownership of MacKenzie NY 2, to the Parent Company. The financial statements of TRS (through its termination date) and MacKenzie NY 2 have been consolidated with the Parent Company. On May 20, 2020, we formed an operating partnership, MacKenzie Realty Operating Partnership, LP (the “Operating Partnership”) for the purpose of acquiring and operating real estate assets. As of June 30, 2023, we own all limited partnership units of the Operating Partnership except for 85,243.43 Class A Limited Partnership units and 473,570.94 preferred units, which would be entitled to receive, at liquidation of the Operating Partnership, 85,243.43 common shares of the Company (stated value of $ 10.25 per share) and $ 11,839,274 (based on the stated value of $ 25 per share for the preferred units) in liquidation preference, respectively. The Parent Company has contributed $ 72,090,886 in capital to the Operating Partnership since inception; thus the Class A and Series A Preferred Units represent approximately 14.99 % of all capital contribution s. In March 2021, we, together with our joint venture partners, formed two operating companies: Madison-PVT Partners LLC (“Madison”) and PVT-Madison Partners LLC (“PVT”), to acquire and operate two residential apartment buildings located in Oakland, California. We own 98.45 % and 98.75 % of equity units of Madison and PVT, respectively. The joint venture partners own the remaining 1.55 % and 1.25 % equity units of Madison and PVT, respectively, and also hold a carried interest in both companies. We are the controlling majority owner of both companies; therefore, effective March 31, 2021, we have consolidated the financial statements of these companies. On April 13, 2021, we filed a preliminary offering circular (the “Offering Circular”) pursuant to Regulation A with the SEC to sell up to $ 50,000,000 of shares of our Series A preferred stock at an initial offering price of $ 25.00 per share. The sale of shares pursuant to this offering began in November 2021 after the definitive version of the Offering Circular was qualified by the SEC on November 2, 2021. We filed a post-effective amendment to the Offering Circular on October 14, 2022, and increased the offering to sell up to $ 75 million of shares of our Series A preferred stock. The post-effective amendment to this Offering Circular was declared effective on November 13, 2022. F-9 Table of Contents On October 4, 2021, through the Operating Partnership, we acquired a 90 % economic interest in Hollywood Hillview Owner, LLC (“Hollywood Hillview”), a Delaware limited liability company, to acquire and operate a multifamily building located in Los Angeles, California. The remaining 10 % economic interest in Hollywood Hillview is owned by an unaffiliated third party, True USA, LLC. Hollywood Hillview owns 100 % of the membership interests in PT Hillview GP, LLC (the “PT Hillview”). We are the controlling majority owner of Hollywood Hillview; therefore, effective December 31, 2021, we have consolidated the financial statements of Hollywood Hillview. On January 25, 2022, through the Operating Partnership, we acquired a 98 % limited liability company interest in MacKenzie BAA IG Shoreline LLC (“MacKenzie Shoreline”), formed to acquire, renovate, and own the 84-unit multifamily building located at 1841 Laguna Street, Concord, CA. The joint venture partners own the remaining 2 % of the limited liability company interest as well as a carried interest. We are the controlling majority owner of the MacKenzie Shoreline; therefore, effective June 30, 2022, we have consolidated the financial statements of MacKenzie Shoreline. On April 1, 2022, we, and our newly formed, wholly owned subsidiary, FSP Merger Sub, Inc. (“Merger Sub”) entered into a reverse triangular merger agreement with FSP Satellite Place Corp. (“FSP Satellite”), pursuant to which the Merger Sub would be merged with and into FSP Satellite with FSP Satellite as the surviving entity, but renamed MacKenzie Satellite Place, Inc. (“MacKenzie Satellite”). On June 1, 2022, the merger closed, and MacKenzie Satellite became our wholly owned subsidiary, which owns the Satellite Place Office Building, a six-story Class “A” suburban office building containing approximately 134,785 rentable square feet of space located on approximately 10 acres of land in Duluth, GA. The former shareholders of FSP Satellite received cash or shares of the Company, based upon their election. All former shareholders of FSP Satellite holders elected to be paid in cash with the exception of two shareholders who elected to receive common and preferred stocks in the amount of $ 27,503 and $ 13,752 , respectively. Subsequent to the completion of the merger, we have consolidated the financial statements of MacKenzie Satellite effective June 30, 2022. On May 6, 2022, the Operating Partnership purchased 100 % of the membership interests in eight limited liability companies (“Management Companies”) and one parcel of entitled land from The Wiseman Company, LLC (“Wiseman”) for $ 18,333,000 and $ 3,050,000 , respectively. The limited liability companies own the general partnership interests in eight limited partnerships, each of which own a Class A or B office property in Napa, Fairfield, or Woodland, California (the “Wiseman Properties”). Each Management Company is the sole general partner of each of the limited partnerships. The membership interest purchase price is subject to adjustments and holdbacks as provided in the membership interest purchase agreement. As part of the purchase agreement, $ 4,650,000 of the purchase price was paid through the issuance of 206,666.67 Preferred Units of the Operating Partnership and $ 750,000 of the land purchase price was paid through the issuance of 77,881.62 Class A units of the Operating Partnership. Further details of this acquisition are discussed in Note 5. We have consolidated the financial statements of the eight limited liability companies, which hold the general partnership interests in the limited partnerships, effective June 30, 2022. Wiseman is a full-service real estate syndicator, developer, broker, and property manager. It was founded in 1979 and served as the general partner for nine currently active partnerships owning the Wiseman Properties. Concurrently with acquiring the general partnership interests in the Wiseman Properties, the Operating Partnership also negotiated the right to acquire the limited partnership interest in each Wiseman Property at pre-determined prices over the following two years . Management believes this transaction is strategically important as it focuses the portfolio on our desired geographic area (Western United States) and creates a captive pipeline of properties which we can acquire when convenient over the next two years . On July 23, 2022, in addition to the general partnership interest in First & Main, LP (“First & Main”), the Operating Partnership completed the acquisition of 100 % of the limited partnership interest in First & Main for total purchase price of $ 3,376,322 , of which $ 2,711,378 was paid through issuance of 120,505.66 Preferred Units of the Operating Partnership. We consolidated the financial statements of First & Main during the quarter ended September 30, 2022. On October 1, 2022, in addition to the general partnership interest in 1300 Main, LP (“1300 Main”), the Operating Partnership completed the acquisition of 100 % of the limited partnership interest in 1300 Main for total purchase price of $ 6,480,582 . We consolidated the financial statements of 1300 Main during the quarter ended December 31, 2022. On January 3, 2023, the Operating Partnership completed the acquisition of 100 % of the limited partnership interest in Woodland Corporate Center Two, LP (“Woodland Corporate Center Two”) for total purchase price of $ 5,636,966 , of which $ 3,242,557 was paid through the issuance of 144,113.63 Preferred Units of the Operating Partnership. On February 1, 2023, the Operating Partnership completed the acquisition of 100 % of the limited partnership interest in Main Street West, LP (“Main Street West”) for total purchase price of $ 8,277,016 . We consolidated the financial statements of Woodland Corporate Center Two and Main Street West during the quarter ended March 31, 2023. F-10 Table of Contents On February 6, 2023, we formed a new entity, MRC Aurora, LLC (the “MRC Aurora”) for the purpose of owning, developing, renovating, leasing, managing, renting, and potentially selling certain real property and building and improvements located at 5000 Wiseman Way, Fairfield, California (the “Aurora Project”). The Parent Company is the manager and the Operating Partnership is the sole common member of MRC Aurora. The Operating Partnership contributed the entitled land located at 5000 Wiseman Way, Fairfield, California in exchange for the common membership interest. MRC Aurora plans to raise $ 10 million in preferred capital and also obtain a construction loan to fund the development of the Aurora Project. As of June 30, 2023, MRC Aurora has not commenced selling the preferred units, making the Operating Partnership the sole equity holder of MRC Aurora. Therefore, we have consolidated the financial statements of MRC Aurora . We are externally managed by MacKenzie Capital Management, LP (“MacKenzie”) under the administration agreement dated and effective as of January 1, 2021 (the “Administration Agreement”). MacKenzie manages all of our affairs except for providing investment advice. MCM Advisers, LP (the “Investment Adviser”) advises us in our assessment, acquisition, and divestiture of securities under the advisory agreement amended and restated effective January 1, 2021 (the “Amended and Restated Investment Advisory Agreement”). MacKenzie Real Estate Advisers, LP (the “Real Estate Adviser”; together, the “Investment Adviser” and the “Real Estate Adviser” may be referred to as “Adviser” or “Advisers” as appropriate) advises us in our assessment, acquisition, and divestiture of real estate assets. We pursue a strategy focused on investing primarily in real estate assets, and to a lesser extent (intended to be less than 20 % of our portfolio) in illiquid or non-traded debt and equity securities issued by U.S. companies generally owning commercial real estate. These companies are likely to be non-traded REITs, small-capitalization publicly traded REITs, public and private real estate limited partnerships, and limited liability companies. As of June 30, 2023, we have raised approximately $ 119.10 million from our three common stock public offerings and $ 16.37 million from our Series A preferred stock offering pursuant to the Offering Circular. As of June 30, 2023, we have issued common and preferred shares with gross proceeds of $ 14.19 million and $ 0.08 million, respectively, under our dividend reinvestment plan (“DRIP”). Of the total shares issued by us as of June 30, 2023, approximately $ 13.36 million worth of common and preferred stock shares have been repurchased under our share repurchase program. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Consolidation Policy The accompanying consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-K and Regulation S-X. We follow the accounting principles generally accepted in the United States of America (“GAAP”) and our consolidated financial statements include the accounts of our wholly owned consolidated subsidiaries and majority-owned controlled subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior period information has been reclassified to conform to the current year end presentation. The reclassification has no effect on our consolidated balance sheet or the consolidated statement of operations as previously reported . Use of Estimates The preparation of consolidated financial statements requires management to make estimates and assumptions that affect reported asset values, liabilities, revenues, expenses and unrealized gains (losses) on investments during the reporting period. Material estimates that are susceptible to change, and actual results could differ from those estimates. Variable Interest Entities We evaluate the need to consolidate our investments in securities in accordance with ASC 810. In determining whether we have a controlling interest in a variable interest entity and whether to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners, as well as whether the entity is a variable interest entity for which we are the primary beneficiary. Refer to Note 7 for additional information . F-11 Table of Contents Assets and Liabilities Held for Sale We classify long-lived assets or disposal groups to be sold as held for sale in the period in which all of the following criteria are met: • Management, having the authority to approve the action, commits to a plan to sell the asset (disposal group); • The asset (disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (disposal groups); • An active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group) have been initiated; • The sale of the asset (disposal group) is probable, and transfer of the asset (disposal group) is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the asset or disposal group beyond one year; • The asset (disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value. The price at which a long-lived asset (disposal group) is being marketed is indicative of whether the entity currently has the intent and ability to sell the asset (disposal group). A market price that is reasonable in relation to fair value indicates that the asset (disposal group) is available for immediate sale, whereas a market price in excess of fair value indicates that the asset (disposal group) is not available for immediate sale; and • Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. On the day that these