What changed in this filing

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Item 7. Management’s Discussion and Analysis

2020-09-21 compared with 2019-09-23 · 186 added, 144 removed, 217 unchanged (60% of the section changed)

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"expect," "should," "would," "if," "seek," "possible," "potential," "likely" or the negative of such terms or comparable terminology.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause

our actual results, levels of activity, performance or achievements to be materially different from any anticipated results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.

For a discussion

of factors that could cause our actual results to differ from forward-looking statements contained herein, please see the discussion under the heading "Risk Factors" above.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our

actual results, levels of activity, performance or achievements to be materially different from any anticipated results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.

For a discussion of

factors that could cause our actual results to differ from forward-looking statements contained herein, please see the discussion under the heading "Risk Factors" above.

We may experience fluctuations in our operating results due to a number of factors, including the return on our equity investments, the interest rates payable on our debt investments, the default

rates on such investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions.

result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

We are an externally managed non-diversified closed-end management investment company that has elected to be treated as a BDC under the 1940 Act.

We generally invest in equity or debt securities issued by real estate

companies, including REITs and similar REIT-like entities.

Our objective is to generate both current income and capital appreciation through real estate-related investments.

We have elected to be treated as a REIT under the Code and as a REIT, we

are not subject to federal income taxes on amounts that we distribute to the stockholders, provided that, on an annual basis, we distribute at least 90% of our REIT taxable income to the stockholders and meet certain other conditions.

To the extent

that we satisfy the annual distribution requirement but distribute less than 100% of our taxable income, we will be subject to an excise tax on our undistributed taxable income.

of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

We are an externally managed non-diversified closed-end management investment company.

We are currently treated as a BDC under the 1940 Act, but our Board of Directors has recommended to our shareholders that we

withdraw our election to be regulated as a BDC.

We generally invest in equity or debt securities issued by real estate companies, including REITs and similar REIT-like entities.

Our objective is to generate both current income and capital

appreciation through real estate-related investments.

We have elected to be treated as a REIT under the Code and as a REIT, which means we are not subject to federal income taxes on amounts that we distribute to the stockholders, provided that, on an

annual basis, we distribute at least 90% of our REIT taxable income to the stockholders and meet certain other conditions.

To the extent that we satisfy the annual distribution requirement but distribute less than 100% of our taxable income, we will

be subject to an excise tax on our undistributed taxable income.

We are managed by the Adviser, and MacKenzie provides the non-investment management services and administrative services necessary for us to operate.

At our board meeting on August 28, 2020, our Board of Directors approved the proposal to withdraw of our BDC election, while continuing our REIT status.

Therefore, on October 23, 2020, our stockholders will be asked to

approve the withdrawal of our BDC election.

If this proposal is approved, the Company will, effective upon receipt by the SEC of the Company’s application for withdrawal, no longer be regulated as a BDC or subject to the regulatory provisions of the

Investment income

We generate revenues in the form of capital gains and dividends on dividend-paying equity securities or other equity interests that we acquire, in addition to interest on any debt investments that we hold.

we may generate revenue in the form of commitment, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees.

Any such fees are generated in

connection with our investments and recognized as earned.

may generate revenue in the form of commitment, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees.

Any such fees are generated in connection

with our investments and recognized as earned.

Our primary operating expenses include the payment of:

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and (iii) other operating expenses as detailed below.

Our investment advisory fees compensate our Adviser for its work in identifying,

evaluating, negotiating, closing, monitoring and servicing our investments the Investment Advisory Agreement .

Our expenses must be billed to and paid by us, except that a sponsor may be reimbursed for actual

cost of goods and services used by us and certain necessary administrative expenses.

Our investment advisory fees compensate our Adviser for its work in identifying, evaluating,

negotiating, closing, monitoring and servicing our investments the Investment Advisory Agreement .

Our expenses must be billed to and paid by us, except that a sponsor may be reimbursed for actual cost of goods

and services used by us and certain necessary administrative expenses.

