What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-13 compared with 2020-05-14 · 166 added, 243 removed, 144 unchanged (74% of the section changed)

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"Risk Factors" in our Annual Report on Form 10-K.

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.

We may experience fluctuations in our operating results due to a number of factors, including the effect of the withdraw of our BDC election, 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.

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

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

Authorization to Withdraw BDC Election

On October 23, 2020, holders of a majority of the outstanding common stock of the Company approved the authorization of the Company’s Board of Directors to withdraw the Company’s

election to be regulated as a business development company under the Investment Company Act of 1940, effective when the Company files the appropriate form with the SEC.

The Company expects to submit the withdrawal to be effective with the SEC by the

end of December 2020.

Withdrawal of our election to be regulated as a BDC will not affect our registration under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”), and we will

continue to file periodic reports on Form 10-K, Form 10-Q, and Form 8-K, and file proxy statements and other reports required under the Exchange Act.

Following withdrawal of our election to be regulated as a BDC, the application and presentation of

our financial statements under accounting principles generally accepted in the United States of America (“GAAP”) could change.

The Company has undertaken several steps to meet the requirements for withdrawal of its election to be regulated as a BDC, including (i) preparing a plan of operations in contemplation of such a change to the status of

the Company, (ii) evaluating potential investments in real estate assets that will allow the Company to transition to direct real estate asset investments, (iii) reviewing the potential adjusted investment strategy with potential capital providers,

and (iv) consulting with outside counsel as to the requirements for withdrawing its election as a BDC.

During this transition period, the Company may liquidate some of its securities portfolio.

By the end of the first year after withdrawal of its election, the Company anticipates that its securities portfolio will

comprise less than 20% of its assets.

Investment Plan

Our investments are generally expected to range in size from $10,000 to $3 million.

However, we may make smaller or larger investments from time to time on an opportunistic basis.

While we remain a BDC, our investments are generally expected to range in size from $10,000 to $3 million.

However, we may make smaller or larger investments from time to time on an

opportunistic basis.

We focus primarily on real estate-related securities.

We purchase most of our securities (i) directly from existing security holders, (ii) through established securities markets, and (iii) in the case of unregistered, privately offered securities,

directly from issuers.

We purchase most of our securities (i) directly from existing security holders, (ii) through established securities markets, and (iii) in the case of unregistered, privately

offered securities, directly from issuers.

We invest primarily in debt and equity securities issued by U.S.

companies that primarily own commercial real estate that are either illiquid or not listed on any exchange.

We generally seek to invest in interests of real estate-related limited partnerships and REITs.

Under normal market conditions, we invest at least 80.0% of our total assets in

common stocks and other equity or debt securities issued by real estate companies, including REITs and similar REIT-like entities.

A real estate company is one that (i) derives at least 50.0% of its revenue from the ownership, construction,

financing, management or sale of commercial, industrial or residential real estate and land;

While we remain a BDC, we generally seek to invest in interests of real estate-related limited partnerships and REITs.

Under normal market conditions, we invest at least 80.0% of

our total assets in common stocks and other equity or debt securities issued by real estate companies, including REITs and similar REIT-like entities.

A real estate company is one that (i) derives at least 50.0% of its revenue from the ownership,

construction, financing, management or sale of commercial, industrial or residential real estate and land;

or (ii) has at least 50.0% of its assets invested in such real estate.

We do not invest in general partnerships, joint ventures, or other entities that do

not afford limited liability to their security holders.

We do not invest in general partnerships, joint ventures, or other

entities that do not afford limited liability to their security holders.

However, limited liability entities in which we invest may hold interests in general partnerships, joint ventures, or other non-limited liability entities.

We generally consider purchasing

securities issued by entities that have (i) completed the initial offering of their securities, (ii) operated for a period of at least two years, and typically more than five years, from the completion of their initial offering, and (iii) fully

invested their capital in real properties or other real estate-related investments.

We may also acquire (i) individual mortgages secured by real property (i.e., we may originate such loans or we may purchase outstanding loans secured by real estate), (ii)

securities of issuers that own mortgages secured by income producing real property, and (iii) using no more than 20.0% of our available capital, securities of issuers that own assets other than real estate.

consider purchasing securities issued by entities that have (i) completed the initial offering of their securities, (ii) operated for a period of at least two years, and typically more than five years, from the completion of their initial offering,

and (iii) fully invested their capital in real properties or other real estate-related investments.