criteria are met, we suspend depreciation on the investment properties held for sale, including depreciation for tenant improvements and additions, as well as on the amortization of acquired in-place leases. The investment properties and liabilities associated with those investment properties that are held for sale are classified separately on the consolidated balance sheets for the most recent reporting period and recorded at the lesser of the carrying value or fair value less costs to sell. Cash, Cash Equivalents and Restricted Cash Our cash and cash equivalents represent current bank accounts and other bank deposits free of encumbrances and having maturity dates of three months or less from the respective dates of deposit. We limit cash investments to financial institutions with high credit standing; therefore, we believe our cash investments are not exposed to any significant credit risk. The restricted cash includes escrow accounts for real property taxes, insurance, capital expenditures and tenant improvements, and debt service and leasing costs held by lenders. These balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits. At times, the cash balances held in financial institutions by us may exceed these insured limits. Restricted cash is subject to legal or contractual restrictions as to withdrawal or use, including restrictions that require the funds to be used for a specified purpose and restrictions that limit the purpose for which the funds can be used. Investments Income Receivable Investment income represent dividends, distributions, and sales proceeds recognized in accordance with our revenue recognition policy but not yet received as of the date of the consolidated financial statements. The amounts are generally fully collectible as they are recognized based on completed transactions. We monitor and adjust our receivables, and those deemed to be uncollectible are written-off only after all reasonable collection efforts are exhausted. We have determined that all investments income receivable balances outstanding as of June 30, 2023 and 2022, are collectible and do not require recording any uncollectible allowance . Rents and Other Receivables We will periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. We exercise judgment in establishing these allowances and consider payment history and current credit status of tenants in developing these estimates. As of June 30, 2023, we recognized an allowance for doubtful accounts of $ 150,786 . As of June 30, 2022, we have determined that all rent receivable balances outstanding, are collectible and do not require recording any uncollectible allowance. F-12 Table of Contents Capital Pending Acceptance We conduct closings for new issuance of our stocks twice per month and admit new stockholders effective beginning the first of each month. Subscriptions are effective only upon our acceptance. Any gross proceeds received from subscriptions which are not accepted as of the period-end are classified as capital pending acceptance in the consolidated balance sheets . As of June 30, 2023 and June 30, 2022 , capital pending acceptance was $ 538,600 and $ 85,000 , respectively. Organization and Offering Costs Organization costs include, among other things, the cost of legal services pertaining to the organization and incorporation of the business, incorporation fees, and audit fees relating to the public offerings and the initial statement of assets and liabilities. These costs are expensed as incurred. Offering costs include, among other things, legal fees and other costs pertaining to the preparation of the registration statements and pre- and post-effective amendments. The offering costs incurred by us on the Offering Circular to sell the Series A preferred stock have been classified as a reduction of equity . Income Taxes and Deferred Tax Liability The Parent Company has elected to be treated as a REIT for tax purposes under the Code and as a REIT, is not subject to federal income taxes on amounts that it distributes to the stockholders, provided that, on an annual basis, it generally distributes at least 90 % of its REIT taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain) to the stockholders and meets certain other conditions. To the extent it satisfies the annual distribution requirement but distributes less than 100 % of its REIT taxable income, it will be subject to U.S. federal corporate income tax on its undistributed taxable income. In addition, it will be subject to a 4 % nondeductible excise tax if the actual amount that it pays to its stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. The Parent Company satisfied the annual dividend payment and other REIT requirements for the tax year ended December 31, 2022. Therefore, it did not incur any tax expense or excise tax on its income from operations during the quarterly periods within the tax year 2022. In addition, for the tax year 2023, we intend to pay the requisite amounts of dividends during the year and meet other REIT requirements such that the Parent Company will not owe any income taxes. Therefore, the Parent Company did not record any income tax provisions during any fiscal periods within the tax year 2023. TRS and MacKenzie NY 2 are subject to corporate federal and state income tax on their taxable income at regular statutory rates. As discussed in Note 1, TRS terminated effective December 31, 2022. As of December 31, 2022, these subsidiaries did not have material taxable income for tax year 2022. Therefore, TRS, and MacKenzie NY 2 did no t record any income tax provisions during any fiscal period within the tax year 2022. As of June 30, 2023, MacKenzie NY 2 , as a taxable corporate subsidiary of the Parent Company, did no t have any taxable income. Therefore, we did no t record any tax provisions for tax year 2023. MacKenzie Satellite is a qualified REIT subsidiary of the Parent Company. Therefore, it does not file a separate tax return. The Operating Partnership is a limited partnership. Hollywood Hillview, MacKenzie Shoreline, Madison, and PVT are limited liability companies. First & Main, 1300 Main, Woodland Corporate Center Two, and Main Street West are limited partnerships. Accordingly, all income tax liabilities of these entities flow through to their partners, which ultimately is the Company. Therefore, no income tax provisions are recorded for these entities. We follow ASC 740, Income Taxes (“ASC 740”), to account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax liabilities attributable to the net unrealized investment gain (losses) on existing investments. In estimating future tax consequences, we consider all future events, other than enactments of changes in tax laws or rates. The effect on deferred tax assets and liabilities of a change in tax rates will be recognized as income or expense in the period of enactment. In addition, ASC 740 provides guidance for recognizing, measuring, presenting, and disclosing uncertain tax positions in the financial statements. As of June 30, 2023 and 2022, there were no uncertain tax positions. Management’s determinations regarding ASC 740 are subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof. F-13 Table of Contents Subsequent Events Subsequent events are events or transactions that occur after the date of the consolidated balance sheets but before the date the consolidated financial statements are issued. Subsequent events that provide additional evidence about conditions that existed at the date of the consolidated balance sheets are considered in the preparation of the consolidated financial statements presented herein. Subsequent events that occur after the date of the consolidated balance sheets that do not provide evidence about the conditions that existed as of the date of the consolidated statements of changes in equity are considered for disclosure based upon their significance in relation to our consolidated financial statements taken as a whole. Fair Value of Financial Instruments Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. We believe that the carrying amounts of our financial instruments, consisting of cash, restricted cash, investments income, rent and other receivables, prepaid expenses and other assets, mortgage notes payable, accounts payable and accrued liabilities, below-market lease liabilities, net, deferred rent and other liabilities and due to related entities, approximate the fair values of such items based on their nature, terms, and interest rates . Revenue Recognition Rental revenue, net of concessions, which is derived primarily from lease contracts and include rents that each tenant pays in accordance with the terms of each lease agreement, is recognized on a straight-line basis over the term of the lease, when collectability is determined to be probable. Minimum rent, including rental abatements, lease incentives, and contractual fixed increases attributable to operating leases are recognized on a straight-line basis over the term of the related leases when collectability is probable. Amounts expected to be received in later years are recorded as deferred rent receivable. If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive and amortized as a reduction of rental revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to: • whether the lease stipulates how a tenant improvement allowance may be spent; • whether the lessee or lessor supervises the construction and bears the risk of cost overruns; • whether the amount of a tenant improvement allowance is in excess of market rates; • whether the tenant or landlord retains legal title to the improvements at the end of the lease term; • whether the tenant improvements are unique to the tenant or general purpose in nature; and • whether the tenant improvements are expected to have any residual value at the end of the lease. In accordance with ASC Topic 842, we determine whether collectability of lease payments in an operating lease is probable. If we determine the lease payments are not probable of collection, we fully reserve for rent and reimbursement receivables, including deferred rent receivable, and recognize rental income on a cash basis. Distributions received from investments are evaluated by management and recorded as dividend income or a return of capital (reduction of investment) on the ex-dividend date. Operational dividends or distributions received from portfolio investments are recorded as investment income. Distributions resulting from the sale or refinance of an investee’s underlying assets are compared to the estimated value of the remaining assets and are recorded as a return of capital or as investment income as appropriate. Realized gains or losses on investments are recognized in the period of disposal, distribution, or exchange and are measured by the difference between the proceeds from the sale or distribution and the cost of the investment. Investments are disposed of on a first-in, first-out basis. Net change in unrealized gain (loss) reflects the net change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized gains or losses. F-14 Table of Contents Dividends and Distributions Dividends (and distributions, if any) to stockholders are recorded on the date of declaration. The amount, if any, to be paid as a quarterly dividend (or distribution, if any) is approved quarterly by the Board of Directors and is generally based upon management’s estimate of our earnings for the quarter. Fair Value Measurements GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observables used in measuring investments at fair value. Market price is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available actively quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observables and a lesser degree of judgment used in measuring fair value. Investments measured and reported at fair value are classified and disclosed in one of the following categories: Level I – Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded equity securities. We do not adjust the quoted price for these investments even in situations where we hold a large position and a sale could reasonably impact the quoted price. Level II – Price inputs are quoted prices for similar financial instruments in active markets; quoted prices for identical or similar financial instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets. Investments which are generally included in this category are publicly traded equity securities with restrictions. Level III – Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair values for these investments are estimated by management using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, financial condition, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant judgment by management. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had an active market for these investments existed. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Management’s assessment of the significance of a particular input to the fair value measurement, in its entirety, requires judgment and considers factors specific to the investment. Valuation of Investments Our consolidated financial statements include investments that are measured at their estimated fair values in accordance with GAAP. Our valuation procedures are summarized below: Securities for which market quotations are readily available on an exchange will be valued at such price as of the closing price on the day closest to the valuation date. Where a security is traded but in limited volume, we may instead utilize the weighted average closing price of the security over the prior 10 trading days. We may value securities that do not trade on a national exchange by using published secondary market trading information. When doing so, we first confirm that GAAP recognizes the trading price as the fair value of the security. Securities for which reliable market data are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or Board of Directors, does not represent fair value, which we expect will represent a substantial portion of our portfolio of securities investments, shall each be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuation conclusions are documented and discussed with our senior management; and (iii) the Board of Directors will discuss valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser and, where appropriate and necessary, the respective third‑party valuation firms. The recommendation of fair value will generally be based on the following factors, as relevant: F-15 Table of Contents • the nature and realizable value of any collateral; • the portfolio company’s ability to make payments; • the portfolio company’s earnings and discounted cash flow; • the markets in which the issuer does business; and • comparisons to publicly traded securities. Securities for which market data is not readily available or for which a pricing source is not sufficient may include the following: • private placements and restricted securities that do not have an active trading market; • securities whose trading has been suspended or for which market quotes are no longer available; • debt securities that have recently gone into default and for which there is no current market; • securities whose prices are stale; • securities affected by significant events; and • securities that the Investment Adviser believes were priced incorrectly. Valuation of Real Property When property is owned directly, the valuation process includes a full review of the property financial information. An Argus model is created using all known data such as current rent rolls, escalators, expenses, market data in the area where the property is located, cap rates, discount rates, mortgages, interest rates, and other pertinent information. We estimate future leasing and costs associated, generally over a ten-year period, to determine the fair value of the property. Once the fair value is determined, and reviewed by the board of directors, a determination of whether any impairment is required is made and documented. In addition, once per year, we obtain a third-party appraisal on directly owned properties. Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements will express the uncertainty of such valuations, and any change in such valuations, on our consolidated financial statements. Equity Securities We have minority and non-controlling equity investments in various limited partnerships and non-traded entities, which do not have readily determinable fair values. We do not have controlling interests in these entities. Thus, these investments have been recorded as investments in equity securities in accordance with ASC Topic 321, Investments – Equity Securities , and measured at fair value. The changes in the fair value of these investments are recorded in the consolidated statement of operations. Equity Method Investments with Fair Value Option Election We elected the fair value option of accounting for the investments listed below that would have otherwise been recorded under the equity method of accounting. The primary purpose of electing the fair value option was to enhance the transparency of our financial condition. Changes in the fair value of these investments, which are inclusive of equity in income, are recorded in the consolidated statement of operations during the period such changes occur. The below list of investments would have been accounted for under the equity method if the fair value method had not been elected and have been included in investments in the consolidated balance sheets as of June 30, 2023 and 2022: Investee Legal Form Asset Type % Ownership Fair Value as of June 30, 2023 5210 Fountaingate, LP Limited Partnership LP Interest 9.92 % $ 6,820 Capitol Hill Partners, LLC Limited Liability Company LP Interest 23.33 % 1,107,795 Citrus Park Hotel Holdings, LLC Limited Liability Company LP Interest 35.27 % 4,100,000 Lakemont Partners, LLC Limited Liability Company LP Interest 17.10 % 829,381 Green Valley Medical Center, LP Limited Partnership GP Interest 1.00 % * 2,363,000 Martin Plaza Associates, LP Limited Partnership GP Interest 1.00 % * 493,000 One Harbor Center, LP Limited Partnership GP Interest 1.00 % * 4,076,500 Westside Professional Center I, LP Limited Partnership GP Interest 1.00 % * 1,784,000 Total $ 14,760,496 F-16 Table of Contents Investee Legal Form Asset Type % Ownership Fair Value as of June 30, 2022 5210 Fountaingate, LP Limited Partnership LP Interest 9.92 % $ 6,820 Capitol Hill Partners, LLC Limited Liability Company LP Interest 23.33 % 1,518,100 Citrus Park Hotel Holdings, LLC Limited Liability Company LP Interest 35.27 % 5,000,000 Dimensions 28, LLP Limited Partnership LP Interest 90.00 % 19,512,036 Lakemont Partners, LLC Limited Liability Company LP Interest 17.10 % 806,290 Secured Income L.P. Limited Partnership LP Interest 6.57 % 520,594 1300 Main, LP Limited Partnership GP Interest 1.00 % * 1,688,000 First & Main, LP Limited Partnership GP Interest 1.00 % * 2,237,000 Green Valley Medical Center, LP Limited Partnership GP Interest 1.00 % * 3,010,000 Main Street West, LP Limited Partnership GP Interest 1.00 % * 4,708,000 Martin Plaza Associates, LP Limited Partnership GP Interest 1.00 % * 725,000 One Harbor Center, LP Limited Partnership GP Interest 1.00 % * 4,162,000 Westside Professional Center I, LP Limited Partnership GP Interest 1.00 % * 1,803,000 Woodland Corporate Center Two, LP Limited Partnership GP Interest 1.00 % * - Total $ 45,696,840 * The general partner has a 1 % partnership interest but is also entitled to profit sharing distributions ranging from 25 % to 50 % after certain thresholds are met. In January 2023, Dimension 28 sold its sole property and distributed substantially all of the sales proceeds. We received approximately $ 21.56 million. Unconsolidated Investments (Non-security) at Fair Value These are equity method investments that do not meet the consolidation requirements under ASC 810. Under the 1940 Act, these investments are considered “voting securities” as opposed to “investment securities”. Therefore, we listed these equity method investments separately from the rest of the equity method investments at fair value in the consolidated balance sheets. As of June 30, 2023, our investments in Green Valley Medical Center, LP, Martin Plaza Associates, LP, One Harbor Center, LP and Westside Professional Center I, LP are considered to be voting securities under the 1940 Act. As of June 30, 2022, our investments in 1300 Main, LP, First & Main, LP, Dimensions 28, LLP, Green Valley Medical Center, LP, Main Street West, LP, Martin Plaza Associates, LP, One Harbor Center, LP, Westside Professional Center I, LP and Woodland Corporate Center Two, LP were considered to be voting securities under the 1940 Act. Therefore, these investments were shown as unconsolidated investments (non-security), at fair value in the consolidated balance sheets. For GAAP purposes, these investments have been recorded under the equity method investments, for which we have elected the fair value option as discussed above. Lease Accounting Topic 842 In February 2016, the FASB issued ASU No. 2016-02 “Leases (Topic 842)” (“ASU 2016-02”). Under ASU 2016-02, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor, and parties to sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to facilitate assessment the amount, timing, and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”). ASU 2018-11 provides lessors with a practical expedient to not separate lease and non-lease components if both (i) the timing and pattern of revenue recognition for the non-lease component and the related lease component are the same and (ii) the combined single lease component would be classified as an operating lease. We adopted the practical expedient as of July 1, 2019, to account for lease and non-lease components as a single component in lease contracts where we or one of our subsidiaries is the lessor. Our current portfolio consists of commercial office properties and residential apartment buildings whereby we generate rental revenue by leasing office space and apartment units to the building’s tenants. These tenant leases fall under the scope of Topic 842, and are classified as operating leases. Revenues from such leases are recognized on a straight-line basis over the terms of the lease agreements. Non-lease components of our leases are combined with the related lease components and accounted for as a single lease component under Topic 842. The balances of net real estate investments and related depreciation on our consolidated financial statements relate to assets for which we are the lessor . F-17 Table of Contents Real Estate Assets, Capital Additions, Depreciation and Amortization We capitalize costs, including certain indirect costs, incurred for capital additions, including redevelopment, development, and construction projects. We also allocate certain department costs, including payroll, at the corporate levels as “indirect costs” of capital additions, if such costs clearly relate to capital additions. We also capitalize interest, property taxes and insurance during periods in which redevelopment, development, and construction projects are in progress. Cost capitalization begins once the development or construction activity commences and ceases when the asset is ready for its intended use. Repair and maintenance and tenant turnover costs are expensed as incurred. Repair and maintenance and tenant turnover costs include all costs that do not extend the useful life of the real estate asset. Depreciation and amortization expense are computed on the straight-line method over the asset’s estimated useful life . We consider the period of future benefit of an asset to determine its appropriate useful life and anticipates the estimated useful lives of assets by class to be generally as follows: Buildings 16 – 45 years Building improvements 1 – 15 years Land improvements 5 – 15 years Furniture, fixtures and equipment 3 – 11 years In-place leases 1 – 10 years Real Estate Purchase Price Allocations In accordance with the guidance for business combinations, upon the acquisition of real estate properties, we evaluate whether the transaction is a business combination or an asset acquisition. If the transaction does not meet the definition of a business combination, we record the assets acquired, the liabilities assumed, and any non-controlling interest as of the acquisition date, measured at their relative fair values. Acquisition-related costs are capitalized in the period incurred and are added to the components of the real estate assets acquired. We assess the acquisition-date fair values of all tangible assets, identifiable intangible assets, and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on several factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant. Intangible assets include the value of in-place leases, which represents the estimated fair value of the net cash flows of leases in place at the time of acquisition, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up. We amortize the value of in-place leases to expense over the remaining non-cancelable term of the respective leases, which is on average five years . Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require us to make significant assumptions to estimate market lease rates, property operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, prevailing interest rates, and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets, and assumed liabilities, which could impact the amount of our net income (loss). Differences in the amount attributed to the fair value estimate of the various assets acquired can be significant based upon the assumptions made in calculating these estimates. Contingent Consideration in an Asset Acquisition Contingent consideration recognized is included in the initial cost of the assets acquired. Subsequent changes in the recorded amount of contingent consideration will generally be recognized as an adjustment to the cost basis of the acquired assets, in accordance with ASC 323-10-35-14a and ASC 360-10-30-1. The subsequent changes will be allocated to the acquired assets based on their relative fair value at the date of acquisition. Subsequent change in contingent consideration impacts the cost basis of acquired assets, which may also impact the statement of operations through subsequent accounting for the acquired asset. We are aware of diversity in practice regarding the subsequent treatment of the statement of operations effect of changes to the cost basis of the acquired assets. We generally believe the depreciation or amortization of these assets should be recognized as a cumulative “catch up” adjustment, as if the additional amount of consideration that is no longer contingent had been accrued from the outset of the arrangement. F-18 Table of Contents Leases The three partnerships that we acquired during the year ended June 30, 2023; 1300 Main, Main Street West and Woodland Corporate Center Two had solar equipment leases in place at the time of our acquisition. Therefore, these existing solar leases were reassessed at the acquisition date and were recorded as finance leases in accordance with ASC 842. We record leases on the consolidated balance sheet in the form of a lease liability for the present value of future minimum payments under the lease terms and a right-of-use asset equal to the lease liability adjusted for items such as deferred or prepaid rent, lease incentives, and any impairment of the right-of-use asset. The discount rate used in determining