We bear all other expenses of our operations and transactions, including:

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costs associated with our reporting and compliance obligations under the 1934 Act, the 1940 Act and applicable federal and state securities laws;

all other expenses incurred by either MacKenzie or us in connection with administering our business, including payments under the Administration Agreement that are based upon our allocable portion of overhead and other expenses

incurred by MacKenzie in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and

related expenses of our chief compliance officer and our chief financial officer and any administrative support staff.

MacKenzie in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and related expenses of

our chief compliance officer and our chief financial officer and any administrative support staff.

In addition, we will bear organization and offering expenses in connection with our current public offering up to $1,650,000.

Any additional amounts with respect to shares being sold pursuant to the second public

Any additional amounts with respect to shares being sold pursuant to the third public

offering will be paid by our Adviser except to the extent the full 10.0% in broker fees are not incurred.

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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.

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.

Fair Value Measurements

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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 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:

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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

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.

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.

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.

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We may value securities that do not trade on a national exchange by using published secondary market trading information.

so, we first confirm that GAAP recognizes the trading price as the fair value of the security.

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

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Our NAV as of June 30, 2020, was $8.04 per share compared to $9.44 per share at June 30, 2019, a $1.40 per share decrease of approximately 14.8%.

The net decrease was due to

(i) a dividend to stockholders of $0.73 per share (on a weighted average basis), (ii) net unrealized loss of $0.40 per share, and (iii) issuance of shares (net of selling commissions and dealer manager fees) below NAV per share resulting in a

decrease of a $0.21 per share.

The decreases were partly offset by increases resulting from (i) net investment income of $0.57 per share, (ii) net realized gain on sale of investments of $0.12 per share, and (iii) redemption of shares below NAV

resulting in gain of $0.02 per share.

decrease was due to (i) net unrealized loss of $1.39 per share, and (ii) a dividend to stockholders of $0.45 per share (on a weighted average basis).

The decreases were partly offset by increases resulting from (i) net investment income of $0.28 per

share, (ii) net realized gain on sale of investments of $0.15 per share, and (iii) redemption of shares below NAV resulting in gain of $0.01 per share.

Results of Operations

COVID-19 pandemic

Considerable uncertainty still surrounds the COVID-19 pandemic and its potential effects, and the extent of and effectiveness of any responses taken on a national and local level.

However, measures taken to limit the

impact of the COVID-19 pandemic, including social distancing and other restrictions on travel, congregation, and business operations have already resulted in significant negative economic impacts, including steep declines in certain stock market

segments and in the traded prices for certain real-estate related assets.

As a result of these impacts, we have experienced a large decrease in fair values of some of our investments as of June 30, 2020.

In addition, some of the companies in which we

have invested have cancelled their quarterly dividends and distributions for the current and future quarters.

While these cancellations did not have a significant impact on the Company’s total investment income for the quarter ended June 30, 2020,

the Company anticipates these cancellations will have a larger impact in future quarters.

The long-term impact of the COVID-19 pandemic on the United States and world economies remains uncertain, but may result in a world-wide economic downturn, the

duration and scope of which cannot currently be predicted.

MacKenzie and our Adviser have taken numerous steps, and will continue to take further actions, to address the COVID-19 pandemic.

They implemented business continuity plans and the management team is in place to

respond to changes in the global environment quickly and effectively.

To protect the health and safety of their team members, they successfully transitioned almost their entire workforce to remote work environments.

They are working closely with our

clients to support them as necessary and as seamlessly as possible.

The situation surrounding the COVID-19 pandemic remains fluid, and we are actively managing our response and assessing potential impacts to our financial position and operating results.

This includes the evaluation and

implementation of certain efforts to help us mitigate the impact that reduced revenues from distributions and capital events may have on our 2020 financial results.

We are focusing on maintaining a strong balance sheet and liquidity position and

searching for opportunistic investments.

In anticipation of reduced revenues and uncertain future economic conditions, the board of directors discontinued dividends starting March 2020 and share redemptions starting May 2020.

Investment income

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Dividend and distribution income for Fiscal 2020 was $8.38 million compared to $11.51 million for Fiscal 2019.

This decrease of $3.13 million or 27.2% was due to decreases in distribution income from sales and

liquidating transactions and dividend income during Fiscal 2020.

The decreases were partly offset by an increase in distribution income from operations.