While we remain a BDC, we may also acquire (i) individual mortgages secured by real property (i.e., we may originate such loans or we may purchase outstanding loans secured by real

estate), (ii) securities of issuers that own mortgages secured by income producing real property, and (iii) using no more than 20.0% of our available capital, securities of issuers that own assets other than real estate.

Investment income

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all other expenses incurred by either MacKenzie or us in connection with administering our business, including payments under the Administration Agreement that will be 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, our Chief Financial Officer, Director of Accounting and Financial Reporting, General Counsel, and any administrative support staff.

expenses of our Chief Compliance Officer, our Chief Financial Officer, Director of Accounting and Financial Reporting, General Counsel, and any administrative support staff.

In addition, we will bear organization and offering expenses in connection with our third public offering up to $1,650,000 plus the savings realized by the Company to the extent

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Portfolio Investment Composition

The following table summarizes the composition of our investments at cost and fair value as of March 31, 2020, and June 30, 2019:

March 31, 2020

The following table summarizes the composition of our investments at cost and fair value as of September 30, 2020, and June 30, 2020:

September 30, 2020

June 30, 2020

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Net Asset Value

March 31, 2020 vs.

December 31, 2019:

Our NAV as of March 31, 2020, was $8.43 per share compared to $9.19 per share as of December 31, 2019, a $0.76 per share decrease of approximately 8.27%.

The net decrease during the

three months was due to (i) net unrealized loss on investments of $0.79 per share, (ii) a dividend to stockholders of $0.12 per share (on a weighted average basis) and (iii) net realized loss from sale of investments of $0.01 per share.

The decreases

were partly offset by increases resulting from (i) net investment income of $0.15 per share and (ii) issuance of shares (net of selling commissions and dealer manager fees) above NAV per share resulting in an increase of a $0.01 per share.

March 31, 2020 vs.

September 30, 2020 vs.

June 30, 2020:

Our NAV as of March 31, 2020, was $8.43 per share compared to $9.44 per share as of June 30, 2019, a $1.01 per share decrease of approximately 10.7%.

Our NAV as of September 30, 2020, was $7.85 per share compared to $8.04 per share as of June 30, 2020, a $0.19 per share decrease of approximately 2.31%.

The net decrease during the

nine months was due to (i) net unrealized loss on investments of $0.92 per share, (ii) dividends to stockholders of $0.46 per share (on a weighted average basis), and (iii) issuance of shares (net of selling commissions and dealer manager fees) below

NAV per share resulting in a decrease of a $0.01 per share.

The decreases were partly offset by increases resulting from (i) net investment income of $0.27 per share (ii) net realized gain from sale of investments of $0.10 per share and (iii)

redemption of shares below NAV resulting in gain of $0.01 per share.

three months was due to (i) net unrealized loss on investments of $0.25 per share, and (ii) net investment loss of $0.02 per share.

The decreases were partly offset by an increase resulting from net realized gain from sale of investments of $0.08 per

Results of Operations

COVID-19 pandemic

The COVID-19 has triggered significant uncertainty regarding the value of our assets.

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 steep declines in domestic stock markets and in the traded prices for other financial assets.

As a result of these significant declines, the fair values of

some of our investments have significantly decreased as of March 31, 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.

cancellations did not have a significant impact on the Company’s total investment income for the quarter ended March 31, 2020, we anticipate 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.

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

They implemented business continuity plans to respond to

changes in the global environment.

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

They are reaching out regularly to managers of our assets to provide advice and

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 September 30, 2020.

addition, some of the companies in which we have invested have cancelled their quarterly dividends and distributions for the current and 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

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balance sheet and liquidity position and searching for opportunistic investments.

Our cash and investments totaled $13.1 million at the end of the first quarter of 2020.

Three Months Ended March 31, 2020, and 2019:

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.

Three Months Ended September 30, 2020, and 2019:

Investment Income:

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Total investment

income for the three months ended March 31, 2020, and 2019, was $3.09 million and $1.74 million, respectively.