the lease liability is based upon incremental borrowing rates that we could obtain for similar loans as of the date of commencement or renewal. We do not record leases on the consolidated balance sheets that are classified as short term (less than one year). At lease inception, we determine the lease term by considering the minimum lease term and all optional renewal periods that we are reasonably certain to renew. The lease term is also used to calculate straight-line rent expense. The depreciable life of leasehold improvements is limited by the estimated lease term, including renewals if they are reasonably certain to be renewed. Our leases do not contain residual value guarantees or material variable lease payments that will impact our ability to pay dividends or cause us to incur additional expenses. The amortization of the right-of-use asset arising from finance leases is expensed through depreciation and amortization expense and the interest on the related lease liability is expensed through interest expense on our consolidated statements of operations. Impairment of Real Estate Assets We continually monitor events and changes in circumstances that could indicate that the carrying value of our real estate and related intangible assets may not be recoverable. When indicators of potential impairment emerge, we assess whether we will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this assessment, if we do not believe that we will recover the carrying value of the real estate and related intangible assets, we will record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets . No impairment charges on assets held for use were recorded for the years ended June 30, 2023 and 2022. However, we recorded an impairment loss of $ 8,121,090 and $ 9,126,461 on our assets held for sale during the year ended June 30, 2023 and 2022, respectively, which is discussed in Note 5. Gain on Dispositions of Real Estate Investments Gains on sales of rental real estate are not considered sales to customers and will generally be recognized pursuant to the provisions of ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”), which applies to sales or transfers to noncustomers of nonfinancial assets or in substance nonfinancial assets that do not meet the definition of a business. Generally, our sales of real estate would be considered a sale of a nonfinancial asset as defined by ASC 610-20. ASC 610-20 refers to the revenue recognition principles under ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). Under ASC 610-20, if we determine we do not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, we will dispose of the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer. Reportable Segments ASC 280, Segment Reporting , establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. We have one reportable segment, income-producing real estate properties, which consists of activities related to investing in real estate. The real estate properties are geographically diversified throughout the United States, and we evaluate operating performance on an overall portfolio level. F-19 Table of Contents NOTE 3 – INVESTMENTS IN REAL ESTATE The following tables provide summary information regarding our operating properties, which are owned through our subsidiaries. The ownership interest shown below is the percentage of the property owned by the subsidiary, not the percentage of the subsidiary owned by the Parent Company or the Operating Partnership . Consolidated Operating Properties Property Name: Commodore Apartments Pon de Leo Apartments Hollywood Apartments Shoreline Apartments Property Owner: Madison-PVT Partners LLC PVT-Madison Partners LLC PT Hillview GP, LLC MacKenzie BAA IG Shoreline LLC Location: Oakland, CA Oakland, CA Hollywood, CA Concord, CA Number of Tenants: 47 36 45 80 Year Built: 1912 1929 1917 1968 Ownership Interest: 100 % 100 % 100 % 100 % Property Name: Satellite Place Office Building First & Main Office Building 1300 Main Office Building Woodland Corporate Center Property Owner: MacKenzie Satellite Place Corp. First & Main, LP 1300 Main, LP Woodland Corporate Center, Two, LP Location: Duluth, GA Napa, CA Napa, CA Woodland, CA Number of Tenants: 2 8 8 14 Year Built: 2002 2001 2020 2004 Ownership Interest: 100 % 100 % 100 % 100 % Property Name: Main Street West Office Building Property Owner: Main Street West, LP Location: Napa, CA Number of Tenants: 7 Year Built: 2007 Ownership Interest: 100 % The following table presents the purchase price allocation of real estate assets acquired during the year ended June 30, 2023 based on asset acquisition accounting . Property Name: First & Main Office Building Acquisition Date: July 23, 2022 Purchase Price Allocation Land $ 966,315 Building 15,597,370 Site Improvements 795,197 Tenant Improvements 524,399 Lease in Place 796,341 Leasing Commissions 347,204 Legal & Marketing Lease Up Costs 52,007 Total assets acquired 19,078,833 Net Leasehold Asset (Liability) ( 220,100 ) Total assets acquired, net $ 18,858,733 F-20 Table of Contents Property Name: 1300 Main Office Building Acquisition Date: October 1, 2022 Purchase Price Allocation Land $ 805,575 Building 14,134,096 Tenant Improvements 323,882 Lease In Place 682,140 Leasing Commissions 250,296 Legal & Marketing Lease Up Costs 57,849 Debt Mark-to-Market 338,000 Solar Finance Lease 76,715 Total assets acquired 16,668,553 Net Leasehold Asset (Liability) 44,422 Total assets acquired, net $ 16,712,975 Property Name: Woodland Corporate Center Acquisition Date: January 3, 2023 Purchase Price Allocation Land $ 1,840,468 Building 8,766,789 Site Improvements 564,014 Tenant Improvements 397,263 Lease In Place 790,382 Leasing Commissions 163,540 Legal & Marketing Lease Up Costs 77,264 Total assets acquired 12,599,720 Net Leasehold Asset (Liability) ( 74,440 ) Total assets acquired, net $ 12,525,280 Property Name: Main Street West Office Building Acquisition Date: February 1, 2023 Purchase Price Allocation Land $ 1,433,698 Building 24,438,447 Site Improvements 9,956 Tenant Improvements 542,390 Lease In Place 926,521 Leasing Commissions 379,516 Legal & Marketing Lease Up Costs 41,152 Debt Mark-to-Market 717,000 Total assets acquired 28,488,681 Net Leasehold Asset (Liability) ( 222,065 ) Total assets acquired, net $ 28,266,616 F-21 Table of Contents The total depreciation expense of our operating properties for the years ended June 30, 2023 and June 30, 2022 was $ 3,735,162 and $ 2,866,400 , respectively . Operating Leases: Our real estate assets are leased to tenants under operating leases that contain varying terms and expirations. The leases may have provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. We retain substantially all the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, we do not require a security deposit from tenants on our commercial real estate properties, depending upon the terms of the respective leases and the creditworthiness of the tenants. Even when required, security deposits generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of the security deposit. Security deposits received in cash related to tenant leases are included in other accrued liabilities in the accompanying consolidated balance sheets and were immaterial as of June 30, 2023 and 2022 . The following table presents the components of income from real estate operations for the year ended June 30, 2023 and 2022: Year Ended June 30, 2023 2022 Lease Income - Operating leases $ 13,531,788 $ 8,783,327 Variable lease income (1) 1,575,431 1,585,847 $ 15,107,219 $ 10,369,174 (1) Primarily includes tenant reimbursements for utilities and common area maintenance. As of June 30, 2023, the future minimum rental income from our real estate properties under non-cancelable operating leases are as follows: Year ended June 30, : Rental Income 2024 $ 7,053,680 2025 6,459,497 2026 4,705,652 2027 3,616,481 2028 3,328,280 Thereafter 9,178,223 Total $ 34,341,813 Lease Intangibles, Above-Market Lease Assets and Below-Market Lease Liabilities, Net As of June 30, 2023 and 2022, our acquired lease intangibles, above-market lease assets, and below-market lease liabilities were as follows: As of June 30, 2023 Lease Intangibles Above-Market Lease Asset Below-Market Lease Liabilities Cost $ 7,760,923 $ 419,166 $ 2,346,666 Accumulated amortization ( 2,124,799 ) ( 70,653 ) ( 936,576 ) Total $ 5,636,124 $ 348,513 $ 1,410,090 Weighted average amortization period (years) 4.9 5.4 5.1 F-22 Table of Contents As of June 30, 2022 Lease Intangibles Above-Market Lease Asset Below-Market Lease Liabilities Cost $ 2,889,828 $ - $ 1,455,317 Accumulated amortization ( 586,168 ) - ( 391,738 ) Total $ 2,303,660 $ - $ 1,063,579 Weighted average amortization period (years) 5.2 - 4.9 Our amortization of lease intangibles, above-market lease assets and below-market lease liabilities for the year ended June 30, 2023, were as follows: Year Ended June 30, 2023 Lease Intangibles Above-Market Lease Asset Below-Market Lease Liabilities Amortization $ 1,538,631 $ 70,653 $ ( 544,838 ) Our amortization of lease intangibles, above-market lease assets and below-market lease liabilities for the year ended June 30, 2022, were as follows: Year Ended June 30, 2022 Lease Intangibles Above-Market Lease Asset Below-Market Lease Liabilities Amortization $ 1,677,943 $ 127,904 $ ( 292,599 ) The following table provides the projected amortization expense and adjustments to revenue from tenants for intangible assets and liabilities for the next five years: Year Ended June 30, : 2024 2025 2026 2027 2028 Thereafter In-place leases, to be included in amortization $ 1,604,141 $ 1,285,059 $ 896,991 $ 520,036 $ 454,565 $ 875,332 Above-market lease intangibles $ 115,725 $ 70,864 $ 41,731 $ 30,177 $ 26,314 $ 63,702 Below-market lease liabilities ( 451,247 ) ( 286,084 ) ( 195,626 ) ( 158,666 ) ( 133,125 ) ( 185,342 ) $ ( 335,522 ) $ ( 215,220 ) $ ( 153,895 ) $ ( 128,489 ) $ ( 106,811 ) $ ( 121,640 ) NOTE 4 – INVESTMENTS The following table summarizes the composition of our equity method investments with fair value option election and other equity securities at fair value as of June 30, 2023 and 2022: Fair Value Fair Value Asset Type June 30, 2023 June 30, 2022 Non Traded Companies $ 7,388,484 $ 11,517,226 GP Interests (Equity method investment with fair value option election) 8,716,500 18,333,000 LP Interest - 330,000 LP Interests (Equity method investment with fair value option election) 6,043,996 27,363,840 Investment Trust - 49,178 Total $ 22,148,980 $ 57,593,244 Our above total investments at fair value are disclosed in two separate lines as investments and unconsolidated investments (non-securities) in the consolidated balance sheets as of June 30, 2023 and 2022. F-23 Table of Contents The following table presents fair value measurements of our investments as of June 30, 2023 and 2022, according to the fair value hierarchy: As of June 30,2023 Asset Type Total Level I Level II Level III Non Traded Companies $ 7,388,484 $ - $ - $ 7,388,484 GP Interests 8,716,500 - - 8,716,500 LP Interests 6,043,996 - - 6,043,996 Total $ 22,148,980 $ - $ - $ 22,148,980 As of June 30,2022 Asset Type Total Level I Level II Level III Non Traded Companies $ 11,517,226 $ - $ - $ 11,517,226 GP Interests 18,333,000 - - 18,333,000 LP Interests 27,693,840 - - 27,693,840 Investment Trust 49,178 - - 49,178 Total $ 57,593,244 $ - $ - $ 57,593,244 The following is a reconciliation of the beginning and ending balances for investments measured at fair value on a recurring basis using significant unobservable inputs (Level III of the fair value hierarchy) for the year ended June 30, 2023: Balance at July 1, 2022 $ 57,593,244 Purchases of investments 1,621,948 Transfers to Level I ( 30,753 ) Transfer to Investments in Real Estate ( 8,488,467 ) Proceeds from sales, net ( 5,149,058 ) Return of capital distributions ( 12,973,337 ) Written off contingent consideration ( 57,875 ) Net realized gains 647,395 Net unrealized loss ( 11,014,117 ) Ending balance at June 30, 2023 $ 22,148,980 The transfer of $ 30,753 of investments from Level III to Level I category during the year ended June 30, 2023 resulted from one of our investments converting from a non-traded REIT to publicly traded REIT. Transfers are assumed to have occurred at the beginning of the year. For the year ended June 30, 2023, changes in unrealized loss , net included in earnings relating to Level III investments still held at June 30, 2023 were $ 2,815,465 . The following is a reconciliation of the beginning and ending balances for investments measured at fair value on a recurring basis using significant unobservable inputs (Level III of the fair value hierarchy) for the year ended June 30, 2022: Balance at July 1, 2021 $ 70,340,043 Purchases of investments 21,789,690 Transfers to Level I ( 230,160 ) Fair value adjustment on FSP Satellite Corp. units owned prior to consolidation (Note 1) ( 3,106,018 ) Proceeds from sales, net ( 33,218,158 ) Return of capital distributions ( 11,807,238 ) Net realized gains 7,277,446 Net unrealized gains 6,547,639 Ending balance at June 30, 2022 $ 57,593,244 F-24 Table of Contents The transfer of $ 230,160 of investments from Level III to Level I category during the year ended June 30, 2022 resulted from two of our investments converting from a non-traded REIT to publicly traded REIT. Transfers are assumed to have occurred at the beginning of the year. For the year ended June 30, 2022, changes in unrealized gains , net included in earnings relating to Level III investments still held at June 30, 2022 were $ 8,698,216 . The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at June 30, 2023: Asset Type Fair Value Primary Valuation Techniques Unobservable Inputs Used Range Weighted Average Non Traded Companies $ 7,388,484 Market Activity Secondary