During Fiscal 2020, the Company received distribution income from sales and liquidating

transactions of $1.70 million compared to $6.07 million during Fiscal 2019, resulting in a decrease of $4.37 million.

During Fiscal 2020, the Company received total dividends of $2.06 million compared to $2.32 million during Fiscal 2019, resulting in

a decrease of $0.26 million.

During Fiscal 2020, the Company received $4.62 million of distribution income from operations compared to $3.12 million during Fiscal 2019, resulting in an increase of $1.50 million.

Dividend and distribution income for Fiscal 2019 was $11.51 million compared to $6.52 million for Fiscal 2018.

This increase of $4.99 million or 76.5% was attributed two factors;

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million (excluding the decrease in debt securities) in cost basis since June 30, 2018.

Dividend and distribution income for Fiscal 2018 was $6.52 million compared to $4.74 million for Fiscal 2017.

This increase of $1.78 million or 37.6% was attributed two factors;

(i) larger amounts of sales

distributions received during Fiscal 2018 and (ii) an increase in our investment portfolio since June 30, 2017.

During Fiscal 2018, the Company received sales and liquidating distributions of $2.80 million from seven investments compared to $1.88

million from six investments during Fiscal 2017, resulting in additional $0.92 million of sales distribution income in Fiscal 2018.

The remaining increase of $0.86 million was due to a net increase in our overall investment portfolio by $19.75

million (excluding the increases in debt securities) in cost basis since June 30, 2017.

Interest and other income:

Interest and other income for Fiscal 2020 and 2019 remained comparable at $0.35 million and $0.37 million, respectively.

Interest and other income for Fiscal 2019 and 2018 were $0.37 million compared to $0.46 million, respectively.

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The debt security earned interest for most of Fiscal 2018.

Interest and other income for Fiscal 2018 and 2017 were $0.46 million compared to $0.04 million, respectively.

This increase of $0.42 million was mainly due to investment in a debt security of $1.1 million, which

earned interest income as well as loan origination fees during Fiscal 2018.

Also, the increase was partially due to the Company receiving settlement proceeds from a class action lawsuit and contingent liquidation proceeds on previously liquidated

Operating Expenses

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The base management fee for Fiscal 2020 was $2.55 million compared to $2.21 million for Fiscal 2019.

The increase was due to the increase in the Gross Invested Capital during Fiscal 2019.

The Gross Invested Capital

as of June 30, 2019 was $109.26 million compared to $84.96 million as of June 30, 2018.

The increase of $0.34 million was due to the increase in the Gross Invested Capital during Fiscal 2020.

Invested Capital as of June 30, 2020 was $128.61 million compared to $109.26 million as of June 30, 2019.

The base management fee for Fiscal 2019 was $2.21 million compared to $1.73 million for Fiscal 2018.

The increase was due to the increase in the Gross Invested Capital during Fiscal 2019.

The Gross Invested Capital

as of June 30, 2018 was $84.96 million compared to $60.97 million as of June 30, 2017.

The Gross Invested Capital as

of June 30, 2019 was $109.26 million compared to $84.96 million as of June 30, 2018.

Portfolio structuring fee :

The portfolio structuring fee for Fiscal 2019 and 2018 remained comparable at $0.71 million and $0.69 million, respectively.

The fee remained comparable as the gross proceeds from new shares issued (excluding the

DRIP shares) during Fiscal 2019 and 2018 remained comparable at $23.24 million and $23.01 million, respectively.

The portfolio structuring fee for Fiscal 2020 was $0.59 million compared to $0.71 million for Fiscal 2019.

The increase of $0.11 million or 19.0% was due to higher amount of capital raised during Fiscal 2018.

The decrease of $0.12 million or 16.9% was due to smaller amount of capital raised during Fiscal 2020.

Fiscal 2020, the Company issued new shares with total gross proceeds of $19.51 million (excluding the DRIP shares) as compared to $23.24 million (excluding the DRIP shares) during Fiscal 2019

The portfolio structuring fee for Fiscal 2019 and 2018 remained comparable at $0.71 million and $0.69 million, respectively.

The fee remained comparable as the gross proceeds from new shares issued (excluding the DRIP

shares) during Fiscal 2019 and 2018 remained comparable at $23.24 million and $23.01 million, respectively.