The increase of $1.35 million or 77.6%, was primarily due to an increase our investment income from sales and liquidation distributions.

During the three months ended March 31, 2020, the Company received $1.35 million of sales and liquidations distributions from four investments whereas during the three months ended March 31, 2019, the Company did not receive any sales and liquidation

distributions.

Investment income from dividends and distributions from operations, interest and other investment income remained comparable during these two periods.

income for the three months ended September 30, 2020, and 2019, was $0.86 million and $1.94 million, respectively.

The decrease of $1.08 million or 55.7%, was primarily due to suspensions of dividends and distributions from our investments as a

result of the COVID-19 pandemic.

During the three months ended September 30, 2020, the Company received $0.51 million of distributions from operations, sales and liquidations as compared to $1.20 million during the three months ended September 30,

During the three months ended September 30, 2020, we received dividends and other investment income of $0.35 million as compared to $0.74 million during the three months ended September 30, 2019.

Operating Expenses:

Base management fee:

The base management fee for the three months ended March 31, 2020 was $0.65 million as compared to $0.57 million for the three months ended March 31, 2019.

The base management fee for the three months ended September 30, 2020 was $0.66 million as compared to $0.61 million for the three months ended September 30, 2019.

This increase of

million, or 14.0% was due to an increase in the Gross Invested Capital by $22.35 million from $104.72 million as of March 31, 2019, to $127.07 million as of March 31, 2020.

$0.05 million, or 8.2% was due to an increase in the Gross Invested Capital by $12.77 million from $116.00 million as of September 30, 2019, to $128.77 million as of September 30, 2020.

Portfolio structuring fee :

The portfolio structuring fees for the three months ended March 31, 2020, and 2019 remained comparable at $0.20 million and $0.19 million, respectively.

This is because the total

capital raised by the Company during these two periods also remained comparable.

During the three months ended March 31, 2020 and 2019, the Company raised new capital of $6.56 million and $6.08 million, respectively, through issuance of new shares

excluding the DRIP.

The portfolio structuring fee for the three months ended September 30, 2020, was less than 0.01 million as compared to $0.20 million during the three months ended September 30,

This decrease was because the Company raised lower amount of new capital during the three months ended September 30, 2020.

During the three months ended September 30, 2020, the Company raised new capital of $0.16 million as compared to $6.47

million during the three months ended September 30, 2019 through issuance of new shares excluding the DRIP.

Subordinated incentive fee:

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sales/capital transactions) and the Income Fee is based on net investment income.

There was neither Income Fee nor Capital Gains Fee for the three months ended March 31, 2020.

This was because the cumulative net investment income and net realized gains were

below the threshold of 7% of Contributed Capital.

There was no Income Fee for the three months ended March 31, 2019 as the cumulative net investment income did not exceed the threshold of 7% of the Contributed Capital as of March

Capital Gains Fee for the three months ended March 31, 2019, was $0.08 million as the cumulative realized capital gains as of March 31, 2019, were over the threshold of 7% of Contributed capital.

The Company records the Capital Gains Fee

accrual on the consolidated statements of operations and statements of assets and liabilities when net realized capital gains less unrealized capital depreciation on its investments exceed the incentive fee threshold of 7% of Contributed Capital.

However, the actual incentive fee payable to the Adviser related to capital gains will be determined and payable in arrears at the end of each fiscal year.

There was neither Income Fee nor Capital Gains Fee for the three months ended September 30, 2020 and 2019.

This was because the cumulative net investment income and net realized

gains were below the threshold of 7% of Contributed Capital.

Administrative cost reimbursements and Transfer agent reimbursements:

Costs reimbursed to MacKenzie for the three months ended March 31, 2020, was $0.17 million as compared to $0.16 million for the three months ended March 31, 2019.

The increase was due to an increase

in the allocable portion of overhead and other expenses incurred by MacKenzie since March 31, 2019, as a result of the increase in the Company’s operating activities.

Effective November 1, 2018, transfer agent services are now provided by MacKenzie 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

costs incurred were expensed under other general and administrative expenses.

Transfer agent cost reimbursement paid to MacKenzie for three months ended March 31, 2020 was $0.02 million.