market industry publication GP Interests 8,716,500 Direct Capitalization Method Capitalization rate 6.3 % - 6.5 % 6.4 % Discount rate 6.8 % - 7.0 % 7.0 % LP Interests 6,037,176 Discounted Cash Flow Discount rate 0 % - 9.0 % 7.0 % LP Interests 6,820 Estimated Liquidation Value Sponsor provided value 12.0 % 12.0 % $ 22,148,980 The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at June 30, 2022: Asset Type Fair Value Primary Valuation Techniques Unobservable Inputs Used Range Weighted Average Non Traded Companies $ 1,011,081 Estimated Liquidation Value Sponsor provided value Liquidity discount 25.0 % - 75.0 % 25.0 % Non Traded Companies 10,506,145 Market Activity Secondary market industry publication Contracted purchase of security GP Interests 18,333,000 Market Activity Contracted purchase price LP Interests 21,550,730 Direct Capitalization Method Capitalization rate 4.0 % - 5.0 % 4.2 % Liquidity discount 15.0 % LP Interests 5,806,290 Discounted Cash Flow Discount rate 6.3 % - 9.0 % 8.6 % LP Interest 6,820 Estimated Liquidation Value Sponsor provided value Liquidity discount 12.0 % LP Interest 330,000 Market Activity Secondary market industry publication Investment Trust 49,178 Direct Capitalization Method Capitalization rate 5.0 % Liquidity discount 15.0 % $ 57,593,244 F-25 Table of Contents Summarized Financial Statements for Equity Method Investments (Fair Value Option) Our investments in securities are generally in small and mid-sized companies in a variety of industries. In accordance with the Rule 8-03(b)(3) of Regulation S-X applicable for smaller reporting companies, we must determine which of our equity method investments measured at fair value under the Fair Value Option are considered “significant”, if any. Regulation S-X mandates the use of three different tests to determine if any of our investments are considered significant investments: the investment test, the asset test, and the income test. The rule requires summarized financial statements for any significant equity method investments in an annual and interim report if any of the three tests exceed 20% . In addition to the SEC rules, ASC 323-10-50-3(c) requires summarized financial statements of our equity method investments, including those reported under the fair value option, if they are material individually or in aggregate. Our investment in Citrus Park Hotel Holdings, LLC were determined to be significant under the income test as of June 30, 2023. In addition, our equity method investments accounted under the fair value option were material in the aggregate as of June 30, 2023. The summarized financial information of Citrus Park Hotel Holdings, LLC and aggregated summarized financial information of all equity method investees as of June 30, 2023 is as follows: Citrus Park Hotel Holdings, LLC All Equity Method Investee Aggregated Total Assets $ 12,099,426 $ 92,234,499 Total Liabilities $ 1,647,262 $ 74,860,139 Total Equities $ 10,452,164 $ 17,374,360 Total Revenues $ 5,776,570 $ 14,584,111 Total Expenses $ 4,843,377 $ 14,262,874 Total Net Income $ 933,193 $ 321,237 Unconsolidated Significant Subsidiaries In accordance with SEC Rules 3-09 and 4-08(g) of Regulation S-X, we must determine which of our investments in securities are considered “significant subsidiaries”, if any. Regulation S-X mandates the use of three different tests to determine if any of our controlled investments are significant subsidiaries: the investment test, the asset test, and the income test. Rule 3-09 of Regulation S-X requires separate audited financial statements for any unconsolidated majority-owned subsidiary in an annual report if any of the three tests exceed 20%. Rule 4-08(g) of Regulation S-X requires summarized financial information in an annual report if any of the three tests exceeds 10%. As of June 30, 2023 and 2022, none of our investments in securities was considered an unconsolidated significant subsidiary under the SEC rules described above. F-26 Table of Contents NOTE 5 – ACQUISITIONS AND HELD FOR SALE Acquisition of General Partnership Interests A s discussed in Note 1, on May 6, 2022, the Operating Partnership purchased 100 % of the membership interests in the eight Management Companies that own the general partnership interests in eight limited partnerships, each of which own a Class A or B office property in Napa, Fairfield, Suisun City or Woodland, California. Each Management Company is the sole general partner of each of the limited partnerships as disclosed in the following table : General Partnership Interests Management Companies Total Purchase Price 1300 Main, LP 1300 Main, LLC $ 1,688,000 First & Main, LP First & Main, LLC 2,237,000 Green Valley Medical Center, LP Green Valley Medical Center, LLC 3,010,000 Main Street West, LP Main Street West, LLC 4,708,000 Martin Plaza Associates, LP Martin Plaza, LLC 725,000 One Harbor Center, LP One Harbor Center, LLC 4,162,000 Westside Professional Center I, LP Westside Professional Center, LLC 1,803,000 Woodland Corporate Center Two, LP Woodland Corporate Center, LLC - Total $ 18,333,000 The acquisition of general partnership interests was made in exchange for cash, preferred units in the Operating Partnership, and, in some cases, a contingent liability as shown below: General Partnership Interests Number of Preferred Units issued Amount of Preferred Units issued Cash Payments Contingent liability Total Purchase Price 1300 Main, LP - $ - $ 1,688,000 $ - $ 1,688,000 First & Main, LP 99,422.22 2,237,000 - - 2,237,000 Green Valley Medical Center, LP - - 2,410,000 600,000 3,010,000 Main Street West, LP - - 3,850,000 858,000 4,708,000 Martin Plaza Associates, LP 26,977.78 607,000 - 118,000 725,000 One Harbor Center, LP 80,266.67 1,806,000 1,571,000 785,000 4,162,000 Westside Professional Center I, LP - - 1,449,000 354,000 1,803,000 Woodland Corporate Center Two, LP - - - - - Total 206,666.67 $ 4,650,000 $ 10,968,000 $ 2,715,000 $ 18,333,000 The Operating Partnership’s preferred units are issued with a $ 25 liquidation preference, but because Wiseman agreed to a 4 -year “lock-up” we agreed to a discounted issuance price of $ 22.50 per unit. Thus, the value of the preferred units listed above is $ 22.50 per unit. As discussed in Note 1, on July 23, 2022, in addition to the general partnership interest, the Operating Partnership completed the acquisition of 100 % of the limited partnership interest in First & Main for total purchase price of $ 3,376,322 , of which $ 2,711,378 was paid through issuance of 120,505.66 Preferred Units of the Operating Partnership. On October 1, 2022, the Operating Partnership completed the acquisition of 100 % of the limited partnership interest in 1300 Main for total purchase price of $ 6,480,582 , all of which was paid in cash. The Operating Partnership completed the acquisition of 100 % of the limited partnership interests in Woodland Corporate Center Two on January 3, 2023 for a total purchase price of $ 5,636,966 , of which $ 3,242,557 was paid through the issuance of 144,113.63 Preferred Units of the Operating Partnership. The Operating Partnership completed the acquisition of 100 % of the limited partnership interests in Main Street West on February 1, 2023 for a total purchase price of $ 8,277,016 , all of which were paid in cash. F-27 Table of Contents Contingent Consideration As discussed in our June 30, 2022 consolidated financial statements, p ursuant to the membership interest purchase agreement, the purchase price paid at closing for the general partnership interests was reduced by 20 % as of the closing date for the property companies that had not received fully executed and in force leases, the annualized scheduled rents of which are equal to or greater than the target scheduled rent as stated in the membership interest purchase agreement. This 20 % holdback will be paid upon a property company reaching the stabilization threshold, reduced by stabilization costs, as defined in the membership interest purchase agreement. Management believes that it is probable that the stabilization thresholds will be reached for each of the property companies that did not meet this threshold at the acquisition date. Hence, the 20 % holdback in the amount of $ 2,715,000 was recorded as a contingent liability as of the acquisition date. During the year ended June 30, 2023, we paid $ 1,154,125 of the total contingent liability. In addition, we reduced the contingent liability by $ 57,875 as of June 30, 2023, due to the actual holdback payment on Westside Professional Center I being lower than the original estimated amount. As of June 30, 2023 and 2022, contingent liability amounted to $ 1,503,000 and $ 2,715,000 , respectively . Debt Guaranty The Wiseman partnerships have mortgage loans with various banks and the loans are guaranteed by Wiseman and its owner, Doyle Wiseman and his trust. The mortgage loans of 1300 Main, LP, One Harbor Center, LP, Martin Plaza Associates, LP, and Main Street West, LP are also guaranteed by the partnerships’ general partner as the co-guarantor . On July 1, 2022, subsequent to Operating Partnership’s acquisition of the management companies, Wiseman’s owner, Doyle Wiseman and the Operating Partnership entered into an indemnity agreement whereby the Operating Partnership will indemnify Doyle Wiseman for any losses suffered by him through the default of a limited partnership on the mortgage secured by the property owned by the limited partnership. Historically, none of the limited partnerships has had any defaults on any mortgages and Doyle Wiseman has not had to satisfy any mortgage default through a guaranty. Furthermore, each of the limited partnerships is adequately capitalized, has sufficient cash flow from operations to service the mortgage notes and has not required Doyle Wiseman to provide any subordinated financial support to the limited partnerships. Therefore, we have no t recorded any liability related to the guaranty on the mortgage loans as of June 30, 2023. Acquisition of Land The Operating Partnership acquired a parcel of entitled land of approximately 3 acres located at the corner of Business Center Drive and Healthcare Drive in Fairfield, California from Wiseman on May 6, 2022. As part of the land acquisition, the Operating Partnership acquired all development agreements and rights, civil, design and building plans, right, benefits and privileges held by Wiseman. The total acquisition price of the land was $ 3,050,000 , of which $ 750,000 was paid through the issuance of 77,882 Class A units of the Operating Partnership. Assets and Liabilities Held for Sale O n June 28, 2022, the Addison Property Owner, LLC (the “Addison Property Owner”) entered into a forbearance agreement for the sale of Addison Corporate Center with the lender of the note payable discussed in Note 10. As a result, the Addison Property Owner’s operations met the criteria to be classified as held for sale, which requires us to present the related assets and liabilities as separate line items in our consolidated balance sheets. We recorded these assets and liabilities at fair value less any costs to sell. Therefore, we recorded an impairment loss allowance of $ 9,126,461 on assets held for sale as of June 30, 2022. Due to an additional decrease in estimated fair value of the property, which was based on the estimated sale price less the estimated closing costs, we recorded an additional impairment loss allowance of $ 8,121,090 prior to the sale of the property during the year ended June 30, 2023 . On June 14, 2023, we sold Addison Corporate Center to a third party for net sales proceeds of $ 8,695,764 , after $ 304,236 of closing costs, and recognized a net loss of $ 352,540 . This is included in the net loss on disposal of real estate in the statement of operations. F-28 Table of Contents The following table presents information related to the major classes of assets and liabilities that were classified as held for sale in our consolidated balance sheets: June 30, 2023 June 30, 2022 Assets Real estate assets Land $ - $ 6,456,615 Building, fixtures and improvements - 19,108,041 Intangible lease assets - 5,154,568 Less: accumulated depreciation and amortization - ( 5,112,309 ) Total real estate assets, net - 25,606,915 Cash - 505,186 Investments income, rents and other receivables - 490,239 Due from related entities - 401 Prepaid expenses and other assets - 14,301 Allowance for impairment of assets held for sale - ( 9,126,461 ) Total assets $ - $ 17,490,581 Liabilities Deferred rent and other liabilities $ - $ 410,908 Accounts payable and accrued liabilities - 334,081 Total liabilities $ - $ 744,989 We determined that the operations included in the table above did not meet the criteria to be classified as discontinued operations under the applicable guidance. NOTE 6 – LEASES Lessee Arrangements As discussed in Note 2, we acquired three partnerships which had solar equipment leases in place. We reassessed the leases as of the acquisition date and recorded them as finance leases in accordance with ASC 842. Our leases have remaining terms of 7.33 to 7.75 years. Right-of-use assets and lease liabilities by lease type, and the associated balance sheet classifications, are as follows: Balance Sheet Classification June 30, 2023 Right-of-use assets: Finance leases Real estate assets, net $ 644,616 Lease liabilities: Finance leases Finance lease liabilities $ 628,420 We have included these leases in real estate assets , net as follows: June 30, 2023 Building, fixtures and improvements $ 658,695 Accumulated depreciation ( 14,079 ) Lease Expense $ 644,616 F-29 Table of Contents Lease Expense The components of total lease cost were as follows for the year ended June 30, 2023: June 30, 2023 Finance lease cost Right-of-use asset amortization $ 14,079 Interest expense 