Subordinated incentive fee:

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The subordinated incentive fee has two parts—the Income Fee and the Capital Gains Fee.

The Capital Gains Fee is based

on realized gains including distributions received from sales/capital transactions and the Income Fee is based on net investment income.

There was no Income Fee for Fiscal 2019, as the net investment income for these periods was below the threshold of 7% of Contributed Capital per annum.

The Capital Gains Fee is based on

realized gains including distributions received from sales/capital transactions and the Income Fee is based on net investment income.

There was neither Income Fee nor the Capital Gains Fee for Fiscal 2020, as the net investment income for Fiscal 2020 and the cumulative realized capital gains as of June 30, 2020 were below the threshold of 7% of

Contributed Capital per annum.

There was no Income Fee for Fiscal 2019, as the net investment income for Fiscal 2019 was below the threshold of 7% of Contributed Capital per annum.

The Capital Gains Fee for Fiscal 2019 was $1.79 million as the

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agreement through June 30, 2018, together with the cumulative net realized gains exceeded the threshold of 7% of the Company’s Contributed Capital per annum resulting in the Income Fee and Capital Gains Fee for that period.

The Capital Gains Fee for Fiscal 2017 was $0.23 million as the cumulative net realized gains as of June 30, 2017, exceeded the threshold of 7% of the Company’s Contributed Capital per annum.

However, there was no

subordinated Income Fee for Fiscal 2017 since the net investment income was below the threshold that triggers the subordinated Income Fee.

Administrative cost and Transfer agent reimbursements:

Costs reimbursed to Mackenzie for Fiscal 2020 and 2019 were $0.68 million and $0.57 million, respectively.

The increase was primarily due to an increase in the allocable portion of overhead and other expenses

incurred by MacKenzie since June 30, 2018, as a result of increase in the Company’s operating activities.

The increase was primarily due to an increase in the allocable portion of overhead and other expenses incurred

by MacKenzie since June 30, 2019, as a result of increase in the Company’s operating activities.

Costs reimbursed to Mackenzie for Fiscal 2019 and 2018 were $0.57 million and $0.43 million, respectively.

The increase was primarily due to an increase in the allocable portion of overhead and other expenses incurred

by MacKenzie since June 30, 2018, as a result of increase in the Company’s operating activities.

Effective November 1, 2018, transfer agent services are also provided by MacKenzie in-house and the costs incurred by MacKenzie in providing the services are reimbursed by the Company.

No fee (only cost

reimbursement) is being paid by the Company to MacKenzie for this service, but the Company is reimbursing MacKenzie for the cost of certain software purchased to implement the service.

This service was previously provided by a third party and the

cost incurred were expensed under other general and administrative expenses.

No fee (only cost reimbursement)

is being paid by the Company to MacKenzie for this service, but the Company is reimbursing MacKenzie for the cost of certain software purchased to implement the service.

This service was previously provided by a third party and the cost incurred were

expensed under other general and administrative expenses.

Transfer agent cost reimbursement paid to MacKenzie for Fiscal 2020 was $0.08 million.

Transfer agent service fees paid to the third party for Fiscal 2019 (during the

period MacKenzie did not provide the service) was $0.03 million.

Transfer agent cost reimbursement paid to MacKenzie for Fiscal 2019 was $0.02 million and transfer agent service fees paid to the

third party for Fiscal 2019 during the period MacKenzie did not provide the service was $0.03 million.

Transfer Agent services fees paid to the third party for Fiscal 2018 was $0.04 million.

Costs reimbursed to Mackenzie for Fiscal 2018 and 2017 were $0.43 million and $0.22 million, respectively.

The increase was primarily due to an increase in the allocable portion of overhead and other expenses

incurred by MacKenzie since June 30, 2017, as a result of increase in the Company’s operating activities.

Amortization of deferred offering costs:

Amortization of deferred offering costs for Fiscal 2020 and Fiscal 2019 were $0.88 million and $0.56 million, respectively.

The increase of $0.32 million or 57.1% was primarily due to amortization of the remaining

unamortized deferred offering costs relating to the second public offering after the offering concluded in October 2019.