There was no transfer agent services cost reimbursement for the

three months ended March 31, 2019, because MacKenzie did not begin the service until November 2018 and the reimbursement did not start until March 14, 2019.

Costs reimbursed to MacKenzie for the three months ended September 30, 2020, was $0.16 million as compared to $0.17 million for the three months ended September 30, 2019.

The slight decrease was due

to a decrease in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to September 30, 2019, as a result of the decrease in the Company’s capital raising activities.

Transfer agent cost reimbursement paid to MacKenzie for three months ended September 30, 2020 was $0.03 million as compared to $0.02 for the three months ended September 30, 2019.

The slight increase

was due to additional software maintenance and implementation costs incurred by MacKenzie.

Other operating expenses:

Other operating expenses include amortization of deferred offering costs, professional fees, directors’ fees printing and mailing, and other general and administrative expenses.

Other operating expenses for the three months ended March 31, 2020 and 2019, were $0.18 million and $0.23 million.

Other operating expenses for the three months ended September 30, 2020 and 2019, were $0.30 million and $0.39 million.

The decrease of $0.09 million was mainly due a larger amount of amortization of deferred offering costs for the three months ended

March 31, 2019 as compared to the same period in 2020.

September 30, 2019 as compared to the same period in 2020.

The decrease in amortization of deferred offering costs was due to the deferred offering costs relating to the second public offering fully amortized as of December 31, 2019 as the offering

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Net realized gain/loss on investments:

During the three months ended March 31, 2020, the Company had a realized loss of $0.17 million as compared to net realized loss of $0.81 million during the three months ended

March 31, 2019.

Total realized loss for the three months ended March 31, 2020, were realized from the final liquidation of two limited partnership interests.

Total realized losses for the three months ended March 31, 2019, were primarily realized

from sales of sixteen publicly traded securities.

During the three months ended September 30, 2020, the Company had a net realized gain of $1.02 million as compared to net realized loss of $0.11 million during the three months

ended September 30, 2019.

Total realized gains for the three months ended September 30, 2020, were realized from sales of eleven publicly traded securities, one limited partnership interest and three non-traded REIT securities.

Total realized gains

for the three months ended September 30, 2019, were primarily realized from sales of two non-traded REIT securities.

Net unrealized gain/loss on investments:

During the three months ended March 31, 2020, we recorded net unrealized losses of $9.86 million, which were net of $1.08 million of unrealized gains reclassification adjustment.

The reclassification adjustment was the accumulated unrealized gains as of December 31, 2019, that were realized during the three months ended March 31, 2020.

Accordingly, the net unrealized losses excluding the reclassification adjustment for the

three months ended March 31, 2020, were $8.78 million, which resulted from fair value depreciations of $4.51 million from non-traded REIT securities, $2.89 million from limited partnership interests and $1.38 million from publicly traded REIT

The significant decline in the fair value during the current quarter was mainly due to the COVID-19 pandemic resulting in steep declines in domestic stock markets and in the traded prices for other financial assets as discussed above.

During the three months ended March 31, 2019, we recorded net unrealized gain of $0.15 million;

however, this is net of $0.96 million of unrealized losses reclassification

The reclassification adjustment was the accumulated unrealized losses as of December 31, 2018, that were realized during the three months ended March 31, 2019.

During the three months ended September 30, 2020, we recorded net unrealized losses of $3.18 million, which were net of $0.81 million of unrealized gains reclassification

The reclassification adjustment was the accumulated unrealized gains as of June 30, 2020, that were realized during the three months ended September 30, 2020.

Accordingly, the net unrealized losses excluding the reclassification

adjustment for the three months ended March 31, 2019, were $0.81 million, which resulted from fair value depreciation of $0.64 million from publicly traded REIT securities, $0.16 from non-traded REIT securities and $0.01 million from limited

partnership interests.

adjustment for the three months ended September 30, 2020, were $2.37 million, which resulted from fair value depreciations of $1.88 million from non-traded REIT securities and $1.11 million from publicly traded REIT securities partly offset by a fair

value appreciation of $0.62 million from limited partnership interests.