12,325 Total lease cost $ 26,404 Lease Obligations Future undiscounted lease payments for finance leases with initial terms of one year or more are as follows: Fiscal Year Ending June 30, : Finance Leases 2024 $ 86,361 2025 89,813 2026 93,408 2027 97,079 2028 100,960 Thereafter 286,082 Total undiscounted lease payments 753,703 Less: Imputed interest ( 125,283 ) Net lease liabilities $ 628,420 Supplemental Lease Information June 30, 2023 Finance lease weighted average remaining lease term (years) 7.53 years Finance lease weighted average discount rate 5.0 % Cash paid for amounts included in the measurement of lease liabilities Financing cash flows from finance leases $ 30,276 Right-of-use assets obtained in exchange for new finance lease liabilities $ 658,695 NOTE 7 – VARIABLE INTEREST ENTITIES A variable interest in a variable interest entity (VIE) is an investment or other interest that will absorb portions of the VIE’s expected losses and/or receive portions of the VIE’s expected residual returns. Our variable interests in VIEs include limited partnership interests. VIEs sometimes finance the purchase of assets by issuing limited partnership interests that are either collateralized by or indexed to the assets held by the VIE. The enterprise with a controlling financial interest in a VIE is known as the primary beneficiary and consolidates the VIE. We determine whether we are the primary beneficiary of a VIE by performing an analysis that principally considers: (a) which variable interest holder has the power to direct activities of the VIE that most significantly impact the VIE’s economic performance; (b) which variable interest holder has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE; (c) the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders; (d) the VIE’s capital structure; (e) the terms between the VIE and its variable interest holders and other parties involved with the VIE; and (f) related-party relationships. We reassess our evaluation of whether an entity is a VIE when certain reconsideration events occur. We reassess our determination of whether it is the primary beneficiary of a VIE on an ongoing basis based on current facts and circumstances. F-30 Table of Contents Nonconsolidated VIEs As of June 30, 2023 and 2022, four and six of our unconsolidated VIEs, respectively, include interests in limited partnerships and limited liability companies. We have determined that the Company is not the primary beneficiary of these entities because the managing partner or member of each of these entities has the power to direct the activities that most significantly affect the VIE’s economic performance. Accordingly, these VIEs have not been consolidated with us, and they have been reported as investments at fair value in the June 30, 2023 and 2022, consolidated balance sheets. The table below presents a summary of the nonconsolidated VIEs in which we hold variable interests: Total Nonconsolidated VIEs As of June 30, 2023 As of June 30, 2022 Fair value of investments in VIEs $ 6,043,996 $ 27,693,840 Carrying value of variable interests - assets $ 8,037,475 $ 19,304,856 Maximum Exposure to Loss: Limited Partnership Interest $ 8,037,475 $ 19,304,856 Our exposure to the obligations of VIEs is generally limited to the carrying value of the limited partnership interests in these entities. NOTE 8 – RELATED PARTY TRANSACTIONS Advisory Agreements Effective January 1, 2021: As discussed in Note 1, on January 26, 2021, our Board of Directors approved, effective January 1, 2021, two advisory agreements, an Advisory Management Agreement with the Real Estate Adviser and the Amended and Restated Investment Advisory Agreement with the Investment Adviser. The terms of the Advisory Management Agreement with the Real Estate Adviser provide that we will continue to pay an Asset Management Fee on essentially the same terms as we were paying the Investment Adviser prior to 2021, namely based upon a percentage of Invested Capital ( 3 % of the first $ 20 million, 2 % of the next $ 80 million, and 1.5 % over $ 100 million). Invested Capital is equal to the amount calculated by multiplying the total number of outstanding shares, preferred shares, and the partnership units (units in our operating partnership issued by us and held by persons other than us) issued by us by the price paid for each or the value ascribed to each in connection with their issuance. The Advisory Management Agreement also provides for a 2.5 % Acquisition Fee on new (non-security) purchases, subject to certain limitations designed to eliminate incentives to “churn” our assets. The new Advisory Management Agreement also provides for an incentive management fee that is equal to 15 % of all distributions once shareholders have received cumulative distributions equal to 6 % from the effective date of the Agreement. We will not pay any Property Management Fees, Debt Financing Fees, or Disposition Fees to the Real Estate Adviser. The Investment Adviser will receive an annual fee equal to $ 100 for providing the investment advice to us as to our securities portfolio under the Amended and Restated Investment Advisory Agreement. During the year ended June 30, 2023, we incurred asset management fees of $ 3,004,725 . During the year ended June 30, 2022, we incurred asset management fees of $ 2,725,588 . F-31 Table of Contents The asset management and base management fees mentioned above were based on the following quarter ended Invested Capital segregated in three columns based on the annual fee rate: Asset Management Fee Annual % 3.0% 2.0% 1.5% Total Invested Capital Quarter ended: September 30, 2022 $ 20,000,000 $ 80,000,000 $ 48,639,649 $ 148,639,649 December 31, 2022 $ 20,000,000 $ 80,000,000 $ 52,470,792 $ 152,470,792 March 31, 2023 $ 20,000,000 $ 80,000,000 $ 60,153,751 $ 160,153,751 June 30, 2023 $ 20,000,000 $ 80,000,000 $ 62,313,487 $ 162,313,487 Quarter ended: September 30, 2021 $ 20,000,000 $ 80,000,000 $ 33,927,634 $ 133,927,634 December 31, 2021 $ 20,000,000 $ 80,000,000 $ 34,242,127 $ 134,242,127 March 31, 2022 $ 20,000,000 $ 80,000,000 $ 35,848,952 $ 135,848,952 June 30, 2022 $ 20,000,000 $ 80,000,000 $ 41,870,274 $ 141,870,274 During the years ended June 31, 2023 and 2022, we did no t incur or accrue any incentive management fee under the new Advisory Management Agreement. Property Management and Leasing Services: On May 6, 2022, the Real Estate Adviser’s newly formed wholly owned subsidiary, Wiseman Company Management, LLC (“WCM”), purchased the property management and leasing services rights from Wiseman. Therefore, effective the acquisition date, WCM has been providing property management and leasing services to the eight property limited partnerships in accordance with the pre-existing agreements. There have been no changes to any of the management services agreements terms with the property limited partnerships since the acquisition of the property management service rights. During the year ended June 30, 2023, the eight limited partnerships paid total property management fees of $ 489,387 and leasing commissions of $ 591,596 to WCM. In addition, during the year ended June 30, 2023, the eight partnerships also paid $ 1,963,432 to WCM for direct operating costs and construction of tenant improvements. Organization and Offering Costs Reimbursement: As provided in the Offering Circular, offering costs incurred and paid by us in excess of $ 550,000 in connection with the offering will be reimbursed by the Advisers except to the extent that 10 % in broker fees are not incurred. In such case, the broker savings were available to be paid by us for marketing expenses or other non-cash compensation. As of June 30, 2022, we incurred $ 600,130 of offering costs on our Offering Circular to sell the preferred stock, of which $ 501,917 relates to syndication cost paid by Mackenzie on behalf of us in connection with the preferred stock offering. Total offering costs incurred as of June 30, 2022, were in an excess of the total offering cost reimbursement threshold including the broker savings by $ 21,841 . However, we increased the offering costs reimbursement threshold from $ 550,000 to $ 825,000 as noted in our updated Offering Circular filed on October 14, 2022. Therefore, the cumulative offering costs as of June 30, 2022 were below the reimbursement threshold. As of June 30, 2023, we incurred $ 1,099,189 of offering costs on our Offering Circular to sell the preferred stocks, of which $ 1,000,667 relates to syndication cost paid by Mackenzie on behalf of us in connection with the preferred stock offering. Total offering costs incurred as of June 30, 2023 were below the offering cost reimbursement threshold including the broker savings. F-32 Table of Contents Administration Agreement: Under the Administration Agreement, we reimburse MacKenzie for its allocable portion of overhead and other expenses it incurs in performing its obligations under the Administration Agreement, including furnishing us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing us with other administrative services, subject to the independent directors’ approval. In addition, we reimburse MacKenzie for the fees and expenses associated with performing compliance functions, and its allocable portion of the compensation of our Chief Financial Officer, Chief Compliance Officer, Director of Accounting and Financial Reporting, and any administrative support staff. Effective November 1, 2018, transfer agent services are also provided by MacKenzie and the costs incurred by MacKenzie in providing the services are reimbursed by us. No fee (only cost reimbursement) is being paid by us to MacKenzie for this service. The administrative cost reimbursements for the years ended June 30, 2023 and 2022 were $ 726,000 and $ 609,600 , respectively. The transfer agent services cost reimbursement for the years ended June 30, 2023 and 2022 were $ 92,000 and $ 106,401 . The table below outlines the related party expenses incurred for the years ended June 30, 2023 and 2022, and unpaid as of June 30, 2023 and 2022. Year ended Unpaid as of Types and Recipient June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Asset management fees- the Real Estate Adviser $ 3,004,725 $ 2,725,588 $ - $ - Asset acquisition fees- the Real Estate Adviser (3) 1,878,356 793,919 - - Administrative cost reimbursements- MacKenzie 726,000 609,600 - - Transfer agent cost reimbursements - MacKenzie 92,000 106,401 - - Organization & Offering Cost (2) - MacKenzie 499,689 480,076 151,132 141,397 Other expenses (1) - MacKenzie and Subsidiary’s GPs - - 5,232 72,697 Due to related entities $ 156,364 $ 214,094 (1) Expenses paid by MacKenzie and General Partner of a subsidiary on behalf of us and subsidiary. (2) Offering costs paid by MacKenzie - discussed in this note under organization and offering costs reimbursements. (3) Asset acquisition fees paid to the Real Estate Adviser were capitalized as a part of the real estate basis in accordance with our policy. The acquisition fee paid during the year ended June 30, 2023 was for the acquisition of First & Main in July 2022, 1300 Main in October 2022, Woodland Corporate Center Two in January 2023 and Main Street West in February 2023. Affiliated Investments: Coastal Realty Business Trust (“CRBT”): CRBT is a Nevada business trust whose trustee is MacKenzie. Each series of the trust has its own beneficiaries and own assets. We own the following series of CRBT and we are the only beneficiary of that series. Under the terms of the agreement, there are no redemption rights to any of the series participants. • CRBT, REEP, Inc.– A has an ownership interest in one of three general partners of a limited partnership which owns one multi-family property located in Frederick, Maryland. During the year ended June 30, 2023, the series sold the underlying investments, distributed the proceeds to us and dissolved the series. We received total proceeds of $ 81,627 and realized a gain of $ 47,637 . F-33 Table of Contents NOTE 9 – MARGIN LOANS We have a brokerage account through which we buy and sell publicly traded securities. The provisions of the account allow us to borrow on certain securities held in the account and to purchase additional securities based on the account equity (including cash). Amounts borrowed are collateralized by the securities held in the account and bear interest at a negotiated rate payable monthly. Securities pledged to secure margin balances cannot be specifically identified as a portion of all securities held in a brokerage account are used as collateral. As of June 30, 2023 and 2022, we had no margin credit available for cash withdrawal or the ability to purchase in additional securities. Accordingly, as of June 30, 2023 and 2022, there was no amount outstanding under this short-term credit line. NOTE 10 – MORTGAGE NOTES PAYABLE, NOTES PAYABLE AND DEBT GUARANTY Addison Property Owner Mortgage Notes Payable Addison Property Owner is the obligor under a note payable to Wells Fargo Bank, NA (the “Lender”) in the original loan amount of $ 32,000,000 at an interest rate of LIBOR plus 3.75 %. The loan originally matured on November 1, 2019 , and was secured by the property owned by Addison Property Owner. On June 8, 2020, as part of the Contribution Agreement, we agreed to “bad-boy” guarantee the loan and the maturity date of the loan was extended to April 30, 2021, with an option to further extend the maturity date to April 30, 2022 . In April 2021, we exercised the option and extended the loan maturity date to April 30, 2022. The principal balance of the loan immediately prior to the Loan Modification Agreement was $ 25,827,107 . The new loan principal amount due under the modified agreement was $ 24,404,257 , and the interest rate was modified to be equal to the