According to our accounting policy, offering costs are capitalized as deferred offering costs as incurred by the Company and

subsequently amortized to expense over a twelve-month period.

Any deferred offering costs that have not been amortized upon the expiration or earlier termination of an offering will be accelerated and expensed upon such expiration or termination.

Amortization of deferred offering costs for Fiscal 2019 and Fiscal 2018 were $0.56 million and $0.37 million, respectively.

The increase of $0.19 or 51.4% was primarily due to increase in the offering costs during

Deferred offering cost incurred during Fiscal 2019 was $0.71 million as compared to $0.42 million during Fiscal 2018.

Amortization of deferred offering costs for Fiscal 2018 and Fiscal 2017 were $0.37 million and $0.31 million, respectively.

These amounts were comparable as the Company incurred a comparable amount of deferred

offering costs on its second public offering during these two fiscal years.

During Fiscal 2018, the Company incurred deferred offering costs of $0.42 million which is comparable to $0.56 million incurred during Fiscal 2017.

Other operating expenses:

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Other operating expenses for Fiscal 2020 and 2019

remained comparable at $0.40 million and $0.44 million, respectively.

were $0.48 million and $0.40 million, respectively.

The increase of $0.08 million or 20.0% was mainly due to increases in the Company’s professional fees.

The Company incurred additional professional fees during Fiscal 2020 in the process of

restructuring and taking control of one of its investments.

Other operating expenses includes professional fees, directors’ fees, legal expenses, audit fees, printing and mailing and other general and administrative expenses.

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Net realized gain on sale of investments

Total net realized gains for Fiscal 2020 was $1.80 million realized from sales and liquidations of three non-traded REIT securities with realized gains of $0.20 million, three limited partnership interests with net

realized gains of $0.41 million and four publicly traded securities with realized gains of $1.19 million.

Total net realized gains for Fiscal 2019 was $1.20 million realized from sales and liquidation of twelve non-traded REIT securities with net realized gains of $3.24 million.

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partnership interests with net realized gains of $0.53 million.

The realized gains were offset by a realized loss of $0.84 million from sales of twenty-one publicly traded securities and $0.06 million from the liquidation of Coastal Realty

Business Trust, Series H2-A.

Total net realized gains for Fiscal 2017 was $1.60 million realized from (i) sales of fourteen publicly traded securities with net realized gains of $0.42 million, and (ii) sales and merger of four non-traded REITs

with net realized gains of 1.37 million, (iii) offset by net realized loss of $0.19 million from sales and liquidations of seven limited partnership interests.

The realized gains were offset by a realized loss of $0.84 million from sales of twenty-one publicly traded securities and $0.06 million from the liquidation of Coastal Realty Business

Trust, Series H2-A.

Net unrealized gain (loss) on investments

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The reclassification adjustment was the

accumulated unrealized gain as of June 30, 2018, that was realized during Fiscal 2019.

Accordingly, the net unrealized loss excluding the realized gains reclassification adjustment were $1.56 million, which resulted from fair value depreciation

of $2.05 million of limited partnership interests and $0.03 million of publicly-traded securities offset by fair value appreciation of $0.52 million of non-traded REIT securities.

The large fair value depreciation in limited partnership interests

mostly resulted from distributions of sales proceeds by two partnerships (The Weatherly, LTD and The Weatherly Building, LLC) following the sales of underlying properties.

The Company recorded $3.3 million of distribution income from sales

transactions, which is a part of the investment income discussed above, from these two partnerships during Fiscal 2019.

During Fiscal 2018, the Company recorded net unrealized gains of $5.85 million, which were net of the reclassification adjustment of $1.91 million of realized gains.

The reclassification adjustment was the

accumulated unrealized gain as of June 30, 2017, that was realized during Fiscal 2018.

Accordingly, the net unrealized gains excluding the realized gains reclassification adjustment were $7.76 million, which resulted from fair value appreciation

of $5.19 million of limited partnership interests and $2.59 million of non-traded REIT securities offset by fair value depreciation of $0.02 million of publicly traded securities.

accumulated unrealized gains as of June 30, 2019, that were realized during Fiscal 2020.