The significant decline in the fair value during the current quarter was mainly due to the COVID-19 pandemic resulting in declines in domestic stock markets and in the traded

prices for other financial assets as discussed above.

During the three months ended September 30, 2019, we recorded net unrealized gains of $1.06 million;

however, this is net of $0.05 million of unrealized losses reclassification

The reclassification adjustment was the accumulated unrealized losses as of June 30, 2019, that were realized during the three months ended September 30, 2019.

Accordingly, the net unrealized gains excluding the reclassification

adjustment for the three months ended September 30, 2019, were $1.01 million, which resulted from fair value appreciation of $1.86 million from limited partnership interests and $0.5 million from publicly traded REIT securities offset by fair value

depreciation of $1.35 million from non-traded REIT securities.

Income tax provision (benefit):

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excise tax on its income from operations during the quarterly periods within the tax year 2019.

Similarly, for the tax year 2019, we believe the Parent Company paid the requisite amounts of dividends during the year such that it will not owe any

Similarly, for the tax year 2020, we believe the Parent Company will pay the requisite amounts of dividends during the year such that it will not owe any

income taxes.

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TRS and MacKenzie NY 2 are subject to corporate federal and state income tax on its taxable income at regular statutory rates.

However, as of March 31, 2020, they did not have any

taxable income for tax year 2019 or 2020.

However, as of September 30, 2020, they did not have

any taxable income for tax year 2019 or 2020.

Therefore, TRS and MacKenzie NY 2 did not record any income tax provisions during any fiscal period within the tax year 2019 and 2020.

Nine months Ended March 31, 2020, and 2019:

Investment Income:

Investment income was made up of dividends, distributions from operations, distributions from sales/capital transactions, interest, and other investment income.

Total investment

income for the nine months ended March 31, 2020, and 2019, was $7.42 million and $8.51 million, respectively.

The decrease of $1.09 million or 12.8%, was mainly due to a decrease of $2.74 million in our sales and liquidation distributions partly

offset by an increase of $1.65 million in our dividend, distributions, interest and other investment income.

During the nine months ended March 31, 2019, the Company received sales and liquidation distributions of $4.43 million from four investments

following the sales of underlying properties.

During the nine months ended March 31, 2020, the Company received $1.70 million of sales or liquidation distributions from seven investments.

The increase of $1.65 million in dividend, distributions,

interest and other investment income was due to increase in our investment portfolio size.

As of March 31, 2019, the Company had an investment portfolio with a total cost basis of $93.46 million which increased to $99.43 million as of March 31, 2020.

Operating Expenses:

Base management fee:

The base management fee for the nine months ended March 31, 2020 was $1.89 million as compared to $1.62 million for the nine months ended March 31, 2019.

This increase of $0.27

million, or 16.7% was due to an increase in the Gross Invested Capital by $22.35 million from $104.72 million as of March 31, 2019, to $127.07 million as of March 31, 2020.

Portfolio structuring fee :

The portfolio structuring fees for the nine months ended March 31, 2020, and 2019 remained comparable at $0.56 million for both periods.

This is because the total capital raised by

the Company during these two periods also remained comparable.

During the nine months ended March 31, 2020 and 2019, the Company raised new capital of $18.53 million and $18.33 million, respectively, through issuance of new shares excluding the DRIP.

Subordinated incentive fee:

There was neither Income Fee nor Capital Gains Fee for the nine months ended March 31, 2020.

This was because the cumulative net investment income and net realized gains were below

the threshold of 7% of Contributed Capital.

There was no Income Fee for the nine months ended March 31, 2019, as the net investment income for the period was below the threshold of 7% Contributed Capital.

Capital Gains Fee

accrual for the nine months ended March 31, 2019 was $1.29 million as the cumulative realized capital gains as of March 31, 2019, were over the threshold of 7% of Contributed capital.

The Company records the Capital Gains Fee accrual when net

realized capital gains less unrealized capital depreciation on its investments exceed the incentive fee threshold of 7% of Contributed Capital.

However, the actual incentive fee payable to the Adviser related to capital gains will be determined and

payable in arrears at the end of each fiscal year.

Administrative cost reimbursements and Transfer agent reimbursements:

Costs reimbursed to MacKenzie for the nine months ended March 31, 2020, was $0.51 million as compared to $0.47 million for the nine months ended March 31, 2019.

The increase was primarily due to an

increase in the allocable portion of overhead and other expenses incurred by MacKenzie since March 31, 2019, as a result of the increase in the Company’s operating activities.

Effective November 1, 2018, transfer agent services are now provided by MacKenzie 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

costs incurred were expensed under other general and administrative expenses.

Transfer agent cost reimbursement paid to MacKenzie for nine months ended March 31, 2020 was $0.06 million.

There was no transfer agent services cost reimbursement paid to

MacKenzie for the nine months ended March 31, 2019, because MacKenzie did not begin the service until November 2018 and the reimbursement did not start until March 14, 2019.

Transfer agent service fees for the four months the Company received the

services from a third party during the nine months ended March 31, 2019 (during the period MacKenzie did not provide the service) was $0.03 million.

Other operating expenses:

Other operating expenses include amortization of deferred offering costs, professional fees, directors’ fees printing and mailing, and other general and administrative expenses.

Other operating expenses for the nine months ended March 31, 2020 and 2019, were $1.10 million and $0.72 million.

The increase of $0.38 million or 52.8% increase was due a larger amount of amortization of deferred offering costs during the nine

months ended March 31, 2020 as compared to the same period in 2019.

The increase in amortization of deferred offering costs was 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.

Net realized gain on investments:

During the nine months ended March 31, 2020, the Company had a realized gain of $1.24 million as compared to $1.22 million during the nine months ended March 31, 2019.

realized gains for the nine months ended March 31, 2020, were primarily realized from sales of three non-traded REIT securities with a total realized gain of $0.20 million, three limited partnership interests with a net total gain of $0.41 million

and one publicly traded REIT security with a gain of 0.63 million.

Total realized gains for the nine months ended March 31, 2019, were realized from liquidations of eight non-traded REIT securities with total realized gain of $2.93 million offset

by losses of $1.71 million realized from sales of twenty-three publicly traded REIT securities and liquidation of two limited partnership securities.

Net unrealized gain/loss on investments:

During the nine months ended March 31, 2020, we recorded net unrealized losses of $11.09 million, which were net of $1.19 million of an unrealized gains reclassification adjustment.

The reclassification adjustment was the accumulated unrealized gains as of June 30, 2019, that were realized during the nine months ended March 31, 2020.

Accordingly, the net unrealized losses excluding the reclassification adjustment for the nine

months ended March 31, 2020, were $9.90 million, which resulted from fair value depreciations of $6.50 million from non-traded REIT securities, $1.25 million from limited partnership interests and $2.15 million from publicly traded REIT securities.

During the nine months ended March 31, 2019, we recorded net unrealized loss of $3.05 million, which was net of $1.98 million of an unrealized gains reclassification adjustment.

The reclassification adjustment was the accumulated unrealized gains as of June 30, 2018, that was realized during the nine months ended March 31, 2019.

Accordingly, the net unrealized losses excluding the reclassification adjustment for the nine

months ended March 31, 2019, were $1.07 million, which resulted from fair value depreciation of $2.61 million from limited partnership interests and $0.31 million from publicly traded REIT securities offset by fair value appreciation of $1.85

million from non-traded REIT securities.

The large fair value depreciation in limited partnership interests mostly resulted from distributions of sales proceeds by three partnerships (The Weatherly, LTD, The Weatherly Building, LLC, and Uniprop

Manufactured Housing Income Fund II) following the sales of underlying properties.

The Company recorded $4.43 million of distribution income from sales transactions, which is a part of the investment income discussed above, from these three

partnerships during the nine months ended March 31, 2019.

Income tax provision (benefit):

Income tax provision for nine months ended March 31, 2020, and 2019 are discussed above under the three months ended section.

Liquidity and Capital Resources

Capital Resources

We offered to sell shares with total gross proceeds of $150 million 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 March 31, 2020, the Company has raised total gross proceeds of $117.90 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 $7.45 million from our third public offering.

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 September 30, 2020, the Company has raised total gross proceeds of $119.04 million from the issuance of shares under three public offerings, $42.46 million from the IPO, which concluded in October 2016, $67.99 million from the second public

offering, which concluded in October 2019, and $8.59 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 March 31,

Of the total capital raised from the public offerings as of September

30, 2020, we have used $9.46 million to repurchase shares 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 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.

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 March 31, 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

The maximum amount of such borrowing is limited by the 1940 Act.

Our primary uses of funds are investing in portfolio companies, paying cash dividends to holders of our common stock (primarily from investment income and realized capital gains),

and the payment of operating expenses.

If all the shares registered under our third registration statement in the third public offering are sold, we would receive investable cash totaling approximately $138.38 million.

The Company finished the quarter ended March 31, 2020 with substantial liquidity, including $13.07 million in cash and cash equivalents, and only $3.00 million of liabilities.

We are planning to issue preferred equity in the near future, but do not currently have any.

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.

While we remain as a BDC, we do not have any plans to borrow money on a long-term basis or issue debt

securities at the Company level;

however, after our BDC status is withdrawn, we may borrow money within the underlying companies in which we have majority ownership.

In addition, 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 September 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.

The third public offering ended on October 31, 2020.

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.

amount of such borrowing is limited by the 1940 Act.

Our primary uses of funds are investing in portfolio companies, paying cash dividends to holders of our common stock (from investment income and realized capital gains), making payments to any lenders

or senior security holders, paying operating expenses.

If all shares registered in our current public offering are sold, we will receive investable cash totaling approximately $133.76 million, of which approximately $7.52 million has been received

as of September 30, 2020.

The Company finished the quarter ended September 30, 2020 with substantial liquidity, including $10.86 million in cash and cash equivalents, and only $0.74 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.

our Board of Directors determined that it was prudent to cancel all regular dividends.

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.

Nine months ended March 31, 2020:

For the nine months ended March 31, 2020, we experienced a net increase in cash of $11.79 million.

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.

Three months ended September 30, 2020:

For the three months ended September 30, 2020, we experienced a net increase in cash of $1.91 million.

During this period, we generated cash of $1.83 million from our operating

activities and $0.08 million from our financing activities.

The net cash inflow of $1.71 million from operating activities resulted from $31.37 million from distributions received from our investments that are considered return of capital,

$6.45 million from sales and liquidations of investments and $2.67 million from investment income, net of operating expenses offset by $38.78 million of cash used in purchasing investments.

The net cash inflow of $10.08 million from financing activities resulted from the sale of shares under our second and third public offering with gross proceeds of $18.54 million

(adjusted for $0.01 million of increase in capital pending acceptance) offset by cash outflows of $3.56 million from payments of cash dividends, $3.19 million from share redemptions, and $1.71 million from payments of selling commissions and fees.

Nine months ended March 31, 2019:

For the nine months ended March 31, 2019, we experienced a net decrease in cash of $6.65 million.

During this period, we generated cash of $13.07 million from our financing

activities and used $19.72 million for our operating activities.

The net cash outflow of $19.72 million from operating activities resulted from $94.71 million of cash used in purchasing investments that was offset by cash inflows of $56.96

million from sales and liquidations of investments, $14.04 million from distributions received that are considered return of capital, and $3.99 million from investment income, net of operating expenses.

The net cash inflow of $13.07 million from financing activities resulted from the sale of shares under our current public offering with gross proceeds of $18.69 million (adjusted

for $0.36 million of increase in capital pending acceptance) offset by cash outflows of $2.78 million from payments of cash dividends, $1.17 million from share redemptions, and $1.67 million from payments of selling commissions and fees.

The net cash inflow of $1.83 million from operating activities resulted from $4.28 million from distributions received from our investments that are considered return of capital and

$5.26 million from sales and liquidations of investments offset by $7.41 million of cash used in purchasing investments and $0.30 million used in operating expenses, net of investment income.

The net cash inflow of $0.08 million from financing activities resulted from the sale of shares under our third public offering with gross proceeds of $0.09 million (net of $0.08

million of decrease in capital pending acceptance) offset by cash outflows of $0.01 million from payments of selling commissions and fees.

Three months ended September 30, 2019:

For the three months ended September 30, 2019, we experienced a net increase in cash of $8.37 million.

During this period, we generated cash of $3.40 million from our operating

activities and $4.97 from our financing activities.

The net cash inflow of $3.40 million from operating activities resulted from $8.34 million of distributions received from investments that are considered return of capital, $1.95

million from sales of investments and $0.33 million from investment income, net of operating expenses, offset by cash outflow of $8.34 million from purchases of investments.

The net cash inflow of $4.97 million from financing activities resulted from the sale of shares under our second public offering with gross proceeds of $7.35 million (adjusted for

$0.88 million of increase in capital pending acceptance) offset by cash outflows of $1.06 million from payments of cash dividends, $0.63 million from share redemptions, and $0.69 million from payments of selling commissions and fees.

Contractual Obligations

24 unchanged sentences

Dividends to Stockholders

We typically intend to pay quarterly dividends to our stockholders to the extent that we have income from operations available.

Our quarterly dividends, if any, will be determined

by our Board of Directors near the beginning of each quarter based on the estimated quarterly income and will be paid pro-rata to holders of our shares.

Any dividends to our stockholders will be declared out of assets legally available for

distribution.

In no event are we permitted to borrow money to pay dividends (or make distributions) if the amount of such distribution would exceed our annual accrued and received revenues, less operating costs.

During the quarter ended March 31,

2020, the Company initially declared a quarterly dividend of $0.17938 per share, which equals to $0.05979 per share per month.

However, on March 31, 2020, the board of directors revoked the dividend declared for the month of March 2020.

the Company’s board of directors unanimously approved the suspension of regular quarterly dividends to the Company’s stockholders, effective immediately.

The dividends declared for January and February 2020 were paid on April 29, 2020.

We qualified and elected to be taxed as a REIT beginning with the tax year ended December 31, 2014.

As a REIT, we are required to distribute at least 90% of our REIT taxable income

to the stockholders and meet certain other conditions.

Our current intention is to make any dividends in additional shares under our DRIP out of assets legally available therefore, unless a stockholder elects to receive dividends in cash, or their

participation in our DRIP is restricted by a state securities regulator.

If one holds shares in the name of a broker or financial intermediary, they should contact the broker or financial intermediary regarding their election to receive dividends in

We can offer no assurance that we will achieve results that will permit the payment of any cash dividends and, if we issue senior securities, we are prohibited from paying dividends if doing so causes us to fail to maintain the asset coverage

ratios stipulated by the 1940 Act or if dividends are limited by the terms of any of our borrowings.

We pay quarterly dividends to stockholders to the extent that we have income from operations available.

Our quarterly dividends, if any, will be determined by our Board of Directors after a review and

distributed pro-rata to holders of our shares;

we declare dividends on a monthly basis, but pay each quarter.

Any dividends to our stockholders will be declared out of assets legally available for distribution.

In no event are we permitted to borrow

money to make dividends if the amount of such dividend would exceed our annual accrued and received revenues, less operating costs.

Dividends in kind are not permitted, except as provided in our Charter.

We have elected to be treated as a REIT under the Code.

As a REIT, we are required to distribute at least 90% of our REIT taxable income to the stockholders and meet certain other

Our current intention is to make any dividends in additional shares under our DRIP out of assets legally available therefore, unless a stockholder elects to receive dividends in cash, or their participation in our DRIP is restricted by a

state securities regulator.

If one holds shares in the name of a broker or financial intermediary, they should contact the broker or financial intermediary regarding their election to receive dividends in cash.

We can offer no assurance that we will

achieve results that will permit the payment of any cash dividends and, if we issue senior securities, we are prohibited from paying dividends if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if

dividends are limited by the terms of any of our borrowings.

On March 31, 2020, after assessing the impacts of the Covid-19 pandemic, the Company’s board of directors unanimously approved the suspension of regular quarterly dividends to the Company’s

stockholders, effective immediately.

As a result, the Company did not pay or accrue any dividend for the quarter ended September 30, 2020.

However, if there is any REIT taxable income to be distributed for tax year ended December 31, 2020, we intend

to meet the REIT distribution requirements by making the requisite distributions by end of December 31, 2020 or through catch-up distributions in tax year 2021 as permitted by the REIT tax rules.

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-Q

Item 2. Management’s Discussion and Analysis