Federal Funds Rate plus 3.75 %. The loan required payments only of interest through the maturity date; however, certain provisions of the loan agreement allow the lender to apply excess cash flow during a cash trap period to the principal balance. On April 30, 2022, the notes payable matured and Addison Property Owner was unable to extend the loan. On June 28, 2022, Addison Property Owner entered into a forbearance agreement with the Lender. The loan accrued interest at the default rate as per the loan agreement. Effective June 28, 2022, on monthly basis the lender collected all cash revenues from Addison Corporate Center and deducted funds sufficient to satisfy monthly accrued interest at the default rate, any outstanding fees and costs incurred by the lender. The excess cash was made available to the borrower for the payment of previously approved budgeted operating expenses. Any funds remaining thereafter were applied towards the unpaid loan principal balance. As discussed in Note 5, on June 14, 2023, we sold Addison Corporate Center in accordance with the forbearance agreement. The total net sales proceeds of $ 7,612,492 were applied to the loan in full satisfaction of the amounts owed. The total outstanding principal balance on the note as of the note settlement date was $ 21,633,233 after sweeping the remaining operating cash balance of $ 495,466 and the accrued interest was $ 819,987 . Therefore, after the sale, we recorded a gain on extinguishment of debt of $ 14,840,728 , as shown in the consolidated statement of operations. The outstanding loan amount as of June 30, 2022 was $ 19,604,382 . Under the Loan Modification Agreement and Replacement Guaranty, we guaranteed only the “Recourse Obligations” under the loan, which were triggered only if the guarantor of the loan engaged in “Bad Boy Acts” (such as fraud, intentional misrepresentation, willful misconduct, waste, conversion, intentional failure to pay taxes or maintain insurance, filing for bankruptcy, etc.). As of June 30, 2022, we did not record any debt guaranty obligation because (i) the Addison Property Owner was current on the loan payments, (ii) Addison Property Owner had sufficient cash flow to meet its monthly payments, and (iii) we had not engaged in inappropriate actions that would give rise to a guaranty obligation. As of June 30, 2023, we did not record any debt guaranty obligations because the Property was sold as of June 30, 2023 as discussed above. Madison and PVT Notes Payable On February 26, 2021, Madison and PVT obtained mortgage loans from First Republic Bank in the amounts of $ 6,737,500 and $ 8,387,500 , respectively, both at a fixed interest rate of 3.0 % per annum through April 1, 2026. Effective May 1, 2026, interest rates will be the average of the twelve most recently published yields on U.S. Treasury securities adjusted a constant maturity of one year as published by the Federal Reserve System in the Statistical Release H.15 plus 2.75 % per annum. The loans were obtained to finance the acquisition of the Commodore Apartments and The Park View (f/k/a as Pon De Leo Apartments), which are located in Oakland, California. The loans mature on April 1, 2031 and are cross-collateralized by both properties owned by Madison and PVT. The loan requires interest only monthly payments through April 1, 2026 and beginning May 1, 2026, monthly payments of principal and interests are due based on 360 months of amortization period. The remaining unpaid principal balance is due at maturity date. Accordingly, as of June 30, 2023 and 2022, the outstanding loan amounts for both years were $ 6,737,500 and $ 8,387,500 , on the Madison and PVT mortgage loans, respectively. F-34 Table of Contents PT Hillview Notes Payable On October 4, 2021, PT Hillview entered into a loan agreement with Ladder Capital Finance in the amount of $ 17,500,000 . The annual interest rate was equal to the greater of (i) a floating rate of interest equal to 5.5 % plus LIBOR, and (ii) 5.75 %. The loan was obtained to finance the acquisition of Hollywood Apartments. The loan matures on October 6, 2023 and can be extended for two successive 12 month terms (the “Maturity Date”) and is secured by the Hollywood Apartments. The loan requires interest-only monthly payments with the principal balance due at maturity date. Interest is due based on a 360 -day amortization period. The outstanding balances as of June 30, 2023, and June 30, 2022, were $ 17,500,000 and $ 16,804,689 , respectively, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets. PT Hillview also entered into an interest rate cap agreement on October 4, 2021, as required by the lender. We have not recorded the fair value and the changes in the fair value of the contract in our consolidated financial statements as the amounts were insignificant to our consolidated financial statements. Pursuant to Section 2.4.5 of the loan agreement, the lender determined that a substitute benchmark rate transition event occurred. Accordingly, the loan agreement was amended on March 15, 2023 to update the interest rate on the loan. Pursuant to the amendment, effective April 6, 2023, the annual interest rate shall be equal to the greater of (i) a floating rate of interest equal to 5.61148 % plus the secured overnight financing rate (SOFR) published by Federal Reserve Bank of New York, and (ii) 5.75 %. We (along with three other principals of True USA) guaranteed: (1) the “Recourse Obligations” as defined in the loan agreement, which are triggered only if the borrower of the loan engages in “Bad Boy Acts” (such as fraud, intentional misrepresentation, willful misconduct, waste, conversion, intentional failure to pay taxes or maintain insurance, filing for bankruptcy, ADA noncompliance, and environmental contamination, etc.), (2) a “Debt Service and Carry Guaranty” under the loan, which guarantees the payment of interest on the loan and other “Basic Carrying Costs”, and (3) a “Guaranty of Completion” guaranteeing that the redevelopment work contracted to be performed will be completed as agreed. As of June 30, 2023, we have not recorded any guaranty obligations since we have not engaged in any bad boy acts, substantial cash reserves are maintained to cover the basic carrying costs and the redevelopment construction work has been completed as agreed. MacKenzie Shoreline Mortgage Notes Payable On May 6, 2021, MacKenzie Shoreline entered into a loan agreement with Pacific Premier Bank, in the amount of $ 17,650,000 . The annual interest rate under the agreement is 3.65 % for the first 60 months, and a variable interest rate based on a 6 -month CME Term Secured Overnight Financing Rate plus a margin of 3.00 percentage points, for months thereafter until maturity. The loan was obtained to finance the acquisition of Shoreline Apartments. The loan matures on June 1, 2032 and is secured by Shoreline Apartments. The loan requires interest only monthly payments through June 30, 2027, and beginning July 1, 2027, monthly payments of principal and interests are due based on 360 months of amortization period. Accordingly, the outstanding loan balance as of June 30, 2023 and 2022, was $ 17,650,000 , which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets. First & Main Mortgage Notes Payable On January 4, 2021, First & Main entered into a loan agreement with Exchange Bank, in the amount of $ 12,000,000 at a fixed annual interest rate of 3.75 %. The loan was obtained to finance the acquisition of First & Main Office Building. The loan matures on February 1, 2026 and is secured by First & Main Office Building. The loan requires monthly payments of principal and interest based on a 25 -year amortization period with the remaining principal balance due at maturity. The loan is guaranteed by Wiseman, but Wiseman was subsequently indemnified by the Operating Partnership on July 1, 2022 as discussed in Note 5. The outstanding balance of the loan as of June 30, 2023 was $ 11,288,012 , which is disclosed as a part of the mortgage notes payable in the consolidated balance sheet. We consolidated First & Main with our consolidated financial statements during the quarter ended September 30, 2022, accordingly, this mortgage note payable is not included in our consolidated balance sheet as of June 30, 2022. F-35 Table of Contents The following table provides the projected principal and interest payments on the loan for the next three years: Fiscal Year Ending June 30, : Principal Interest 2024 $ 324,846 $ 417,753 2025 337,136 405,363 2026 10,626,030 230,553 Total $ 11,288,012 $ 1,053,669 First & Main Other Note Payables: Junior Debt In 2018, First & Main voted to issue $ 1,000,000 in interest-only junior promissory notes. The notes were issued in 2018 and 2019 with a maturity date of December 31, 2023 and include no prepayment penalty for early retirement. Interest on the notes is payable on the first day of each month at 7 % per annum. The promissory notes are disclosed as a part of the notes payable in the consolidated balance sheet as of June 30, 2023. We consolidated First & Main with our consolidated financial statements during the quarter ended September 30, 2022; accordingly, these notes are not included in our consolidated balance sheet as of June 30, 2022. Small Business Administration (“SBA”) Loan In June 2020, First & Main borrowed $ 151,000 from the SBA, under the Economic Injury Disaster Loan program. The loan will be paid back over 30 years at an annual interest rate of 3.75 % starting in December 2022. Monthly payments will be $ 731 . The loan is disclosed as a part of the notes payable in the consolidated balance sheet as of June 30, 2023. We consolidated First & Main with our consolidated financial statements during the quarter ended September 30, 2022; accordingly, this loan was not included in our consolidated balance sheet as of June 30, 2022. Solar System Loan (First & Main) In August 2020, First & Main borrowed $ 220,000 from The Wiseman Family Trust to fund the installation of the solar power system at First & Main Office Building. The loan will be paid back over a period of 10 years at an annual interest rate of 5 %. Monthly payments of principal and interest will be $ 1,486 . As of June 30, 2023, the outstanding balance of the loan amounted to $ 182,393 and is disclosed as a part of the notes payable in the consolidated balance sheet. We consolidated First & Main with our consolidated financial statements during the quarter ended September 30, 2022; accordingly, this loan is not included in our consolidated balance sheet as of June 30, 2022. 1300 Main Mortgage Notes Payable On April 12, 2019, 1300 Main entered into a loan agreement with Suncrest Bank, in the amount of $ 9,160,000 at a fixed annual interest rate of 4.55 % for the first 60 payments. Beginning May 25, 2024, the interest rate will be calculated on the unpaid principal balance at an interest rate based on the Prime Rate as published in the Western Edition Wall Street Journal, plus a margin of 1 %. The loan was obtained to consolidate the construction loans obtained during the development and construction of the building. The loan matures on April 25, 2029 , and is secured by 1300 Main Office Building. The loan requires monthly payments of principal and interest of $ 51,610 for 60 consecutive payments followed by 59 monthly payments of principal and interest of $ 60,674 with the remaining principal balance due at maturity. The loan is guaranteed by Wiseman, but Wiseman was subsequently indemnified by the Operating Partnership on July 1, 2022 as discussed in Note 5. The outstanding balance of the loan as of June 30, 2023 was $ 8,393,068 , which is disclosed as a part of the mortgage notes payable in the consolidated balance sheet as of June 30, 2023. We consolidated 1300 Main with our consolidated financial statements during the quarter ended December 31, 2022, accordingly, this mortgage note payable was not included in our consolidated balance sheet as of June 30, 2022. In accordance with the asset acquisition accounting, the debt assumed from the acquisition of 1300 Main was measured at fair value. The interest rate on the debt was below the current market rates, as a result, $ 338,000 of the acquisition cost was allocated to debt mark-to-market as disclosed in Note 2. The debt mark-to-market value is amortized over the remaining loan term. The debt mark-to-market value, net of accumulated amortization as of June 30, 2023 amounted to $ 177,895 and was netted against the total debt balance in the consolidated balance sheet. F-36 Table of Contents The following table provides the projected principal and interest payments on the loan for the next five years: Fiscal Year Ending June 30, : Principal Interest 2024 $ 254,268 $ 383,254 2025 360,159 367,933 2026 377,129 350,963 2027 394,900 333,192 2028 412,646 315,446 Thereafter 6,593,966 247,220 Total $ 8,393,068 $ 1,998,008 1300 Main Other Notes Payable: SBA Loan On January 13, 2021, 1300 Main borrowed $ 150,000 from the SBA, under the Economic Injury Disaster Loan program. The loan will be paid back over 30 years at an annual interest rate of 3.75 % starting in July 2023. Monthly payments will be $ 731 . The loan is disclosed as a part of the notes payable in the consolidated balance sheet as of June 30, 2023. We consolidated 1300 Main with our consolidated financial statements during the quarter ended December 31, 2022; accordingly, this loan was not included in our consolidated balance sheet as of June 30, 2022. Woodland Corporate Center Two Mortgage Notes Payable On October 2, 2019, Woodland Corporate Center Two entered into a loan agreement with Western Alliance Bank, in the amount of $ 7,500,000 at a fixed annual interest rate of 4.15 %. The loan was obtained to finance the acquisition of Woodland Corporate Center