Accordingly, the net unrealized loss excluding the realized gains reclassification adjustment was $15.80 million, which resulted from fair value depreciations

of $11.42 million of non-traded REIT securities, $3.17 million of limited partnership interests and $1.21 million of publicly traded securities.

The significant declines in fair value during Fiscal 2020 were mainly due to the COVID-19 pandemic

resulting in steep declines in certain domestic stock market segments and in the traded prices for other financial assets as discussed above.

During Fiscal 2019, the Company recorded net unrealized loss of $3.96 million, which were net of the reclassification adjustment of $2.40 million of realized gains.

The reclassification adjustment was the accumulated

unrealized gain as of June 30, 2018, that was realized during Fiscal 2019.

Accordingly, the net unrealized loss excluding the realized gains reclassification adjustment were $1.56 million, which resulted from fair value depreciation of $2.05

million of limited partnership interests and $0.03 million of publicly traded securities offset by fair value appreciation of $0.52 million of non-traded REIT securities.

The large fair value depreciation in limited partnership interests mostly

resulted from distributions of sales proceeds by two partnerships (The Weatherly, LTD and The Weatherly Building, LLC) following the sales of underlying properties.

The Company recorded $3.3 million of distribution income from sales transactions,

which is a part of the investment income discussed above, from these two partnerships during Fiscal 2019.

During Fiscal 2018, the Company recorded net unrealized gains of $5.85 million, which were net of the reclassification adjustment of $1.91 million of realized gains.

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accumulated unrealized gain as of June 30, 2017, that was realized during Fiscal 2018.

Accordingly, the net unrealized gains excluding the realized gains reclassification adjustment were $3.39 million, which resulted from fair value appreciation

of $1.64 million of non-traded REIT securities and $1.94 million from limited partnership interests, offset by fair value depreciation of $0.19 million of publicly traded securities and investment trusts.

Accordingly, the net unrealized gains excluding the realized gains reclassification adjustment were $7.76 million, which resulted from fair value appreciation of

$5.19 million of limited partnership interests and $2.59 million of non-traded REIT securities offset by fair value depreciation of $0.02 million of publicly traded securities.

Income tax provision (benefit)

The Parent Company did not record any income tax expenses for Fiscal 2020, 2019, or 2018, as we have elected to be treated as a REIT for tax purposes beginning with the tax year ended December 31, 2014.

the Parent Company is not subject to federal income taxes on amounts that it distributes to the stockholders, provided that, on an annual basis, it distributes at least 90% of its REIT taxable income to the stockholders and meets certain other

As a REIT, the

Parent Company is not subject to federal income taxes on amounts that it distributes to the stockholders, provided that, on an annual basis, it distributes at least 90% of its REIT taxable income to the stockholders and meets certain other

The Parent Company satisfied the annual dividend payment and other REIT requirements for the tax year ended December 31, 2019, 2018, and 2017.

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Parent Company had net unrealized built-in gains of $239,595, for which the Parent Company recorded an estimated tax liability of $95,431 as of December 31, 2013.

Accordingly, in each subsequent period, the Parent Company only recorded the

difference between the actual and estimated tax on the built-in gains it realized during the year as income tax expense or benefit.

All unrealized built-in gains after December 31, 2018 were not taxable as the five-year period following the REIT

election date ended on December 31, 2018.

Therefore, the remaining deferred tax liabilities on the unrealized built-in gains were reversed as of June 30, 2019.

Accordingly, in each subsequent period, the Parent Company only recorded the difference

between the actual and estimated tax on the built-in gains it realized during the year as income tax expense or benefit.

All unrealized built-in gains after December 31, 2018 were not taxable as the five-year period following the REIT election date

ended on December 31, 2018.

Therefore, the remaining deferred tax liabilities of $13,348 on the unrealized built-in gains were reversed as of June 30, 2019.

TRS is subject to corporate federal and state income tax on its taxable income at regular statutory rates.

However, for the year ended June 30, 2019 and 2017, TRS did not have any taxable income;

However, for the years ended June 30, 2020 and 2019, TRS did not have any taxable income;

therefore, TRS did

not record any income tax provisions.

The income tax expense of $800 for the year ended June 30, 2017, was the minimum state tax paid by TRS.

For the year ended June 30, 2019, it recorded an income tax provision of $6,723.

