INVESTMENTS

12 Months Ended

Jun. 30, 2022

NOTE 4 – INVESTMENTS

The following table summarizes the composition of our equity method investments with fair value option election and other equity securities at fair value as of June 30, 2022 and 2021 (successor basis):

	Fair Value		Fair Value
Asset Type	June 30, 2022		June 30, 2021
Publicly Traded Companies	$	-	$	169,200
Non Traded Companies		11,517,226		29,426,441
Non Traded Company (Equity method investment with fair value option election)		-		2,867,911
GP Interests		18,333,000		-
LP Interests		330,000		288,494
LP Interests (Equity method investment with fair value option election)		27,363,840		37,722,483
Investment Trust		49,178		34,714
Total	$	57,593,244	$	70,509,243

Our above total investments at fair value are disclosed in two separate lines as investments and unconsolidated investments (non-securities) in the consolidated balance sheets as of June 30, 2022 and 2021.

The following table presents fair value measurements of our investments as of June 30, 2022 and 2021, according to the fair value hierarchy (successor basis):

	As of June 30,2022
Asset Type	Total		Level I		Level II		Level III
Non Traded Companies	$	11,517,226	$	-	$	-	$	11,517,226
GP Interests		18,333,000		-		-		18,333,000
LP Interests		27,693,840		-		-		27,693,840
Investment Trust		49,178		-		-		49,178
Total	$	57,593,244	$	-	$	-	$	57,593,244

	As of June 30,2021
Asset Type	Total		Level I		Level II		Level III
Publicly Traded Companies	$	169,200	$	169,200	$	-	$	-
Non Traded Companies		32,294,352		-		-		32,294,352
LP Interests		38,010,977		-		-		38,010,977
Investment Trust		34,714		-		-		34,714
Total	$	70,509,243	$	169,200	$	-	$	70,340,043

The following is a reconciliation of the beginning and ending balances for investments measured at fair value on a recurring basis using significant unobservable inputs (Level III of the fair value hierarchy) for the year ended June 30, 2022 (successor basis):

Balance at July 1, 2021	$	70,340,043
Purchases of investments		21,789,690
Transfers to Level I		(230,160	)
Fair value adjustment on FSP Satellite Corp. units owned prior to consolidation (Note 1)		(3,106,018	)
Proceeds from sales, net		(33,218,158	)
Return of capital distributions		(11,807,238	)
Net realized gains		7,277,446
Net unrealized gains		6,547,639
Ending balance at June 30, 2022	$	57,593,244

The transfer of $230,160 of investments from Level III to Level I category during the year ended June 30, 2022 resulted from two of our investments converting from a non-traded REIT to publicly traded REIT. Transfers are assumed to have occurred at the beginning of the year.

For the year ended June 30, 2022, changes in unrealized gains, net included in earnings relating to Level III investments still held at June 30, 2022 were $8,698,216.

Balance at December 31, 2020	$	68,877,889
Purchases of investments		8,830,765
Transfers to Level I		(229,879	)
Proceeds from sales, net		(1,922,780	)
Return of capital distributions		(6,001,052	)
Net realized losses		(160,108	)
Net unrealized gains		945,208
Ending balance at June 30, 2021	$	70,340,043

The transfers of $229,879 from Level III to Level I category during the six months ended June 30, 2021 resulted from one of our investments converting from a non-traded REIT to publicly traded REIT. Transfers are assumed to have occurred at the beginning of the period.

For the six months ended June 30, 2021, changes in unrealized gains, net included in earnings relating to Level III investments still held at June 30, 2021 were $945,208.

Balance at July 1, 2020	$	86,460,491
Purchases of investments		13,448,477
Transfers to Level I		(1,900,470	)
Consolidation of the Operating Partnership		(8,027,584	)
Proceeds from sales, net		(1,011,748	)
Return of capital		(11,486,835	)
Net realized gains		30,050
Net unrealized losses		(8,634,492	)
Ending balance at December 31, 2020	$	68,877,889

The transfer of $1,900,470 of investments from Level III to Level I category during the six months ended December 31, 2020 resulted from one of our investments converting from a non-traded REIT to publicly traded REIT. Transfers are assumed to have occurred at the beginning of the period.

For the six months ended December 31, 2020, changes in unrealized losses, net included in earnings relating to Level III investments still held at December 31, 2020 were $1,836,915.

The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at June 30, 2022 (successor basis):

Asset Type

Fair Value

Primary Valuation

Techniques

Unobservable Inputs Used

Range

Weighted Average

Non Traded Companies

1,011,081

Estimated Liquidation Value

Sponsor provided value

Liquidity discount

25.0% - 75.0%

25.0%

Non Traded Companies

10,506,145

Market Activity

Secondary market industry publication

Contracted purchase of security

GP Interests

18,333,000

Market Activity

Contracted purchase price

LP Interests

21,550,730

Direct Capitalization Method

Capitalization rate

4.0% - 5.0%

4.2%

Liquidity discount

15.0%

LP Interests

5,806,290

Discounted Cash Flow

Discount rate

6.3% - 9.0%

8.6%

LP Interests

6,820

Estimated Liquidation Value

Sponsor provided value

Liquidity discount

12%

LP Interest

330,000

Market Activity

Secondary market industry publication

Investment Trust

49,178

Direct Capitalization Method

Capitalization rate

5.0%

Liquidity discount

15.0%

57,593,244

The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at June 30, 2021 (successor basis):

Asset Type

Fair Value

Primary Valuation

Techniques

Unobservable Inputs Used

Range

Weighted Average

Non Traded Company

2,867,911

Direct Capitalization Method

Capitalization rate

7.9%

Liquidity discount

32.0%

Non Traded Companies

66,337

Estimated Liquidation Value

Sponsor provided value

Liquidity discount

2.0% - 67.0%

53.6%

Bankruptcy filing

Non Traded Companies

29,360,104

Market Activity

Secondary market industry publication

Underlying property sales contract

Acquisition cost

LP Interests

19,717,495

Direct Capitalization Method

Capitalization rate

3.5% - 7.5%

5.8%

Liquidity discount

20.0% - 33.0%

20.9%

LP Interests

11,448,000

Discounted Cash Flow

Discount rate

9.0% - 20.0%

13.2%

Discount term (months)

LP Interests

6,845,482

Estimated Liquidation Value

Sponsor provided value

Underlying property sales contract

Liquidity discount

5.0% - 46.19%

16.1%

Appraisal

Investment Trust

34,714

Direct Capitalization Method

Capitalization rate

6.0%

Liquidity discount

33.0%

70,340,043

Impact of COVID-19 Pandemic

The COVID-19 pandemic and related changes in tenant behavior have adversely impacted the fair value of our investments as of June 30, 2022 and 2021, and the values assigned as of this date may differ materially from the values that we may ultimately realize with respect to our investments. The impact of the COVID-19 pandemic may not yet be fully reflected in the valuation of our investments as our valuations, and particularly valuations of private investments and private companies, are inherently uncertain, may fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that is often from a time period earlier, generally two to three months, than the quarter for which we are reporting. Additionally, we may not have yet received information or certifications from our portfolio companies that indicate any or the full extent of declining performance or non-compliance with debt covenants, as applicable, as a result of the COVID-19 pandemic. As a result, our valuations at June 30, 2022 and 2021, may not show the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto. Accordingly, we may continue to incur additional net unrealized losses or may incur realized losses subsequent to June 30, 2022, which could have a material adverse effect on our business, financial condition and results of operations.

Summarized Financial Statements for Equity Method Investments (Fair Value Option)

Our investments in securities are generally in small and mid-sized companies in a variety of industries. In accordance with the Rule 8-03(b)(3) of Regulation S-X applicable for smaller reporting companies, we must determine which of our equity method investments measured at fair value under the Fair Value Option are considered “significant”, if any. Regulation S-X mandates the use of three different tests to determine if any of our investments are considered significant investments: the investment test, the asset test, and the income test. The rule requires summarized financial statements for any significant equity method investments in an annual and interim report if any of the three tests exceed 20%.

In addition to the SEC rules, ASC 323-10-50-3(c) requires summarized financial statements of its equity method investments, including those reported under the fair value option, if they are material individually or in aggregate. Our investment in Dimension 28, LLP was determined to be significant under the income test as of June 30, 2022. In addition, our equity method investments accounted under the fair value option were material in aggregate as of June 30, 2022. The summarized financial information of Dimension 28, LLP and aggregated summarized financial information of all equity method investees is as follows:

	Dimension 28, LLP			All Equity Method Investee Aggregated
Total Assets	$	18,684,443		$	95,185,176
Total Liabilities	$	13,788,779		$	73,988,432
Total Equities	$	4,895,664		$	21,196,744
Total Revenues	$	3,075,016		$	13,139,175
Total Expenses	$	3,747,794		$	13,013,280
Total Net Income (Loss)	$	(672,778	)	$	125,895

Unconsolidated Significant Subsidiaries

In accordance with SEC Rules 3-09 and 4-08(g) of Regulation S-X, we must determine which of our investments in securities are considered “significant subsidiaries”, if any. Regulation S-X mandates the use of three different tests to determine if any of our controlled investments are significant subsidiaries: the investment test, the asset test, and the income test. Rule 3-09 of Regulation S-X requires separate audited financial statements for any unconsolidated majority-owned subsidiary in an annual report if any of the three tests exceed 20%. Rule 4-08(g) of Regulation S-X requires summarized financial information in an annual report if any of the three tests exceeds 10%.

As of June 30, 2022 and 2021, none of our investments in securities was considered an unconsolidated significant subsidiary under the SEC rules described above.