Two Office Building. The loan matures on October 7, 2024 and is secured by Woodland Corporate Center Two Office Building. The loan requires monthly payments of principal and interest based on a 5 year amortization period with the remaining principal balance due at maturity. The loan is guaranteed by Wiseman, but Wiseman was subsequently indemnified by the Operating Partnership on July 1, 2022 as discussed in Note 5. The outstanding balance of the loan as of June 30, 2023 was $ 6,827,930 , which is disclosed as a part of the mortgage notes payable in the consolidated balance sheet. We consolidated Woodland Corporate Center Two with our consolidated financial statements during the quarter ended March 31, 2023, accordingly, this mortgage note payable was not included in our consolidated balance sheet as of June 30, 2022 The following table provides the projected principal and interest payments on the loan for the next two years: Fiscal Year Ending June 30, : Principal Interest 2024 $ 201,386 $ 284,221 2025 6,626,544 92,832 Total $ 6,827,930 $ 377,053 F-37 Table of Contents Main Street West Mortgage Notes Payable On October 22, 2019, Main Street West entered into a loan agreement with First Northern Bank of Dixon, in the amount of $ 16,600,000 at a fixed annual interest rate of 4 %. The loan was obtained to finance the acquisition of Main Street West Office Building. The loan matures on November 1, 2024 and is secured by Main Street West Office Building. The loan requires monthly payments of principal and interest based on a 5 year amortization period with the remaining principal balance due at maturity. The loan is guaranteed by Wiseman, but Wiseman was subsequently indemnified by the Operating Partnership on July 1, 2022 as discussed in Note 5. The outstanding balance of the loan as of June 30, 2023 was $ 15,337,106 , which is disclosed as a part of the mortgage notes payable in the consolidated balance sheet. We consolidated Main Street West with our consolidated financial statements during the quarter ended March 31, 2023, accordingly, this mortgage note payable was not included in our consolidated balance sheet as of June 30, 2022. In accordance with the asset acquisition accounting, the debt assumed from the acquisition of Main Street West was measured at fair value. The interest rate on the debt was below the current market rates, as a result, $ 717,000 of the acquisition cost was allocated to debt mark-to-market as disclosed in Note 2. The debt mark-to-market value is amortized over the remaining loan term. The debt mark-to-market value, net of accumulated amortization as of June 30, 2023 amounted to $ 15,337,106 and was netted against the total debt balance in the consolidated balance sheet. The following table provides the projected principal and interest payments on the loan for the next two years: Fiscal Year Ending June 30, : Principal Interest 2024 $ 443,481 $ 615,658 2025 14,893,625 251,898 Total $ 15,337,106 $ 867,556 Main Street West Other Notes Payable: SBA Loan On April 7, 2021, Main Street West borrowed $ 150,000 from the SBA, under the Economic Injury Disaster Loan program. The loan will be paid back over 30 years at an annual interest rate of 3.75 % starting in September 4, 2022. Monthly payments will be $ 731 . The loan is disclosed as a part of the notes payable in the consolidated balance sheet as of June 30, 2023. We consolidated Main Street West with our consolidated financial statements during the quarter ended March 31, 2023; accordingly, this loan was not included in our consolidated balance sheet as of June 30, 2022. NOTE 11 – EARNINGS PER SHARE Basic earnings per share is computed using the weighted average number of shares outstanding. Diluted earnings per share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributed to potentially diluted securities . The following table sets forth the computation of basic and diluted earnings per share for years ended June 30, 2023 and 2022 : Year Ended Year Ended June 30, 2023 June 30, 2022 Net income (loss) attributable to common stockholders $ ( 4,793,006 ) $ 4,507,957 Basic and diluted weighted average common shares outstanding 13,282,927.98 13,340,164.03 Basic and diluted earnings per share $ ( 0.36 ) $ 0.34 F-38 Table of Contents NOTE 12 – SHARE OFFERINGS AND FEES During the year ended June 30, 2023, we issued 189,289.44 common shares with total gross proceeds of $ 1,638,720 under the DRIP. In addition, in April 2023 and July 2022, we issued 4,309.17 and 169.67 common shares at $ 10.25 per share, to the Class A unit holders of the Operating Partnership who exercised their option to convert their Class A units to our common shares. During the year ended June 30, 2023, we issued 552,587.88 preferred shares with total gross proceeds of $ 13,408,089 under the Offering Circular and incurred syndication costs of $ 1,652,903 in relation to preferred shares offering. For the year ended June 30, 2023, we issued 735.56 preferred shares with total gross proceeds of $ 75,379 under the DRIP. During the year ended June 30, 2022, we issued 128,741 common shares with total gross proceeds of $ 1,187,630 under the D RIP. In March 2022, we issued 212 common shares at $ 10.25 per share to the Class A unit holders of the Operating Partnership. The Class A units of the Operating Partnerships are convertible to our common share on 1 :1 basis. In addition, we also issued 3,172 units of common shares at $ 8.67 per share pursuant to the FSP Satellite merger as discussed in Note 1. During the year ended June 30, 2022, we issued 119,380 preferred shares with gross proceeds of $ 2,957,530 and incurred syndication costs of $ 847,167 in relation to preferred shares offering. For the year ended June 30, 2022, we issued 36.70 preferred shares with total gross proceeds of $ 826 under the DRIP. NOTE 13 – SHARE REPURCHASE PLAN During the years ended June 30, 2023 and 2022, we repurchased our own shares through our Share Repurchase Program and through third-party auctions as noted in the below table: Period Total Number of Shares Repurchased Average Repurchase Price Per Share Total Repurchase Consideration During the year ended June 30, 2023 Common stocks September 1, 2022 through September 30, 2022 40,817.06 $ 9.47 $ 386,385 December 1, 2022 through December 31, 2022 44,048.79 9.44 415,968 March 1, 2023 through March 31, 2023 58,896.45 7.38 434,656 June 1, 2023 through June 30, 2023 60,298.00 7.38 444,999 204,060.30 $ 1,682,008 Preferred stocks April 1, 2023 through April 30, 2023 1,400.00 $ 22.75 $ 31,850 Period Total Number of Shares Repurchased Average Repurchase Price Per Share Total Repurchase Consideration During the year ended June 30, 2022 December 22, 2021 5,607.89 $ 9.84 $ 55,188 January 6, 2022 through March 31, 2022 125,677.16 9.15 1,149,490 June 1, 2022 through June 30, 2022 63,695.00 8.96 570,620 194,980.05 $ 1,775,298 NOTE 14 – STOCKHOLDER DIVIDENDS On March 31, 2020, after assessing the impacts of the COVID- 19 pandemic, our Board of Directors unanimously approved the suspension of regular quarterly dividends to our stockholders. On May 10, 2021, the Board of Directors resumed the quarterly dividends after reassessing our cash flow. F-39 Table of Contents The following table reflects the dividends per share that we have declared on our common stock and preferred stock during the year ended June 30, 2023: Dividends Common Stock Preferred Stock During the Quarter Ended Per Share Amount Per Share Amount September 30, 2022 $ 0.105 $ 1,390,290 $ 0.375 $ 87,884 December 31, 2022 0.110 1,456,391 0.375 155,909 March 31, 2023 0.115 1,520,985 0.375 209,620 June 30, 2023 0.120 1,586,864 0.375 242,188 $ 0.450 $ 5,954,530 $ 1.500 $ 695,601 During the year ended June 30, 2023, we paid common dividends of $ 5,691,554 , of which $ 1,638,739 have been reinvested under our DRIP. During the year ended June 30, 2023, we paid preferred dividends of $ 491,410 , of which $ 75,379 have been reinvested under our DRIP. Preferred and common dividends declared during the year ended June 30, 2023 were paid in July 2023 . The following table reflects the distributions declared by the Operating Partnership for the Class A and Preferred unit holders during the year ended June 30, 2023: Dividends Class A Units Preferred Units During the Quarter Ended Per Share Amount Per Share Amount September 30, 2022 $ 0.105 $ 9,403 $ 0.375 $ 107,626 December 31, 2022 0.110 9,851 0.375 122,884 March 31, 2023 0.115 10,299 0.375 177,222 June 30, 2023 0.120 10,229 0.375 177,589 $ 0.450 $ 39,782 $ 1.500 $ 585,321 The following table reflects the dividends per share that we have declared on our common stock and preferred stock during the year ended June 30, 2022 : Dividends Common stock Preferred stock During the Quarter Ended Per Share Amount Per Share Amount September 30, 2021 $ 0.130 * $ 1,731,482 $ - $ - December 31, 2021 0.080 1,068,612 0.125 440 March 31, 2022 0.090 1,193,841 0.375 18,507 June 30, 2022 0.100 1,323,888 0.375 37,982 $ 0.400 $ 5,317,823 $ 0.875 $ 56,929 * $ 0.06 per share of dividend for the quarter ended June 30, 2021 was declared subsequently in July 2021 ; therefore, it is included in the dividend declared during the quarter ended September 30, 2021 . During the year ended June 30, 2022, we paid total dividends of $ 4,012,882 of which $ 1,188,456 has been reinvested under our DRIP. Dividends declared during the quarter ended June 30, 2022 , were paid on July 29, 2022 . Total distributions declared by the Operating Partnership for the Class A unit holders during the year ended June 30, 2022, was $ 9,985 (which was $ 0.40 per unit), of which $ 723 ( $ 0.06 per unit) was related to dividend declared for the quarter ended June 30, 2021. Total distributions declared by the Operating Partnership for the preferred unit holders during the year ended June 30, 2022 was $ 51,667 (which was 0.25 per unit). On July 14, 2023 , we declared the Series A Preferred stock quarterly dividend of $ 0.375 per share payable at the rate of $ 0.125 per month for holders of record as of July 31, 2023 , August 31, 2023 , and September 30, 2023 . Subsequently, on September 18, 2023 , we declared the Series A Preferred stock quarterly dividend of $ 0.375 per share payable at the rate of $ 0.125 per month for holders of record as of October 31, 2023 , November 30, 2023 , and December 31, 2023 . The preferred stock dividend declared on July 14, 2023, will be paid on or about October 15, 2023 , and the preferred stock dividend declared on September 18, 2023, will be paid on or about January 15, 2024 . On September 18, 2023 , we also declared the common stock quarterly dividend of $ 0.125 per share for the quarter ended September 30, 2023. The common stock dividend declared on September 18, 2023 will be paid on or about October 30, 2023 , to record holders as of September 30, 2023 . F-40 Table of Contents MacKenzie Realty Capital, Inc. Schedule III- Real Estate Properties and Accumulated Depreciation June 30, 2023 Initial Costs Subsequent Acquisition Subsequent Disposal Gross Amount Carried at Property: Acquisition Date Encumbrances at June 30, 2023 Land Building & Improvements Land Building & Improvements Land Building & Improvements June 30, 2023 Accumulated Depreciation Commodore Apartment Building March 5, 2021 $ 6,737,500 $ 5,519,963 $ 7,558,560 $ - $ 68,349 $ - $ - $ 13,146,872 $ ( 596,684 ) The Park View Building March 5, 2021 8,387,500 4,317,013 11,833,069 - 94,254 - - 16,244,336 ( 777,443 ) Hollywood Property October 4, 2021 17,404,780 8,704,577 13,949,357 - 251,288 - - 22,905,222 ( 803,507 ) Shoreline Apartments May 16, 2022 17,603,428 7,559,390 20,124,777 - 305,034 - - 27,989,201 ( 891,815 ) Satellite Place June 1, 2022 - 2,966,129 10,716,785 - 194,112 - - 13,877,026 ( 703,210 ) MRC Aurora (f/k/a WW Land) May 6, 2022 - 3,050,000 - - 361,095 - - 3,411,095 - First & Main Office Building July 23, 2022 11,288,012 966,314 16,917,134 - 34,942 - - 17,918,390 ( 428,101 ) 1300 Main Office Building October 1, 2022 8,215,173 805,575 14,567,200 - 76,111 - - 15,448,886 ( 253,377 ) Woodland Corporate Center January 3, 2023 6,827,930 1,840,468 10,208,686 - 3,514 - - 12,052,668 ( 192,316 ) Main Street West Office Building February 1, 2023 14,783,061 1,433,698 25,192,993 - 27,410 - - 26,654,101 ( 270,669 ) $ 91,247,384 $ 37,163,127 $ 131,068,561 $ - $ 1,416,109 $ - $ - $ 169,647,797 $ ( 4,917,122 ) A summary of activity for real estate and accumulated depreciation for the years ended June 30, 2023 and 2022 : Year Ended June 30, Real Estate 2023 2022 Balance at the beginning of the year $ 96,299,620 $ 54,641,596 Additions - acquisitions 73,348,177 67,519,697 Disposals - ( 297,017 ) Reclassified to assets held for sale - ( 25,564,656 ) Balance at the end of the year $ 169,647,797 $ 96,299,620 Accumulated Depreciation Balance at the beginning of the year $ 1,181,962 $ 1,107,466 Depreciation expense 3,735,160 2,866,400 Disposals - ( 49,711 ) Reclassified to assets held for sale *1 - ( 2,742,193 ) Balance at end of the year $ 4,917,122 $ 1,181,962 *1 Excludes $ 2,370,116 of accumulated amortization associated with acquired intangible assets reclassified as held for sale for the year ended June 30, 2022. S-1 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. MACKENZIE REALTY CAPITAL, INC. (Registrant) By: /s/ Robert Dixon Robert Dixon Chief Executive Officer Date: September 28, 2023 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Robert Dixon Chief Executive Officer September 28, 2023 Robert Dixon (Principal Executive Officer) /s/ Angche Sherpa Chief Financial Officer September 28, 2023 Angche Sherpa (Principal Financial and Accounting Officer) /s/ Chip Patterson Director September 28, 2023 Chip Patterson /s/ Tim Dozois Director September 28, 2023 Tim Dozois /s/ Tom Frame Director September 28, 2023 Tom Frame