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Capital Resources

We are offering to sell up to $150 million of shares under our current registered offering, although we believe it improbable that all shares will be sold prior to the end of the offering.

As of June 30, 2019, the

Company has raised total gross proceeds of $99.38 million from the issuance of shares under two public offerings, $42.46 million from the IPO, which concluded in October 2016, and $56.92 million from the current public offering.

In addition, we

have raised $8.27 million from the issuance of shares under the DRIP.

Of the total capital raised as of June 30, 2019, $6.26 million worth of shares have been repurchased under the Company’s share repurchase program.

We do not have any plans to

issue any preferred equity.

We plan to fund future investments with the net proceeds raised from our second offering and any future offerings of securities and cash flows from operations, as well as interest earned from the temporary investment of

We offered to sell up to $150 million of shares under our second public offering which ended on October 28, 2019.

In September 2019, we filed our third registration statement with

the SEC for the public offering of 15 million shares with total potential gross proceeds of $153.75 million.

The third registration statement was declared effective by the SEC on October 31, 2019 and the public offering commenced shortly thereafter.

As of June 30, 2020, the Company has raised total gross proceeds of $118.88 million from the issuance of shares under three public offerings, $42.46 million from the IPO, which concluded in October 2016, and $67.99 million from the second public

offering and $8.43 million from our third public offering.

In addition, we have raised $11.16 million from the issuance of shares under the DRIP.

Of the total capital raised from the public offerings as of June 30, 2020, we have used $9.46 million to

repurchase shares under the Company’s share repurchase program.

We do not have any current plans to issue any preferred equity.

We plan to fund future investments with the net proceeds raised from our third offering and any future offerings of

securities and cash flows from operations, as well as interest earned from the temporary investment of cash in U.S.

government securities and other high-quality debt investments that mature in one year or less.

We may also fund a portion of our investments through borrowings from banks and issuances of senior securities.

We currently do not have any

plans to borrow money on a long-term basis or issue debt securities;

however, from time to time we may draw on the margin line of credit on a temporary basis to bridge our investment purchases and sales or capital raising.

As of June 30, 2019, we

were selling our shares on a continuous basis at a price of $10 per share, which may be below NAV per share from time to time, as approved by our stockholders.

We may also fund a portion of our

investments through borrowings from banks and issuances of senior securities.

We currently do not have any plans to borrow money on a long-term basis or issue debt securities;

however, from time to time we may draw on the margin line of credit on a

temporary basis to bridge our investment purchases and sales or capital raising.

As of June 30, 2020, we were selling our shares on a continuous basis at a price of $10.25 which may be below NAV per share from time to time, as approved by our

stockholders.

Our aggregate borrowings (if any), secured and unsecured, are expected to be reasonable in relation to our net assets and will be reviewed by the Board of Directors at least quarterly.

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security holders, paying operating expenses.

If all shares registered under our second registration statement in our current public offering are sold, we will receive investable cash totaling approximately $130.5 million, of which approximately

$49.82 million has been received as of June 30, 2019.

If all shares registered in our current public offering are sold, we will receive investable cash totaling approximately $133.76 million, of which approximately $7.37 million has been received as of June

The Company finished the quarter ended June 30, 2020 with substantial liquidity, including $8.96 million in cash and cash equivalents, and only $0.94 million of liabilities.

However, the Company has historically relied upon distributions and capital gains from its investments to fund dividends.

During and following the outbreak of COVID-19, we do not believe we can rely on our traditional sources of cash flow.

in anticipation of uncertain future economic conditions, our board of directors discontinued dividends starting March 2020 and share redemptions starting May 2020.

The Company intends to continue to qualify as a REIT and to meet the associated

testing requirements, including paying out at least 90% of its taxable income.

For Fiscal 2020, we experienced a net increase in cash of $7.68 million.

During this period, we generated cash of $9.41 million from our financing activities and used $1.73 million

in our operating activities.

The net cash outflow of $1.73 million from operating activities was primarily due to the cash outflow of $45.08 million from purchases of investments offset by cash inflows of $8.01 million from sales of investments,

$31.37 million from distributions received from our investments that are considered return of capital and $3.97 million from investment income, net of the Company’s operating expenses.

The net cash inflow of $9.41 million from financing activities resulted from the sale of shares under our second and third public offering with gross proceeds of $18.93 million (adjusted for $0.58 million of decrease

in capital pending acceptance) offset by cash outflows of $4.53 million from payments of cash dividends, $3.19 million from share redemptions, and $1.80 million from payments of selling commissions and fees.

For Fiscal 2019, we experienced a net decrease in cash of $7.16 million.

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During this period, we generated $15.23 million of cash from our financing activities and used $18.64 million in operating activities.

The net cash outflow of $18.64 million from operating activities was primarily due to the cash outflow of $79.22 million from purchases of investments offset by cash inflows of $39.60 million from sales of

investments, $17.19 million from distributions received from our investments that are considered return of capital and $3.79 million from investment income, net of the Company’s operating expenses.

$17.19 million from distributions received from our investments that are considered return of capital and $3.79 million from investment income, net of the Company’s operating expenses.

The net cash inflow of $15.23 million from financing activities resulted from the sale of the Company’s shares under the second public offering with gross proceeds of $21.84 million (adjusted for the $1.16 million of

change in capital pending acceptance) offset by cash outflows of $1.45 million from share redemptions, $2.98 million from payments of cash dividends and $2.18 million from payment of selling commissions and fees.

For Fiscal 2017, we experienced a net increase in cash of $9.50 million.

During this period, we generated $14.42 million of cash from our financing activities and used $4.92 million in operating activities.

The net cash outflow of $4.92 million from operating activities was primarily due to the cash outflow of $34.81 million from purchases of investments offset by cash inflows of $26.39 million from sales of

investments, $2.17 million from distributions received from our investments that are considered return of capital and $1.33 million from investment income, net of the Company’s operating expenses.

The net cash inflow of $14.42 million from financing activities resulted from the sale of shares in the IPO and the second public offering with gross proceeds of $19.48 million (adjusted for the $0.18 million of increase in capital pending

acceptance) offset by cash outflows of $0.92 million from share redemptions, $2.14 million from dividend payments and $2.00 million from selling commissions and fees payments.

Contractual Obligations

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Each of these agreements is terminable by either party upon proper notice.

Payments under the

Advisory Agreement in future periods (after the up-front payment of the portfolio structuring fee during the IPO) are (i) a percentage of the value of our Gross Invested Capital;

and (ii) incentive fees based on our income and our performance above

specified hurdles (except in the year of liquidation).

Payments under the Advisory

Agreement in future periods (after the up-front payment of the portfolio structuring fee during the IPO) are (i) a percentage of the value of our Gross Invested Capital;

and (ii) incentive fees based on our income and our performance above specified

hurdles (except in the year of liquidation).

Payments under the Administration Agreement will 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.

However, if MacKenzie withdraws as our administrator, it is liable for any

expenses we incur as a result of such withdrawal.

We have entered into an agreement with MacKenzie, the Investor Service Agreement, effective November 1, 2018.

Pursuant to the agreement, transfer agent services are provided by MacKenzie inhouse and the costs

incurred by MacKenzie in providing the services are reimbursed by the Company.

Pursuant to the agreement, transfer agent services are provided by MacKenzie in-house and the costs incurred

by MacKenzie in providing the services are reimbursed by the Company.

No fee (only cost reimbursement) is paid by the Company to MacKenzie for this service.

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We do not have any current plans to borrow money or issue preferred securities.

If we do borrow money, we expect to be subject to various customary covenants and restrictions on our operations, such as

covenants which would (i) require us to maintain certain financial ratios, including asset coverage, debt to equity and interest coverage, and a minimum net worth, and/or (ii) restrict our ability to incur liens, additional debt, merge or sell

assets, make certain investments and/or distributions or engage in transactions with affiliates.

If we do borrow money, we expect to be subject to various customary covenants and restrictions on our operations, such as covenants which

would (i) require us to maintain certain financial ratios, including asset coverage, debt to equity and interest coverage, and a minimum net worth, and/or (ii) restrict our ability to incur liens, additional debt, merge or sell assets, make certain

investments and/or distributions or engage in transactions with affiliates.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis