Creative Media & Community Trust Corp 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures As of December 31, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, regarding the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15I and 15d-15(e) under the Exchange Act) at the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded, as of that time, that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and include controls and procedures designed to ensure the information required to be disclosed by us in such reports is accumulated and communicated to 65 Table of Contents management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management’s Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. We reviewed the results of management’s assessment with the Audit Committee of the Board of Directors. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013) . Based on their assessment, management determined that as of December 31, 2022, our internal control over financial reporting was effective based on those criteria. The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by Deloitte & Touche, LLP, an independent registered public accounting firm as stated in their report which appears herein. 66 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Creative Media & Community Trust Corporation Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Creative Media & Community Trust Corporation (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated March 30, 2023, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Tempe, Arizona March 30, 2023 67 Table of Contents Limitations on the Effectiveness of Controls Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal controls will prevent all errors and fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected. Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 68 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance Information required by this Item regarding our directors and executive officers, and corporate governance, including information with respect to beneficial ownership reporting compliance, will appear in the Proxy Statement we will deliver to our stockholders in connection with our 2023 Annual Meeting of Stockholders. Such information is incorporated herein by reference. Information relating to the registrant’s Code of Business Conduct and Ethics that applies to its employees, including its senior financial officers, is included in Part I of this Annual Report on Form 10-K under “Item 1––Business—Available Information.” Item 11. Executive Compensation The information required by this Item will appear in the Proxy Statement we will deliver to our stockholders in connection with our 2023 Annual Meeting of Stockholders. Such information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item regarding security ownership of certain beneficial owners and management will appear in the Proxy Statement we will deliver to our stockholders in connection with our 2023 Annual Meeting of Stockholders. Such information is incorporated herein by reference. Information relating to securities authorized for issuance under our equity compensation plans is included in Part II of this Annual Report on Form 10-K under “Item 5—Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.” Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item will appear in the Proxy Statement we will deliver to our stockholders in connection with our 2023 Annual Meeting of Stockholders. Such information is incorporated herein by reference. Item 14. Principal Accountant Fees and Services The information required by this Item will appear in the Proxy Statement we will deliver to our stockholders in connection with our 2023 Annual Meeting of Stockholders. Such information is incorporated herein by reference. 69 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules (a) 1. Financial Statements The list of the financial statements filed as part of this Annual Report on Form 10-K is set forth on page F-1 herein. 2. Financial Statement Schedules The list of the financial statement schedules filed as part of this Annual Report on Form 10-K is set forth on page F-1 herein. Note: Other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto. 3. Exhibits The following documents are included or incorporated by reference in this Annual Report on Form 10-K: Exhibit No. Document 3.1 Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 2, 2014). 3.1(a) Articles of Amendment (Name Change) (incorporated by reference to Exhibit 3.4 to the Registrant's Current Report on Form 8-K filed with the SEC on May 2, 2014). 3.1(b) Articles of Amendment (Reverse Stock Split) (incorporated by reference to Exhibit 3.5 to the Registrant's Current Report on Form 8-K filed with the SEC on May 2, 2014). 3.1(c) Articles of Amendment (Par Value Decrease) (incorporated by reference to Exhibit 3.6 to the Registrant's Current Report on Form 8-K filed with the SEC on May 2, 2014). 3.1(d) Articles of Amendment (Reverse Stock Split) (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 6, 2019). 3.1(e) Articles of Amendment (Par Value Decrease) (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 6, 2019). 3.1(f) Articles of Amendment (Name Change) (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 10, 2022). 3.2 Articles Supplementary , designating the Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the SEC on October 27, 2016). 3.3 Amendment No. 1 to the Articles Supplementary , designating the Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 31, 2020). 3.4 Articles Supplementary , designating the Series D Preferred Stock (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 31, 2020). 3.5 Articles Supplementary , designating the Series L Preferred Stock (incorporated by reference to Exhibit 4.1 to the Registrant's Pre-Effective Amendment No. 4 to the Form S-11 Registration Statement (333-218019) filed with the SEC on November 15, 2017). 3.6 Articles Supplementary , designating the Series A1 Preferred Stock (incorporated by reference to Exhibit 3. 1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 16 , 202 2 ). 3.7 Bylaws of Creative Media & Community Trust Corporation (incorporated by reference to Exhibit 3.6 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 16, 2022). *4.1 Description of Securities of Creative Media & Community Trust Corporation. 4.2 Purchase Agreement among PMC Commercial Trust, PMC Preferred Capital Trust-A and Taberna Preferred Funding I, Ltd. dated March 15, 2005 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed with the SEC on May 10, 2005). 4.3 Junior Subordinated Indenture between PMC Commercial Trust and JPMorgan Chase Bank, National Association as Trustee dated March 15, 2005 (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q filed with the SEC on May 10, 2005). 4.4 Amended and Restated Trust Agreement among PMC Commercial Trust, JPMorgan Chase Bank, National Association, Chase Bank USA, National Association and The Administrative Trustees Named Herein dated March 15, 2005 (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10‑Q filed with the SEC on May 10, 2005). 70 Table of Contents 4.5 Floating Rate Junior Subordinated Note due 2035 (incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q filed with the SEC on May 10, 2005). 4.6 Warrant Agreement, dated June 28, 2016, between CIM Commercial Trust Corporation and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-11/A filed with the SEC on June 29, 2016). 4.7 First Amendment to Warrant Agreement, dated November 6, 2019, between CIM Commercial Trust Corporation and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 8, 2019). 4.8 Form of Warrant Certificate (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form S-11 filed with the SEC on June 29, 2016). +10.1 2015 Equity Incentive Plan (incorporated by reference to Annex A to the Registrant's Definitive Proxy Statement related to its 2015 annual meeting of stockholders, as filed with the SEC on April 17, 2015). +10.2 Amended and Restated Executive Employment Contract with Barry N. Berlin dated August 30, 2013 (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed with the SEC on August 30, 2013). 10.3 Master Services Agreement dated March 11, 2014 by and among PMC Commercial Trust, certain of its subsidiaries, and CIM Service Provider, LLC (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on March 11, 2014). 10.4 Service Agreement, dated as of August 7, 2014, by and among CIM Commercial Trust Corporation and CIM Service Provider, LLC, under the Master Services Agreement dated March 11, 2014, by and among PMC Commercial Trust, certain of its subsidiaries, and CIM Service Provider, LLC (incorporated by reference to Exhibit 10.8 to the Registrant's Quarterly Report on Form 10-Q filed with the SEC on August 11, 2014). 10.5 Form of Indemnification Agreement for directors and officers of CIM Commercial Trust Corporation (incorporated by reference to Exhibit 10.9 to the Registrant's Quarterly Report on Form 10-Q filed with the SEC on August 11, 2014). 10.6 Staffing and Reimbursement Agreement, dated as of January 1, 2015, by and among CIM SBA Staffing, LLC, PMC Commercial Lending, LLC and CIM Commercial Trust Corporation (incorporated by reference to Exhibit 10.15 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 16, 2015). 10.7 Investment Management Agreement, dated as of December 10, 2015, between CIM Urban Partners, L.P. and CIM Investment Advisors, LLC (incorporated by reference to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 15, 2016). 10.8 Assignment Agreement, dated as of January 1, 2019, by and among CIM Capital, LLC (formerly known as CIM Investment Advisors, LLC), CIM Capital Controlled Company Management, LLC, CIM Capital RE Debt Management, LLC, CIM Capital Real Property Management, LLC and CIM Capital Securities Management, LLC (incorporated by reference to Exhibit 10.12 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 18, 2019). 10.9 Third Amended and Restated Dealer Manager Agreement, dated as of June 16, 2022, by and among Creative Media & Community Trust Corporation, CIM Service Provider, LLC and CCO Capital, LLC (incorporated by reference to Exhibit 1.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 16, 2022). 10.10 Third Amended and Restated Dealer Manager Guaranty, dated as of June 16, 2022, by and among Creative Media & Community Trust Corporation, CIM Service Provider, LLC and CCO Capital, LLC (incorporated by reference to Exhibit 1.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 16, 2022). 10.11 Second Amended and Restated Agreement of Limited Partnership of CIM Urban Partners, L.P., dated as of December 22, 2005, by and among CIM Urban Partners GP, Inc. and CIM Urban REIT, LLC (incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 16, 2015). 10.12 Credit Agreement, dated as of December 16, 2022, by and among certain subsidiary borrowers of Creative Media & Community Trust Corporation, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 16, 2022). 10.13 Credit Guaranty, dated as of December 16, 2022, by and among certain subsidiary borrowers of Creative Media & Community Trust Corporation, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 16, 2022). 10.14 Modification Agreement, dated as of September 2, 2020, among certain subsidiary borrowers of CIM Commercial Trust Corporation, each Lender party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8‑K filed with the SEC on September 3, 2020). 10.15 Lease Agreement, dated as of June 29, 2009, by and among CIM/Oakland 1 Kaiser Plaza, LP and Kaiser Foundation Health Plan, Inc, as amended by the First Amendment to Lease, dated as of June 15, 2012, as further amended by the Second Amendment to Lease, dated as of December 16, 2013, as further amended by the Third Amendment to Lease, dated as of July 8, 2015, and as further amended by the Fourth Amendment to Lease, dated as of November 18, 2015 (incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 16, 2020). 71 Table of Contents 10.16 Equity Distribution Agreement, dated as of March 16, 2020, by and among CIM Commercial Trust Corporation, CIM Capital, LLC, CIM Service Provider, LLC and Ladenburg Thalmann & Co. Inc. (incorporated by reference to Exhibit 1.1 to the Registrant’s Current Report on Form 8‑K filed with the SEC on March 16, 2020). 10.17 Amendment No. 2, dated as of September 22, 2021, to Second Amended and Restated Dealer Manager Agreement, dated as of January 28, 2020, by and among CIM Commercial Trust Corporation, CIM Service Provider, LLC and CCO Capital, LLC (incorporated by reference to Exhibit 1.1 to the Registrant's Current Report on 8-K filed with the SEC on September 24, 2021) 10.18 Fee Waiver, dated January 5, 2022, by and among CIM Commercial Trust Corporation, CIM Service Provider, LLC, CIM Capital, LLC, CIM Capital Securities Management, LLC, CIM Capital Controlled Company Management, LLC, CIM Capital RE Debt Management, LLC, CIM Capital Real Property Management, LLC, CIM Urban Partners, L.P., PMC Funding Corp. and PMC Properties, Inc. (incorporated by reference to Exhibit 1 .1 to the Registrant’s Current Report on Form 8‑K filed with the SEC on January 6, 2023 ) 10.19 Equity Interest Purchase and Sale Agreement, dated as of January 31, 2023, by and between Jack London Square Development (Oakland) Holdings, LLC and Channel House (Oakland) Owner, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8‑K filed with the SEC on February 3, 2023 ) 10.20 Equity Interest Purchase and Sale Agreement, dated as of January 31, 2023, by and between 466 Water Street (Oakland) Holdings, LLC, and Parcel D 466 Water Street (Oakland) Owner, LLC (incorporated by reference to Exhibit 10. 2 to the Registrant’s Current Report on Form 8‑K filed with the SEC on February 3, 2023) 10.21 Equity Interest Purchase and Sale Agreement, dated as of January 31, 2023, by and between JLS F-3 (Oakland) Holdings, LLC, and Parcel F-3 (Oakland) Owner, LLC (incorporated by reference to Exhibit 10. 3 to the Registrant’s Current Report on Form 8‑K filed with the SEC on February 3, 2023) 10.22 Equity Interest Purchase and Sale Agreement, dated as of January 31, 2023, by and between 1100 Clay Venture Holdings, LLC and CMCT 1100 Clay (Oakland) Owner, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8‑K filed with the SEC on February 29 , 2023) *10.23 Amended And Restated Limited Liability Company Operating Agreement of 4750 Co-Investor, LLC *21.1 Subsidiaries of the Registrant. *23.1 Consent of Deloitte & Touche, LLP. *24.1 Powers of Attorney (included on signature page). *31.1 Section 302 Officer Certification-Chief Executive Officer. *31.2 Section 302 Officer Certification-Chief Financial Officer. *32.1 Section 906 Officer Certification-Chief Executive Officer. *32.2 Section 906 Officer Certification-Chief Financial Officer. * Filed herewith. + Management contract or compensatory plan (b) Exhibits The exhibits listed in Item 15(a) are incorporated by reference or attached hereto. (c) Excluded Financial Statements None. Item 16. Form 10-K Summary None. 72 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Creative Media & Community Trust Corporation Dated: March 30, 2023 By: /s/ DAVID THOMPSON David Thompson Chief Executive Officer Dated: March 30, 2023 By: /s/ BARRY N. BERLIN Barry N. Berlin Chief Financial Officer POWERS OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David Thompson and Barry N. Berlin and each of them severally, his true and lawful attorney-in-fact with power of substitution and resubstitution to sign in his name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange Commission in connection with this Annual Report on Form 10-K and any and all amendments hereto, as fully for all intents and purposes as he might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each acting alone, and his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ David Thompson Chief Executive Officer (Principal Executive March 30, 2023 David Thompson Officer) /s/ Barry N. Berlin Chief Financial Officer (Principal Financial March 30, 2023 Barry N. Berlin Officer and Principal Accounting Officer) /s/ Douglas Bech Director March 30, 2023 Douglas Bech /s/ John Hope Bryant Director March 30, 2023 John Hope Bryant /s/ Marcie L. Edwards Director March 30, 2023 Marcie L. Edwards /s/ Shaul Kuba Director March 30, 2023 Shaul Kuba /s/ Richard Ressler Director March 30, 2023 Richard Ressler /s/ Avraham Shemesh Director March 30, 2023 Avraham Shemesh /s/ Elaine Wong Director March 30, 2023 Elaine Wong 73 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS Financial Statements Page Number Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) F- 2 Consolidated Balance Sheets as of December 31, 202 2 and 202 1 F- 4 Consolidated Statements of Operations for the Years Ended December 31, 202 2 and 202 1 F- 5 Consolidated Statements of Equity for the Years Ended December 31, 202 2 and 202 1 F- 6 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 2 and 202 1 F- 8 Notes to Consolidated Financial Statements as of December 31, 202 2 and 202 1 and for the Years Ended December 31, 202 2 and 202 1 F- 9 Schedule III—Real Estate and Accumulated Depreciation F- 45 Schedule IV—Mortgage Loans on Real Estate F- 47 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Creative Media & Community Trust Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Creative Media & Community Trust Corporation (the "Company") as of December 31, 2022, and 2021, the related consolidated statements of operations, equity and cash flows, for each of the two years in the period ended December 31, 2022, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 30, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Investments in Real Estate – Evaluation of Impairment Indicators and Undiscounted Cash Flows – Refer to Note 2 to the consolidated financial statements Critical Audit Matter Description The Company’s evaluation of investments in real estate for impairment involves an initial assessment of each real estate asset to determine whether events or changes in circumstances exist that may indicate that the carrying amounts of each investment in real estate is no longer recoverable. Possible indications of impairment may include, but is not limited to, changes in anticipated holding periods, changes in real estate market conditions, property performance, and occupancy, and additional property valuation assumptions including discount and terminal capitalization rates. When events or changes in circumstances exist, the Company evaluates its investment in real estate for impairment by comparing undiscounted future cash flows expected to be generated over the life of each asset to the respective carrying amount. If the carrying amount of an asset exceeds the undiscounted future cash flows, an analysis is performed to determine the fair value of the asset. F-2 Table of Contents The Company makes significant assumptions to evaluate investments in real estate for possible indications of impairment. Changes in these assumptions could have a significant impact on the investment in real estate identified for further analysis. For those investments in real estate where indications of impairment have been identified, the Company makes significant estimates and assumptions to determine whether the undiscounted future cash flows expected to be generated over the life of the asset exceed the carrying amount of the investment in real estate. Management concluded that the carrying value of the assets were recoverable and therefore were not subjected to a discounted cash flow analysis. Estimates and assumptions used for the undiscounted future cash flows of the office property include rental rates, lease-up period, growth rates, holding period, occupancy, capital expenditures and terminal capitalization rates. We identified the determination of impairment indicators for investments in real estate and certain assumptions used for the undiscounted future cash flows of the properties as a critical audit matter because of (1) the significant assumptions management makes when determining whether events or changes in circumstances have occurred indicating that the carrying amounts of investments in real estate assets may not be recoverable and (2) for those investments in real estate where indications of impairment have been identified, the significant estimates and assumptions management makes to evaluate whether the undiscounted future cash flows expected to be generated over the life of the asset exceed the carrying amount of the property, including those related to rental rates, lease-up period, growth rates, holding period, occupancy, capital expenditures and terminal capitalization rates. This required a high degree of auditor judgment and an increased extent of effort , including the need to involve our fair value specialists, when performing audit procedures to evaluate (1) whether management appropriately identified impairment indicators and (2) the reasonableness of management’s assumptions related to rental rates, lease-up period, growth rates, holding period, occupancy, capital expenditures and terminal capitalization rates for the undiscounted future cash flows analysis. How the Critical Audit Matter Was Addressed in the Audit • We tested the effectiveness of controls over (1) management’s identification of possible circumstances that may indicate that the carrying amounts of investments in real estate are no longer recoverable and (2) the undiscounted cash flows, including review of the underlying inputs. • We evaluated the accuracy, relevance, and completeness of factors utilized in the Company’s qualitative assessment for a sample of properties. • We performed corroborating inquiries with management, including property accounting, leasing and portfolio oversight to determine whether factors were identified in the current period that may be an impairment indicator, including changes in expected holding periods, and corroborated these inquiries through review of third-party market reports and inspection of meeting minutes of the Board of Directors. In addition, we evaluated whether factors were identified in the current period that may result in a change to assumptions used in the undiscounted cash flow models. • We evaluated whether the assumptions used in the Company’s undiscounted model relating to rental rates, lease-up period, growth rates, holding period, occupancy, capital expenditures and terminal capitalization rates were consistent with evidence obtained in other areas of the audit. • For properties in which we identified a change in expected holding period or the property was more likely than not to be disposed, we obtained the Company’s analysis to determine whether the expected proceeds were less than the carrying value. • With the assistance of our fair value specialists, we evaluated the undiscounted cash flow analysis, including office asset estimates of rental rates, lease-up periods, growth rates, holding period, capital expenditures and terminal capitalization rates by (1) evaluating the source of information and assumptions used by management and (2) testing the mathematical accuracy of the undiscounted cash flow analysis. • We evaluated the reasonableness of management’s undiscounted cash flow analysis by comparing management’s projections to the Company’s historical results and external market sources. /s/ Deloitte & Touche LLP Tempe, Arizona March 30, 2023 We have served as the Company's auditor since 2020. F-3 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except share and per share amounts) December 31, 2022 2021 ASSETS Investments in real estate, net $ 502,006 $ 497,984 Investment in unconsolidated entity 12,381 — Cash and cash equivalents 46,190 22,311 Restricted cash 11,290 11,340 Loans receivable, net 62,547 73,543 Accounts receivable, net 3,780 3,396 Deferred rent receivable and charges, net 37,543 36,095 Other intangible assets, net 4,461 5,251 Other assets 10,050 10,946 TOTAL ASSETS $ 690,248 $ 660,866 LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY LIABILITIES: Debt, net $ 184,267 $ 201,145 Accounts payable and accrued expenses 107,220 26,751 Intangible liabilities, net 20 237 Due to related parties 3,155 4,541 Other liabilities 17,856 16,861 Total liabilities 312,518 249,535 COMMITMENTS AND CONTINGENCIES (Note 14) REDEEMABLE PREFERRED STOCK: Series A cumulative redeemable preferred stock, $ 0.001 par value; 35,438,752 and 35,776,705 shares authorized as of December 31, 2022 and December 31, 2021, respectively; 693,741 shares issued and outstanding as of December 31, 2022 and 1,633,965 and 1,631,965 shares issued and outstanding, respectively, as of December 31, 2021; liquidation preference of $ 25.00 per share, subject to adjustment 15,697 37,782 EQUITY: Series A cumulative redeemable preferred stock, $ 0.001 par value; 35,438,752 and 35,776,705 shares authorized as of December 31, 2022 and December 31, 2021, respectively; 8,126,597 and 7,565,349 shares issued and outstanding, respectively, as of December 31, 2022 and 6,492,632 and 6,271,337 shares issued and outstanding, respectively, as of December 31, 2021; liquidation preference of $ 25.00 per share, subject to adjustment 189,048 156,431 Series A1 cumulative redeemable preferred stock, $ 0.001 par value; 27,990,070 shares authorized; 5,966,077 and 5,956,147 shares issued and outstanding, respectively, as of December 31, 2022 and no shares issued, outstanding, or authorized as of December 31, 2021; liquidation preference of $ 25.00 per share, subject to adjustment 147,514 — Series D cumulative redeemable preferred stock, $ 0.001 par value; 26,992,000 and 32,000,000 shares authorized as of December 31, 2022 and December 31, 2021, respectively; 56,857 and 48,857 shares issued and outstanding, respectively, as of December 31, 2022 and 56,857 shares issued and outstanding as of December 31, 2021; liquidation preference of $ 25.00 per share, subject to adjustment 1,200 1,396 Series L cumulative redeemable preferred stock, $ 0.001 par value; 919,260 and 6,306,420 shares authorized as of December 31, 2022 and December 31, 2021, respectively; No shares issued and outstanding, respectively, as of December 31, 2022 and 8,080,740 and 5,387,160 shares issued and outstanding as of December 31, 2021; liquidation preference of $ 28.37 per share, subject to adjustment — 152,834 Common stock, $ 0.001 par value; 900,000,000 shares authorized; 22,737,853 and 23,369,331 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively 23 24 Additional paid-in capital 861,721 866,746 Distributions in excess of earnings ( 837,846 ) ( 804,227 ) Total stockholders’ equity 361,660 373,204 Noncontrolling interests 373 345 Total equity 362,033 373,549 TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY $ 690,248 $ 660,866 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share amounts) Year Ended December 31, 2022 2021 REVENUES: Rental and other property income $ 56,226 $ 52,838 Hotel income 33,432 16,722 Interest and other income 12,248 21,366 Total Revenues 101,906 90,926 EXPENSES: Rental and other property operating 50,526 39,272 Asset management and other fees to related parties 3,570 9,030 Expense reimbursements to related parties—corporate 1,925 2,050 Expense reimbursements to related parties—lending segment 1,929 1,921 Interest 9,604 9,413 General and administrative 6,869 6,844 Transaction costs 223 143 Depreciation and amortization 20,348 20,112 Total Expenses 94,994 88,785 Income from unconsolidated entity 164 — INCOME BEFORE PROVISION FOR INCOME TAXES 7,076 2,141 Provision for income taxes 1,131 2,992 NET INCOME (LOSS) 5,945 ( 851 ) Net (income) loss attributable to noncontrolling interests ( 27 ) 1 NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY 5,918 ( 850 ) Redeemable preferred stock dividends declared or accumulated (Note 10) ( 18,558 ) ( 18,763 ) Redeemable preferred stock deemed dividends (Note 10) ( 19 ) ( 253 ) Redeemable preferred stock redemptions (Note 10) ( 13,126 ) ( 113 ) NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ ( 25,785 ) $ ( 19,979 ) NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE: Basic $ ( 1.11 ) $ ( 1.04 ) Diluted $ ( 1.11 ) $ ( 1.04 ) WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic 23,153 19,187 Diluted 23,154 19,187 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Consolidated Statements of Equity (In thousands, except share and per share amounts) Years Ended December 31, 2022 and 2021 Common Stock (1) Preferred Stock Additional Distributions Total Non- Par Par Paid - in in Excess Stockholders’ controlling Total Shares Value Shares Value Capital of Earnings Equity Interests Equity Balances, December 31, 2020 14,827,410 $ 15 9,784,067 $ 262,036 $ 794,127 $ ( 778,519 ) $ 277,659 $ 455 $ 278,114 Contributions to noncontrolling interests — — — — — — — 9 9 Distributions to noncontrolling interests — — — — — — — ( 118 ) ( 118 ) Stock-based compensation expense 20,332 — — — 220 — 220 — 220 Common dividends ($ 0.300 per share) — — — — — ( 5,732 ) ( 5,732 ) — ( 5,732 ) Dividends to holders of Series A Preferred Stock ($ 1.375 per share) — — — — — ( 10,289 ) ( 10,289 ) — ( 10,289 ) Issuance of Series D Preferred Stock — — 37,712 923 ( 30 ) — 893 — 893 Dividends to holders of Series D Preferred Stock ($ 1.413 per share) — — — — — ( 65 ) ( 65 ) — ( 65 ) Dividends to holders of Series L Preferred Stock ($ 1.560 per share) — — — — — ( 8,406 ) ( 8,406 ) — ( 8,406 ) Reclassification of Series A Preferred Stock to permanent equity — — 2,006,456 50,508 ( 4,702 ) — 45,806 — 45,806 Redeemable Preferred Stock deemed dividends — — — — — ( 253 ) ( 253 ) — ( 253 ) Redemption of Series A Preferred Stock — — ( 112,881 ) ( 2,806 ) 219 ( 113 ) ( 2,700 ) — ( 2,700 ) Issuance of Common Stock 8,521,589 9 — — 76,912 — 76,921 — 76,921 Net loss — — — — — ( 850 ) ( 850 ) ( 1 ) ( 851 ) Balances, December 31, 2021 23,369,331 $ 24 11,715,354 $ 310,661 $ 866,746 $ ( 804,227 ) $ 373,204 $ 345 $ 373,549 (Continued) F-6 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Consolidated Statements of Equity (Continued) (In thousands, except share and per share amounts) Years Ended December 31, 2022 and 2021 Common Stock Preferred Stock Shares Par Value Shares Par Value Additional Paid-in Capital Distributions in Excess of Earnings Total Stockholders’ Equity Non-controlling Interests Total Equity Balances, December 31, 2021 23,369,331 $ 24 11,715,354 $ 310,661 $ 866,746 $ ( 804,227 ) $ 373,204 $ 345 $ 373,549 Contributions to noncontrolling interests — — — — — — — 5 5 Distributions to noncontrolling interests — — — — — — — ( 4 ) ( 4 ) Stock based compensation expense 30,984 — — — 202 — 202 — 202 Repurchase of common stock ( 662,462 ) ( 1 ) — — ( 4,714 ) — ( 4,715 ) — ( 4,715 ) Common dividends ($ 0.340 per share) — — — — — ( 7,838 ) ( 7,838 ) — ( 7,838 ) Issuance of A1 Preferred Stock — — 5,966,077 147,761 ( 12,370 ) — 135,391 — 135,391 Redemptions of Series A1 Preferred Stock — — ( 9,930 ) ( 247 ) 23 ( 3 ) ( 227 ) — ( 227 ) Dividends to holders of A1 Preferred Stock ($ 1.125 per share) — — — — — ( 2,463 ) ( 2,463 ) — ( 2,463 ) Redemptions of Series D Preferred Stock — — ( 8,000 ) ( 196 ) 7 9 ( 180 ) — ( 180 ) Dividends to holders of Series D Preferred Stock ($ 1.413 per share) — — — — — ( 62 ) ( 62 ) — ( 62 ) Repurchase and Redemption of Series L Preferred Stock — — ( 5,387,160 ) ( 152,834 ) 14,270 ( 12,692 ) ( 151,256 ) — ( 151,256 ) Dividends to holders of Series L Preferred Stock ($ 1.560 per share) — — — — — ( 7,329 ) ( 7,329 ) — ( 7,329 ) Reclassification of Series A Preferred stock to permanent equity — — 1,630,765 40,998 ( 3,232 ) — 37,766 — 37,766 Redeemable Preferred Stock deemed dividends — — — — — ( 19 ) ( 19 ) — ( 19 ) Redemption of Series A Preferred Stock — — ( 336,753 ) ( 8,381 ) 789 ( 440 ) ( 8,032 ) — ( 8,032 ) Dividends to holders of Series A Preferred Stock ($ 1.375 per share) — — — — — ( 8,700 ) ( 8,700 ) — ( 8,700 ) Net income — — — — — 5,918 5,918 27 5,945 Balances, December 31, 2022 22,737,853 $ 23 13,570,353 $ 337,762 $ 861,721 $ ( 837,846 ) $ 361,660 $ 373 $ 362,033 The accompanying notes are an integral part of these consolidated financial statements. F-7 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 5,945 $ ( 851 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization, net 20,497 20,188 Amortization of deferred loan costs 1,066 1,068 Amortization of premiums and discounts on debt 48 ( 61 ) Unrealized premium adjustment 1,471 2,930 Amortization of deferred costs and accretion of fees on loans receivable, net ( 688 ) ( 622 ) Write-offs (recoveries) of uncollectible receivables 259 ( 82 ) Deferred income taxes ( 3 ) 72 Stock-based compensation 202 220 Income from unconsolidated entity ( 164 ) — Loans funded, held for sale to secondary market ( 30,770 ) ( 96,991 ) Proceeds from sale of guaranteed loans 31,943 109,000 Principal collected on loans subject to secured borrowings 692 1,786 Commitment fees remitted and other operating activity ( 1,086 ) ( 2,559 ) Return on investment from unconsolidated entity 164 — Changes in operating assets and liabilities: Accounts receivable ( 480 ) ( 1,519 ) Other assets ( 40 ) ( 1,340 ) Accounts payable and accrued expenses 801 2,574 Deferred leasing costs ( 2,056 ) ( 1,669 ) Other liabilities 995 7,128 Due to related parties 3,614 7,009 Net cash provided by operating activities 32,410 46,281 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 8,816 ) ( 4,047 ) Acquisition of real estate ( 10,787 ) ( 2,933 ) Investment in unconsolidated entity ( 22,652 ) — Return of investment from unconsolidated entity 10,271 — Loans funded ( 9,849 ) ( 36,299 ) Principal collected on loans 19,559 30,584 Net cash used in investing activities ( 22,274 ) ( 12,695 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of unsecured revolving lines of credit, revolving credit facilities, mortgages payable, term notes and principal on SBA 7(a) loan-backed notes ( 182,700 ) ( 157,910 ) Proceeds from unsecured revolving lines of credit, revolving credit facilities and term notes 166,230 35,396 Payment of principal on secured borrowings ( 692 ) ( 1,786 ) Payment of deferred preferred stock offering costs ( 1,581 ) ( 1,149 ) Payment of deferred costs ( 2,928 ) ( 1 ) Payment of common dividends ( 7,658 ) ( 3,979 ) Proceeds from issuance of Common Stock — 78,825 Payment of Common Stock offering costs — ( 1,900 ) Repurchase of Common Stock ( 4,715 ) — Net proceeds from issuance of Preferred Stock 148,007 29,829 Payment of preferred stock dividends ( 24,327 ) ( 18,045 ) (Continued) CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Continued) (In thousands) Year Ended December 31, 2022 2021 Repurchase of Series L Preferred Stock ( 67,417 ) — Redemption of Preferred Stock ( 8,527 ) ( 2,755 ) Noncontrolling interests’ distributions ( 4 ) ( 118 ) Noncontrolling interests’ contributions 5 9 Net cash provided by (used in) financing activities 13,693 ( 43,584 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 23,829 ( 9,998 ) CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: Beginning of period 33,651 43,649 End of period $ 57,480 $ 33,651 RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS: Cash and cash equivalents $ 46,190 $ 22,311 Restricted cash 11,290 11,340 Total cash and cash equivalents and restricted cash $ 57,480 $ 33,651 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 8,388 $ 8,463 Federal income taxes paid $ 1,105 $ 2,900 SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: Accrued capital expenditures, tenant improvements and real estate developments $ 3,859 $ 2,127 Accrued deferred costs $ 22 $ — Accrued preferred stock offering costs $ 68 $ 161 Accrual of dividends payable to preferred stockholders $ 6,276 $ 12,051 Accrual of dividends payable to common stockholders $ 1,933 $ 1,753 Preferred stock offering costs offset against redeemable preferred stock $ 2,105 $ 400 Reclassification of Series A Preferred Stock from temporary equity to permanent equity $ 37,766 $ 45,806 Reclassification of Preferred Stock from permanent equity to accounts payable $ 83,838 $ 48 Redeemable preferred stock deemed dividends $ 19 $ 253 Accrued Redeemable Preferred Stock fees $ 450 $ 638 Equity-based payment for management fees $ 5,000 $ 9,174 The accompanying notes are an integral part of these consolidated financial statements. F-8 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 1. ORGANIZATION AND OPERATIONS Creative Media & Community Trust Corporation (formerly known as CIM Commercial Trust Corporation) (the “Company”), is a Maryland corporation and real estate investment trust (“REIT”). The Company primarily acquires, develops, owns and operates both premier multifamily properties situated in vibrant communities throughout the United States and Class A and creative office real assets in markets with similar business and employment characteristics to its multifamily investments. The Company also owns one hotel in northern California and a lending platform that originates loans under the Small Business Administration (“SBA”) 7(a) loan program. The Company seeks to apply the expertise of CIM Group, L.P. (“CIM Group”) to the acquisition, development and operation of premier multifamily properties and creative office assets that cater to rapidly growing industries such as technology, media and entertainment in vibrant and emerging communities throughout the United States. Subsequent to December 31, 2022, the Company acquired two multifamily properties in Oakland, California and acquired a 50 % interest in a multifamily property in.Los Angeles, California (see Note 18 for more details). The Company’s common stock, $ 0.001 par value per share (“Common Stock”), is currently traded on the Nasdaq Global Market (“Nasdaq”) under the ticker symbol “CMCT”, and on the Tel Aviv Stock Exchange (the “TASE”) under the ticker symbol “CMCT.” The Company has authorized for issuance 900,000,000 shares of common stock and 100,000,000 shares of preferred stock (“Preferred Stock”). Since June 2022, the Company has been conducting a continuous public offering with respect to shares of its Series A1 Preferred Stock, par value $ 0.001 per share with an initial stated value of $ 25.00 per share, subject to adjustment (Note 10). The Company has qualified and intends to continue to qualify as a REIT, as defined in the Internal Revenue Code of 1986, as amended. 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation —The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Principles of Consolidation —The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. In determining whether the Company has controlling interests in an entity and the requirement to consolidate the accounts in that entity, the Company analyzes its investments in real estate in accordance with standards set forth in GAAP to determine whether they are variable interest entities (“VIEs”), and if so, whether the Company is the primary beneficiary. The Company’s judgment with respect to its level of influence or control over an entity and whether the Company is the primary beneficiary of a VIE involves consideration of various factors, including the form of the Company’s ownership interest, the Company’s voting interest, the size of the Company’s investment (including loans), and the Company’s ability to participate in major policy-making decisions. The Company’s ability to correctly assess its influence or control over an entity affects the presentation of these investments in real estate on the Company’s consolidated financial statements. For the year ended December 31, 2022, the Company has determined that the trust formed for the benefit of the note holders (the “Trust”) for the securitization of the unguaranteed portion of certain of the Company’s SBA 7(a) loans receivable was considered a VIE. Applying the consolidation requirements for VIEs, the Company determined that it is the primary beneficiary based on its power to direct activities through its role as servicer and its obligations to absorb losses and right to receive benefits. As of December 31, 2022, the Trust held no assets or liabilites as the note holders had been paid in full. In addition, as of December 31, 2022, the Company has determined that its Unconsolidated Joint Venture (as defined below) is considered a VIE. Applying the consolidation requirements for VIEs, the Company determined that it is not the primary beneficiary based on its lack of power to direct activities and its obligations to absorb losses and right to receive benefits, and therefore the Unconsolidated joint venture does not qualify for consolidation. The Company accounts for the investment in the Unconsolidated Joint Venture as an equity method investment. Investments in Real Estate —Investments in real estate are stated at depreciated cost. Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives as follows: F-9 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) Buildings and improvements 15 - 40 years Furniture, fixtures, and equipment 3 - 5 years Tenant improvements Lesser of useful life or lease term The fair value of real estate acquired is recorded to acquired tangible assets, consisting primarily of land, land improvements, building and improvements, tenant improvements, furniture, fixtures, and equipment, and identified intangible assets and liabilities, consisting of the value of acquired above-market and below-market leases, in-place leases and ground leases, if any, based in each case on their respective fair values. Loan premiums, in the case of above-market rate loans, or loan discounts, in the case of below-market rate loans, are recorded based on the fair value of any loans assumed in connection with acquiring the real estate. Capitalized Project Costs The Company capitalizes project costs, including pre-construction costs, interest expense, property taxes, insurance, and other costs directly related and essential to the development, redevelopment, or construction of a project, while activities are ongoing to prepare an asset for its intended use. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Improvements and replacements are capitalized when they extend the useful life, increase capacity, or improve the efficiency of the asset. Ordinary repairs and maintenance are expensed as incurred. Recoverability of Investments in Real Estate —The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Investments in real estate are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If, and when, such events or changes in circumstances are present, the recoverability of assets to be held and used requires significant judgment and estimates and is measured by a comparison of the carrying amount to the future undiscounted cash flows expected to be generated by the assets and their eventual disposition. If the undiscounted cash flows are less than the carrying amount of the assets, an impairment is recognized to the extent the carrying amount of the assets exceeds the estimated fair value of the assets. The process for evaluating real estate impairment requires management to make significant assumptions related to certain inputs, including rental rates, lease-up period, occupancy, estimated holding periods, capital expenditures, growth rates, market discount rates and terminal capitalization rates. These inputs require a subjective evaluation based on the specific property and market. Changes in the assumptions could have a significant impact on either the fair value, the amount of impairment charge, if any, or both. Any asset held for sale is reported at the lower of the asset’s carrying amount or fair value, less costs to sell. When an asset is identified by the Company as held for sale, the Company will cease recording depreciation and amortization of the asset. The Company did no t recognize any impairment of long-lived assets during the years ended December 31, 2022 and 2021 (Note 3). Investment in Unconsolidated Entity —In February 2022, the Company invested in an unconsolidated joint venture arrangement (the “Unconsolidated Joint Venture”) with a CIM-managed separate account (the “CIM JV Partner”) to purchase an office property in Los Angeles, California for a gross purchase price of approximately $ 51.0 million, of which the Company initially contributed approximately $ 22.4 million and the CIM JV Partner initially contributed the remaining balance. The Company accounts for its approximately 44 % investment in the Unconsolidated Joint Venture under the equity method, as the Company has the ability to exercise significant influence over the investment. The Unconsolidated Joint Venture records its assets and liabilities at fair value. As such, the Company records its share of the Unconsolidated Joint Venture’s unrealized gains or losses as well as its share of the revenues and expenses on a quarterly basis as an adjustment to the carrying value of the investment on the Company’s consolidated balance sheet and such share is recognized within the Company’s income from unconsolidated entity on the consolidated statements of operations. The Company recorded income of $ 164,000 related to its investment in the Unconsolidated Joint Venture during the year ended December 31, 2022, in the consolidated statements of operations. In connection with the closing of the financing of the property owned by the Unconsolidated Joint Venture, the Company received a distribution from the Unconsolidated Joint Venture of $ 10.4 million during the year ended December 31, 2022, 164,000 of which was recognized as a return on investment and 10.3 million of which was recognized as a return of investment. The Company also made additional contributions during the year ended December 31, 2022 totaling $ 242,000 . The Company’s investment in the Unconsolidated Joint Venture was $ 12.4 million and its ownership percentage remained unchanged as of December 31, 2022. Cash and Cash Equivalents —Cash and cash equivalents include short-term liquid investments with initial maturities of three months or less. F-10 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) Restricted Cash —The Company’s mortgage loan and hotel management agreements provide for depositing cash into restricted accounts reserved for capital expenditures, free rent, tenant improvement and leasing commission obligations. Restricted cash also includes cash required to be segregated in connection with certain of the Company’s loans receivable. Loans Receivable —The Company’s loans receivable are carried at their unamortized principal balance less unamortized acquisition discounts and premiums, retained loan discounts and loan loss reserves. Acquisition discounts or premiums, origination fees and retained loan discounts are amortized as a component of interest and other income using the effective interest method over the life of the respective loans, or on a straight-line basis when it approximates the effective interest method. All loans were originated pursuant to programs sponsored by the Small Business Administration (the “SBA”). The programs consist of loans originated under the SBA 7(a) Small Business Loan Program (the “SBA 7(a) Program”) and, commencing with the quarter ended June 30, 2020 and ending during the quarter ended June 30, 2021, the Paycheck Protection Program (the “PPP”). Pursuant to the SBA 7(a) Program, the Company sells the portion of the loan that is guaranteed by the SBA. Upon sale of the SBA guaranteed portion of the loans, which are accounted for as sales, the unguaranteed portion of the loan retained by the Company is recorded at fair value and a discount is recorded as a reduction in basis of the retained portion of the loan. Unamortized retained loan discounts were $ 9.0 million and $ 9.6 million as of December 31, 2022 and 2021, respectively. A loan receivable is generally classified as non-accrual (a “Non-Accrual Loan”) if (i) it is past due as to payment of principal or interest for a period of 60 days or more, (ii) any portion of the loan is classified as doubtful or is charged-off or (iii) the repayment in full of the principal and or interest is in doubt. Generally, loans are charged-off when management determines that the Company will be unable to collect any remaining amounts due under the loan agreement, either through liquidation of collateral or other means. Interest income, included in interest and other income, on a Non-Accrual Loan is recognized on the cost recovery basis. Loan Loss Reserves —On a quarterly basis, the Company evaluates the collectability of its loans receivable. The Company’s evaluation of collectability involves significant judgment, estimates, and a review of the ability of the borrower to make principal and interest payments, the underlying collateral and the borrowers’ business models and future operations. For the years ended December 31, 2022 and 2021, the Company recorded net impairment losses of $ 0 and $ 19,000 , respectively, on its loans receivable. There were no material loans receivable subject to credit risk which were considered to be impaired as of December 31, 2022 or 2021. The Company considers a loan to be impaired when the Company does not expect to collect all of the contractual interest and principal payments as scheduled in the loan agreements. The Company also establishes a general loan loss reserve when available information indicates that it is probable a loss has occurred based on the carrying value of the portfolio and the amount of the loss can be reasonably estimated. Significant judgment is required in determining the general loan loss reserve, including estimates of the likelihood of default and the estimated fair value of the collateral. The general loan loss reserve includes those loans, which may have negative characteristics which have not yet become known to the Company. In addition to the reserves established on loans not considered impaired that have been evaluated under a specific evaluation, the Company establishes the general loan loss reserve using a consistent methodology to determine a loss percentage to be applied to loan balances. These loss percentages are based on many factors, primarily cumulative and recent loss history and general economic conditions. For the years ended December 31, 2022 and 2021, the Company has loan loss reserves of $ 1.1 million and $ 943,000 , respectively. Deferred Rent Receivable and Charges —Deferred rent receivable and charges consist of deferred rent, deferred leasing costs, deferred offering costs (Note 10), deferred financing costs and other deferred costs. Deferred leasing costs, which represent lease commissions and other direct costs associated with the acquisition of tenants, are capitalized and amortized on a straight-line basis over the terms of the related leases. Deferred offering costs represent direct costs incurred in connection with the Company’s offerings of Series A1 Preferred Stock (as defined below), Series A Preferred Stock (as defined below), and, after January 2020, Series A Preferred Stock (as defined below) and Series D Preferred Stock (as defined below), excluding costs specifically identifiable to a closing, such as commissions, dealer-manager fees, and other offering fees and expenses. Generally, for a specific issuance of securities, issuance-specific offering costs are recorded as a reduction of proceeds raised on the issuance date and offering costs incurred but not directly related to a specifically identifiable closing of a security are deferred. Deferred offering costs are first allocated to each issuance of a security on a pro-rata basis equal to the ratio of the number of securities issued in a given issuance to the maximum number of securities that are expected to be issued in the related offering. In the case of the Series A Preferred Stock issued prior to February 2020, the issuance-specific offering costs and the deferred offering costs allocated to such issuance were further allocated to the Series A Preferred Stock and Series A Preferred Warrants issued in such issuance based on the relative fair value of the instruments on the date of issuance. The F-11 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) deferred offering costs allocated to the Series A Preferred Stock and Series A Preferred Warrants are reductions to temporary equity and permanent equity, respectively. Deferred financing costs related to the securing of a revolving line of credit are presented as an asset and amortized ratably over the term of the line of credit arrangement. As such, the Company’s current and corresponding prior period total deferred costs, net in the accompanying consolidated balance sheets relate only to the revolving loan portion of the credit facilities. As of December 31, 2022 and 2021, deferred rent receivable and charges, net consist of the following: December 31, 2022 December 31, 2021 (in thousands) Deferred rent receivable $ 20,949 $ 20,870 Deferred leasing costs, net of accumulated amortization of $ 9,637 and $ 8,971 , respectively 8,319 8,453 Deferred offering costs 5,664 6,281 Deferred financing costs, net of accumulated amortization of $ 30 and $ 0 , respectively 2,120 — Other deferred costs 491 491 Deferred rent receivable and charges, net $ 37,543 $ 36,095 Noncontrolling Interests —Noncontrolling interests represent the interests in various properties owned by third parties. Redeemable Preferred Stock —Beginning on the date of original issuance of any given shares of Series A1 Preferred Stock, par value $ .001 per share (“Series A1 Preferred Stock”), with an initial stated value of $ 25.00 per share, subject to adjustment (the “Series A1 Preferred Stock Stated Value”), Series A Preferred Stock, par value $ 0.001 per share (“Series A Preferred Stock”) with an initial stated value of $ 25.00 per share, subject to adjustment (the “Series A Preferred Stock Stated Value”), or Series D Preferred Stock, par value $ 0.001 per share (“Series D Preferred Stock”), with an initial stated value of $ 25.00 per share, subject to adjustment (the “Series D Preferred Stock Stated Value”), and from and after the fifth anniversary date of the original issuance of the Series L Preferred Stock, the holder of such shares has the right to require the Company to redeem such shares, subject to certain limitations as discussed in Note 10. The Company records the activity related to the Series A1 Preferred Stock, Series A Preferred Warrants, Series D Preferred Stock and Series L Preferred Stock in permanent equity. In the event a holder of Series A Preferred Stock requests redemption of such shares and such redemption takes place prior to the first anniversary of the date of original issuance, the Company is required to pay such redemption in cash. As a result, the Company recorded issuances of Series A Preferred Stock in temporary equity. On the first anniversary of the date of original issuance of a particular share of Series A Preferred Stock, the Company reclassifies such share of Series A Preferred Stock from temporary equity to permanent equity because the feature giving rise to temporary equity classification, the requirement to satisfy redemption requests in cash, lapses on the first anniversary date. Purchase Accounting for Acquisition of Investments in Real Estate —The Company applies the acquisition method to all acquired real estate assets. The purchase consideration of the real estate, which includes the transaction costs incurred in connection with such acquisitions, is recorded at fair value to the acquired tangible assets, consisting primarily of land, land improvements, building and improvements, tenant improvements, and furniture, fixtures, and equipment, and identified intangible assets and liabilities, consisting of the value of acquired above-market and below-market leases, in-place leases and ground leases, if any, based in each case on their relative fair values. Loan premiums, in the case of above-market rate loans, or loan discounts, in the case of below-market rate loans, are recorded based on the fair value of any loans assumed in connection with acquiring the real estate. The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land (or acquired ground lease if the land is subject to a ground lease), land improvements, building and improvements, and tenant improvements based on management’s determination of the relative fair values of these assets. Management determines the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses, and estimates of lost rental F-12 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases, including leasing commissions, legal, and other related costs. In allocating the purchase consideration of the identified intangible assets and liabilities of an acquired property, above-market, below-market, and in-place lease values are recorded based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases measured over a period equal to the remaining non-cancelable term of the lease, and for below-market leases, over a period equal to the initial term plus any below-market fixed-rate renewal periods. Acquired above-market and below-market leases are amortized and recorded to rental and other property income over the initial terms of the respective leases. The aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, is measured by the estimated cost of operations during a theoretical lease-up period to replace in-place leases, including lost revenues and any unreimbursed operating expenses, plus an estimate of deferred leasing commissions for in-place leases. The value of in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease is terminated prior to its stated expiration, all unamortized amounts relating to that lease are written-off. Revenue Recognition —At the inception of a revenue-producing contract, the Company determines if a contract qualifies as a lease and if not, then as a customer contract. Based on this determination, the appropriate treatment in accordance with GAAP is applied to the contract, including its revenue recognition. Revenue from leasing activities The Company operates as a lessor of real estate assets. When the Company enters into a contract or amends an existing contract, the Company evaluates if the contracts meet the definition of a lease using the following criteria: • One party (lessor) must hold an identified asset; • The counterparty (lessee) must have the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of the contract; and • The counterparty (lessee) must have the right to direct the use of the identified asset throughout the period of the contract. The Company determined that the Company’s contracts with its tenants explicitly identify the premises and that any substitution rights to relocate tenants to other premises within the same building stated in the contract are not substantive. Additionally, so long as payments are made timely under such contracts, the Company’s tenants have the right to obtain substantially all the economic benefits from the use of the identified asset and can direct how and for what purpose the premises are used to conduct their operations. Therefore, the contracts with the Company’s tenants constitute leases. All leases are classified as operating leases and minimum rents are recognized on a straight-line basis over the terms of the leases when collectability is probable and the tenant has taken possession or controls the physical use of the leased asset. The excess of rents recognized over amounts contractually due pursuant to the underlying leases is recorded as deferred rent. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is considered the owner of the improvements, any tenant improvement allowance that is funded is treated as an incentive. Lease incentives paid to tenants are included in other assets and amortized as a reduction to rental revenue on a straight-line basis over the term of the related lease. Lease incentives of $ 3.9 million and $ 4.0 million are presented net of accumulated amortization of $ 3.0 million and $ 2.7 million as of December 31, 2022 and 2021, respectively. Reimbursements from tenants, consisting of amounts due from tenants for common area maintenance, real estate taxes, insurance, and other recoverable costs, are recognized as revenue and are included in rental and other property income in the period the expenses are incurred, with the corresponding expenses included in rental and other property operating expense. Tenant reimbursements are recognized and presented on a gross basis when the Company is primarily responsible for fulfilling the promise to provide the specified good or service and control that specified good or service before it is transferred to the tenant. The Company has elected not to separate lease and non-lease components as the pattern of revenue recognition does not differ for the two components, and the non-lease component is not the primary component in the Company’s leases. F-13 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) In addition to minimum rents, certain leases, including the Company’s parking leases with third-party operators, provide for additional rents based upon varying percentages of tenants’ sales in excess of annual minimums. Percentage rent is recognized once lessees’ specified sales targets have been met. For the years ended December 31, 2022 and 2021, the Company recognized rental income as follows: Year Ended December 31, 2022 2021 (in thousands) Rental and other property income Fixed lease payments (1) $ 46,373 $ 45,773 Variable lease payments (2) 9,853 7,065 Rental and other property income $ 56,226 $ 52,838 (1) Fixed lease payments include contractual rents under lease agreements with tenants recognized on a straight-line basis over the lease term, including amortization of acquired above-market leases, below-market leases and lease incentives. (2) Variable lease payments include expense reimbursements billed to tenants and percentage rent, net of bad debt expense from the Company’s operating leases plus cash payments from tenants deemed not probable of collections. Collectability of Lease-Related Receivables The Company continually reviews whether collection of lease-related receivables, including any straight-line rent, and current and future operating expense reimbursements from tenants is probable. The determination of whether collectability is probable takes into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Upon the determination that the collectability of a receivable is not probable, the Company will record a reduction to rental and other property income and a decrease in the outstanding receivable. Revenue from leases where collection is deemed to be not probable is recorded on a cash basis until collectability becomes probable. Management’s estimate of the collectability of lease-related receivables is based on the best information available at the time of estimate. The Company does not use a general reserve approach. As of December 31, 2022 and 2021, the Company had identified certain tenants where collection was no longer considered probable and decreased outstanding receivables by $ 387,000 and $ 579,000 , respectively, across all operating leases. Revenue from lending activities Interest income included in interest and other income is comprised of interest earned on loans and the Company’s short-term investments and the accretion of loan discounts. Interest income on loans is accrued as earned with the accrual of interest suspended when the related loan becomes a Non-Accrual Loan (as defined below). Revenue from hotel activities The Company recognizes revenue from hotel activities separate from its leasing activities. At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or implied by customary business practices. Various performance obligations of hotel revenues can be categorized as follows: • cancellable and noncancelable room revenues from reservations and • ancillary services including facility usage and food or beverage. Cancellable reservations represent a single performance obligation of providing lodging services at the hotel. The Company satisfies its performance obligation and recognizes revenues associated with these reservations over time as services are rendered to the customer. The Company satisfies its performance obligation and recognizes revenues associated with F-14 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) noncancelable reservations at the earlier of (i) the date on which the customer cancels the reservation or (ii) over time as services are rendered to the customer. Ancillary services include facilities usage and providing food and beverage. The Company satisfies its performance obligation and recognizes revenues associated with these services at a point in time when the good or service is delivered to the customer. At inception of a contract with a customer for hotel goods and services, the contractual price is equivalent to the transaction price as there are no elements of variable consideration to estimate. The Company presents hotel revenues net of sales, occupancy, and other taxes. Below is a reconciliation of the hotel revenue from contracts with customers to the total hotel segment revenue disclosed in Note 17: Year Ended December 31, 2022 2021 (in thousands) Hotel properties Hotel income $ 33,432 $ 16,722 Rental and other property income 1,650 1,070 Interest and other income 131 57 Hotel revenues $ 35,213 $ 17,849 Tenant recoveries outside of the lease agreements Tenant recoveries outside of the lease agreements are related to construction projects in which the Company’s tenants have agreed to fully reimburse the Company for all costs related to construction. These services include architectural, permit expediter and construction services. At inception of the contract with the customer, the contractual price is equivalent to the transaction price as there are no elements of variable consideration to estimate. While these individual services are distinct, in the context of the arrangement with the customer, all of these services are bundled together and represent a single package of construction services requested by the customer. The Company satisfies its performance obligation and recognizes revenues associated with these services over time as the construction is completed. No such amounts were recognized for tenant recoveries outside of the lease agreements for the years ended December 31, 2022 and 2021. As of December 31, 2022, there were no remaining performance obligations associated with tenant recoveries outside of the lease agreements. Premiums and Discounts on Debt — Premiums and discounts on debt are accreted or amortized to interest expense using the effective interest method or on a straight-line basis over the respective term of the debt, which approximates the effective interest method. Stock-Based Compensation Plans —The Company has issued and continue to issue restricted shares under stock-based compensation plans described more fully in Note 8. The Company uses fair value recognition provisions to account for all awards granted, modified or settled. Earnings per Share (“EPS”) —Basic EPS is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of Common Stock outstanding for the period. Net income attributable to common stockholders includes a deduction for dividends due to preferred stockholders. Diluted EPS is computed by dividing net income attributable to common stockholders by the weighted average number of shares of Common Stock outstanding adjusted for the dilutive effect, if any, of securities such as stock-based compensation awards, warrants, including the Series A Preferred Warrants and preferred stock, including the Series A1 Preferred Stock, Series A Preferred Stock, Series D Preferred Stock and Series L Preferred Stock, whose redemption is payable in shares of Common Stock or cash, at the discretion of the Company. The dilutive effect of stock-based compensation awards and warrants, including the Series A Preferred Warrants, is reflected in the weighted average diluted shares calculation by application of the treasury stock method. The dilutive effect of preferred stock, including the Series A1 Preferred Stock, Series A Preferred Stock, Series D Preferred Stock and Series L Preferred F-15 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) Stock, whose redemption is payable in shares of Common Stock or cash, at the discretion of the Company, is reflected in the weighted average diluted shares calculation by application of the if-converted method. Distributions —Distributions on the Company’s Series A1 Preferred Stock, Series A Preferred Stock, Series D Preferred Stock, Series L Preferred Stock and Common Stock are recorded when they are authorized by its Board of Directors and declared by the Company. Assets Held for Sale and Discontinued Operations —In the ordinary course of business, the Company may periodically enter into agreements to dispose of its assets. Some of these agreements are non-binding because either they do not obligate either party to pursue any transactions until the execution of a definitive agreement or they provide the potential buyer with the ability to terminate without penalty or forfeiture of any material deposit, subject to certain specified contingencies, such as completion of due diligence at the discretion of such buyer. The Company does not classify assets that are subject to such non-binding agreements as held for sale. The Company classifies assets as held for sale, if material, when they meet the necessary criteria, which include: a) management commits to and actively embarks upon a plan to sell the assets, b) the assets to be sold are available for immediate sale in their present condition, c) the sale is expected to be completed within one year under terms usual and customary for such sales and d) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company generally believes that it meets these criteria when the plan for sale has been approved by its management, having the authority to approve the sale, there are no known significant contingencies related to the sale and management believes it is probable that the sale will be completed within one year. Assets held for sale are recorded at the lower of cost or estimated fair value less cost to sell. In addition, if the Company were to determine that the asset disposal associated with assets held for sale or disposed of represents a strategic shift, the revenues, expenses and net gain (loss) on dispositions would be recorded in discontinued operations for all periods presented through the date of the applicable disposition. Derivative Financial Instruments —As part of risk management and operational strategies, from time to time, the Company may enter into derivative contracts with various counterparties. All derivatives are recognized on the balance sheet at their estimated fair value. Accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative instrument and the designation of the derivative instrument. The change in fair value of the derivative instrument that is designated as a hedge is recorded as other comprehensive income. The changes in fair value for derivative instruments that are not designated as hedges or that do not meet the hedge accounting criteria are recorded as a gain or loss to operations. Income Taxes —The Company has elected to be taxed as a REIT under the provisions of the Code. To the extent the Company qualifies for taxation as a REIT, it generally will not be subject to a federal corporate income tax on its taxable income that is distributed to its stockholders. The Company may, however, be subject to certain federal excise taxes and state and local taxes on its income and property. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates and will not be able to qualify as a REIT for four subsequent taxable years. In order to remain qualified as a REIT under the Code, the Company must satisfy various requirements in each taxable year, including, among others, limitations on share ownership, asset diversification, sources of income, and the distribution of at least 90% of its taxable income within the specified time in accordance with the Code. The Company has wholly-owned taxable REIT subsidiaries (“TRS’s”) which are subject to federal income taxes. The income generated from the taxable REIT subsidiaries is taxed at normal corporate rates. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases. The Company has established a policy on classification of penalties and interest related to audits of its federal and state income tax returns. If incurred, the Company’s policy for recording interest and penalties associated with audits will be to record such items as a component of general and administrative expense. Penalties, if incurred, will be recorded in general and administrative expense and interest paid or received will be recorded in interest expense or interest income, respectively, in the Company’s consolidated statements of operations. ASC 740, Income Taxes , provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more likely than not” of F-16 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current period. The Company has reviewed all open tax years and concluded that the application of ASC 740 resulted in no material effect to its consolidated financial position or results of operations. Use of Estimates —The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company bases such estimates on historical experience, information available at the time, and assumptions the Company believes to be reasonable under the circumstances and at such time. Actual results could differ from those estimates. Concentration of Credit Risk —Financial instruments that subject us to credit risk consist primarily of cash and cash equivalents and interest rate swap agreements. The Company has its cash and cash equivalents on deposit with what it believes to be high-quality financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Management routinely assesses the financial strength of its tenants and, as a consequence, believes that its accounts receivable credit risk exposure is limited. The majority of the Company’s revenues are earned from properties located in California. The Company is subject to risks incidental to the ownership and operation of commercial real estate. These include, among others, the risks normally associated with changes in the general economic climate in the communities in which the Company operates, trends in the real estate industry, changes in tax laws, interest rate levels, availability of financing, and the potential liability under environmental and other laws. Segment Information —Segment information is prepared on the same basis that the Company’s management reviews information for operational decision-making purposes. The Company reportable segments for the years ended December 31, 2022 and 2021 consist of two types of commercial real estate properties, namely office and hotel, as well as a segment for its lending business. The products for the Company’s office segment primarily include rental of office space and other tenant services, including tenant reimbursements, parking, and storage space rental. The products for the Company’s hotel segment include revenues generated from the operations of hotel properties and rental income generated from a garage located directly across the street from the hotel. The income from the Company’s lending segment includes premium income recognized from the sale of the government guaranteed portion of loans receivable, income from the yield on its loans receivable and other related fee income earned on its loans receivable. Recently Issued Accounting Pronouncements— In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which was subsequently amended by ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses (“ASU 2018-19”) in November 2018. Subsequently, the FASB issued ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-02 to provide additional guidance on the credit losses standard. ASU 2016-13 and the related updates improve financial reporting requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held-for-investment, held-to-maturity debt securities, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current GAAP. ASU 2018-19 clarified that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASU No. 2016-02, Leases (Topic 842). For smaller reporting companies, public entities that are not SEC filers, and entities that are not public business entities, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2022. Early adoption is permitted for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2018. The Company adopted ASU 2016-13 and the related updates on January 1, 2023 and the adoption did not have a material impact. On April 10, 2020, the FASB issued a question-and-answer document (the “Q&A”) to address stakeholder questions on the application of the lease accounting guidance for lease concessions related to the effects of COVID-19. The lease modification guidance in Topic 842, Leases , (or Topic 840, Leases ) would require the Company to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease F-17 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) modification accounting framework) or if a lease concession was made pursuant to the enforceable rights and obligations of the existing lease agreement (precluded from applying the lease modification accounting framework). However, the Q&A provides that the Company may bypass the lease by lease analysis if certain criteria are met, and instead elect to either consistently apply, or consistently not apply, the lease modification framework to groups of leases with similar characteristics and similar circumstances. The Company has elected not to apply the lease modification guidance to concessions related to the effects of COVID-19 that do not result in a substantial increase in the Company’s rights as lessor, including concessions that result in the total payments required by the modified lease being substantially the same as or less than the total payments required by the original lease. 3. INVESTMENTS IN REAL ESTATE Investments in real estate consist of the following: December 31, 2022 2021 (in thousands) Land $ 151,727 $ 141,236 Land improvements 1,837 2,644 Buildings and improvements 455,275 454,431 Furniture, fixtures, and equipment 4,339 4,398 Tenant improvements 34,372 29,733 Work in progress 12,863 10,260 Investments in real estate 660,413 642,702 Accumulated depreciation ( 158,407 ) ( 144,718 ) Net investments in real estate $ 502,006 $ 497,984 For the years ended December 31, 2022 and 2021, the Company recorded depreciation expense of $ 17.3 million and $ 16.9 million, respectively. 2022 Transactions — During the year ended December 31, 2022, the Company acquired a 100 % fee-simple interest in the following properties from unrelated third-parties which were accounted for as asset acquisitions. Asset Date of Purchase Property Type Acquisition Square Feet Price (1) (in thousands) 3109 S Western Avenue, Los Angeles, CA (1)(5) Multifamily (5) August 4, 2022 5,900 $ 700 1007 E 7th Street, Austin, TX (2) (6) Office (6) July 1, 2022 1,352 $ 1,900 3022 S Western Avenue, Los Angeles, CA (3) (7) Multifamily (7) May 20, 2022 6,000 $ 5,650 3101 S Western Avenue, Los Angeles, CA (4) (8) Multifamily (8) February 11, 2022 3,752 $ 2,260 F-18 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) (1) Transaction costs that were capitalized as a component of the assets acquired and liabilities assumed in connection with the acquisition of this property totaled $ 11,000 , which are not included in the purchase price above. (2) Transaction costs that were capitalized as a component of the assets acquired and liabilities assumed in connection with the acquisition of this property totaled $ 52,000 , which are not included in the purchase price above. (3) Transaction costs that were capitalized as a component of the assets acquired and liabilities assumed in connection with the acquisition of this property totaled $ 192,000 , which are not included in the purchase price above. (4) Transaction costs that were capitalized as a component of the assets acquired and liabilities assumed in connection with the acquisition of this property totaled $ 22,000 , which are not included in the purchase price above. (5) The Company intends to redevelop approximately seven commercial units totaling 5,635 rentable square feet and six parking stalls starting in 2024. (6) The property is located on a land site of approximately 7,450 square feet. The Company intends to complete pre-development and entitlement work to provide optionality for future development. (7) The property is located on a land site of approximately 28,300 square feet. The Company intends to entitle the property and develop approximately 119 residential units starting in 2024. (8) The property is located on a land site of approximately 11,300 square feet. The Company intends to entitle the property and develop approximately 40 residential units starting in 2023. Please refer to “Investments in Unconsolidated Entities” (Note 4) for information on the Company’s acquisition of an approximate 44 % interest in an office property in February 2022. There were no dispositions during the year ended December 31, 2022. 2021 Transactions — During the year ended December 31, 2021, the Company acquired a 100 % fee-simple interest in the following property from an unrelated third-party. The purchase was accounted for as an asset acquisition. Asset Date of Purchase Property Type Acquisition Square Feet Price (in thousands) 1037 North Sycamore, Los Angeles, CA (1) Office July 13, 2021 4,900 $ 2,900 (1) Transaction costs that were capitalized as a component of the assets acquired and liabilities assumed in connection with the acquisition of this property totaled $ 33,000 , which are not included in the purchase price above. There were no dispositions during the year ended December 31, 2021. The results of operations of the properties the Company acquired have been included in the consolidated statements of operations from the date of acquisition. The following table summarizes the purchase price allocation of the aforementioned acquisitions during the years ended December 31, 2022 and 2021. Year Ended December 31, 2022 2021 (in thousands) Land $ 10,491 $ 1,839 Land improvements 54 33 Buildings and improvements 164 1,061 Tenant improvements 47 — Acquired in-place leases 68 — Acquired above-market leases — — Acquired below-market leases ( 37 ) — Net assets acquired $ 10,787 $ 2,933 F-19 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) 4. INVESTMENT IN UNCONSOLIDATED ENTITY In February 2022, the Company invested in the Unconsolidated Joint Venture with the CIM JV Partner to purchase an office property in Los Angeles, California for a gross purchase price of approximately $ 51.0 million, of which the Company initially contributed approximately $ 22.4 million and the CIM JV Partner initially contributed the remaining balance. The Unconsolidated Joint Venture records its assets and liabilities at fair value. The following table details the Company’s equity method investment in the Unconsolidated Joint Venture. See to Note 2 - Basis of Presentation and Summary of Significant Accounting Policies (dollars in thousands): Carrying Value Property Asset Type Location Date of Acquisition Ownership Interest December 31, 2022 December 31, 2021 1910 Sunset Boulevard (1) Office Los Angeles, CA February 11, 2022 44 % $ 12,381 $ — ______________________ (1) 1910 Sunset Boulevard is an office building with 97,746 square feet of office space and 2,760 square feet of retail space. The Unconsolidated Joint Venture plans to undertake a capital improvement program to renovate and modernize the building into creative office space as well as a limited number of multifamily units. The Company recorded income of $ 164,000 related to its investment in the Unconsolidated Joint Venture during the year ended December 31, 2022 in the consolidated statements of operations. In September 2022, the Unconsolidated Joint Venture obtained financing through a mortgage loan of $ 23.9 million secured by its investment in real estate with an estimated fair value of $ 52.5 million as of December 31, 2022 (the “1910 Sunset Mortgage Loan”). The 1910 Sunset Mortgage Loan has a three-year term with interest-only monthly payments. The Company entered into a guaranty with the lender, under which the Company agreed to guarantee the Unconsolidated Joint Venture’s obligations under the 1910 Sunset Mortgage Loan (the “1910 Sunset Guarantee”). Under the terms of the Unconsolidated Joint Venture, the Company and the CIM JV Partner are subject to cross indemnity obligations pursuant to which the CIM JV Partner agrees to reimburse the Company for its share of any indemnity payment, to the extent any such indemnity payment did not result from the Company’s fraud, gross neglect, or willful misconduct. In connection with the closing of the financing of the property owned by the Unconsolidated Joint Venture, the Company received a distribution from the Unconsolidated Joint Venture of $ 10.4 million during the year ended December 31, 2022, $ 164,000 of which was recognized as a return on investment and $ 10.3 million of which was recognized as a return of investment. The Company also made additional contributions during the year ended December 31, 2022 totaling $ 242,000 . The Company’s investment in the Unconsolidated Joint Venture was $ 12.4 million and its ownership percentage remained unchanged as of December 31, 2022. F-20 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) 5. LOANS RECEIVABLE Loans receivable consist of the following: December 31, 2022 2021 (in thousands) SBA 7(a) loans receivable, subject to credit risk $ 56,116 $ 42,103 SBA 7(a) loans receivable, subject to loan-backed notes — 18,050 SBA 7(a) loans receivable, Paycheck Protection Program — 5,050 SBA 7(a) loans receivable, subject to secured borrowings 6,127 6,857 SBA 7(a) loans receivable, held for sale 117 1,200 Loans receivable 62,360 73,260 Deferred capitalized costs, net 1,293 1,226 Loan loss reserves ( 1,106 ) ( 943 ) Loans receivable, net $ 62,547 $ 73,543 SBA 7(a) Loans Receivable, Subject to Credit Risk —Represents the unguaranteed portions of loans originated under the SBA 7(a) Program which were retained by the Company. SBA 7(a) Loans Receivable, Subject to Loan-Backed Notes —Represents the unguaranteed portions of loans originated under the SBA 7(a) Program which were transferred to a trust and are held as collateral in connection with a securitization transaction. The proceeds received from the transfer were reflected as loan-backed notes payable (Note 7). These loans were subject to credit risk. SBA 7(a) Loans Receivable, Paycheck Protection Program —As an SBA 7(a) licensee, the Company originated loans under the PPP. As of December 31, 2022, all of the loans originated under the PPP have been repaid in full. SBA 7(a) Loans Receivable, Subject to Secured Borrowings —Represents the government guaranteed portions of loans originated under the SBA 7(a) Program which were sold with the proceeds received from the sale reflected as secured borrowings—government guaranteed loans. There was no credit risk associated with these loans since the SBA has guaranteed payment of the principal. SBA 7(a) Loans Receivable, Held for Sale — Represents the government guaranteed portion of loans held for sale at the end of the period or that had been sold but in respect of which proceeds had not been received as of the end of the period. Other As of December 31, 2022 and 2021, the Company’s loans subject to credit risk were 99.9 % and 99.8 %, respectively, concentrated in the hospitality industry. As of December 31, 2022 and 2021, 98.4 % and 100.0 %, respectively, of the Company’s loans subject to credit risk were current. The Company classifies loans with negative characteristics in substandard categories ranging from special mention to doubtful. As of December 31, 2022 and 2021, $ 1.0 million and $ 1.1 million, respectively, of loans subject to credit risk were classified in substandard categories. F-21 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) 6. OTHER INTANGIBLE ASSETS AND LIABILITIES A schedule of our intangible assets and liabilities and related accumulated amortization and accretion as of December 31, 2022 and 2021, is as follows: As of December 31, 2022 2021 (in thousands) Intangible assets: Acquired in-place leases, net of accumulated amortization of $ 7,795 and $ 9,030 , respectively, with an average useful life of 8 and 9 years, respectively $ 1,488 $ 2,266 Acquired above-market leases, net of accumulated amortization of $ 39 and $ 27 , respectively, both with an average useful life of 6 years 16 28 Trade name and license 2,957 2,957 Total intangible assets, net $ 4,461 $ 5,251 Intangible lease liabilities: Acquired below-market leases, net of accumulated amortization of $ 22 and $ 1,134 , respectively, with an average useful life of 1 and 5 years, respectively $ 20 $ 237 Amortization of the acquired above-market leases is recorded as a reduction to rental and other property income, and amortization of the acquired in-place leases is included in depreciation and amortization in the accompanying consolidated statements of operations. Amortization of the acquired below-market leases is recorded as an increase to rental and other property income in the accompanying consolidated statements of operations. During the years ended December 31, 2022 and 2021, the Company recognized amortization related to its intangible assets and liabilities as follows: Year Ended December 31, 2022 2021 (in thousands) Acquired above-market lease amortization $ 12 $ 12 Acquired in-place lease amortization $ 846 $ 1,050 Acquired below-market lease amortization $ 254 $ 350 A schedule of future amortization and accretion of acquired intangible assets and liabilities as of December 31, 2022, is as follows: Assets Liabilities Acquired Acquired Acquired Above-Market In-Place Below-Market Years Ending December 31, Leases Leases Leases (in thousands) 2023 $ 10 $ 503 $ ( 20 ) 2024 5 374 — 2025 1 171 — 2026 — 123 — 2027 — 123 — Thereafter — 194 — $ 16 $ 1,488 $ ( 20 ) F-22 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) 7. DEBT The following table summarizes the debt balances as of December 31, 2022 and 2021, and the debt activity for the year ended December 31, 2022 (in thousands): During the Year Ended December 31, 2022 Balances as of December 31, 2021 Debt Issuances & Assumptions Repayments Accretion & (Amortization) Balances as of December 31, 2022 Mortgage Payable: Outstanding Balance $ 97,100 $ — $ — $ — $ 97,100 Deferred debt issuance costs — Mortgage Payable ( 120 ) — — 26 ( 94 ) Total Mortgage Payable 96,980 — — 26 97,006 Secured Borrowings – Government Guaranteed Loans: Outstanding Balance 6,671 — ( 692 ) — 5,979 Unamortized premiums 305 — — ( 47 ) 258 Total Secured Borrowings—Government Guaranteed Loans 6,976 — ( 692 ) ( 47 ) 6,237 Other Debt: 2018 revolving credit facility 60,000 110,000 ( 170,000 ) — — 2022 credit facility revolver — — — — — 2022 credit facility term loan — 56,230 — — 56,230 Junior subordinated notes 27,070 — — — 27,070 SBA 7(a) loan-backed notes 7,670 — ( 7,670 ) — — Borrowed funds from the Federal Reserve through the Paycheck Protection Program Liquidity Facility 5,030 — ( 5,030 ) — — Deferred debt issuance costs — other ( 989 ) — — 210 ( 779 ) Discount on junior subordinated notes ( 1,592 ) — — 95 ( 1,497 ) Total Other Debt 97,189 166,230 ( 182,700 ) 305 81,024 Total Debt, Net $ 201,145 $ 166,230 $ ( 183,392 ) $ 284 $ 184,267 Mortgage Payable —The mortgage payable is secured by a deed of trust on a property and assignments of rents receivable. As of December 31, 2022, the Company’s mortgage payable had a fixed interest rate of 4.14 % per annum, with monthly payments of interest only, due on July 1, 2026. The loan is nonrecourse. Secured Borrowings — Government Guaranteed Loans —Secured borrowings—government guaranteed loans represent sold loans which are treated as secured borrowings because the loan sales did not meet the derecognition criteria provided for in ASC 860-30, Secured Borrowing and Collateral . These loans included cash premiums that are amortized as a reduction to interest expense over the life of the loan using the effective interest method and are fully amortized when the underlying loan is repaid in full. As of December 31, 2022, the Company’s secured borrowings-government guaranteed loans included $ 3.6 million of loans sold for a premium and excess spread, with a variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 6.88 % at December 31, 2022, and $ 2.4 million of loans sold for an excess spread, with a variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 4.57 % at December 31, 2022. 2018 Revolving Credit Facility —In October 2018, the Company entered into a secured revolving credit facility with a bank syndicate that, as amended, allowed the Company to borrow up to $ 209.5 million, subject to a borrowing base calculation (the “2018 revolving credit facility”). The 2018 revolving credit facility was secured by properties in the Company’s F-23 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) real estate portfolio: eight office properties and one hotel property. In September 2020, the 2018 revolving credit facility was amended (the “2018 Credit Facility Modification”) to remedy the effect that COVID-19 had on the Company’s ability to borrow under the 2018 revolving credit facility during the period from September 2, 2020 through August 14, 2021 (the “Deferral Period”). The 2018 revolving credit facility bore interest during the Deferral Period at (A) the base rate plus 1.05 % or (B) LIBOR plus 2.05 % and (ii) bore interest after the Deferral Period, at (A) the base rate plus 0.55 % or (B) LIBOR plus 1.55 %. The 2018 revolving credit facility was also subject to an unused commitment fee of 0.15 % or 0.25 % depending on the amount of aggregate unused commitments. In October 2022, the Company executed a one-year extension of the 2018 revolving credit facility to extend its maturity to October 2023. In connection with the extension, the Company paid 25 % of the extension fee specified in the 2018 revolving credit facility (i.e., 25 % of 0.15 % of each lender’s commitment being extended) on October 30, 2022. On December 16, 2022, the 2018 revolving credit facility was refinanced and replaced by the 2022 credit facility (as described below) and the remaining 75 % of the extension fee specified in the 2018 revolving credit facility was not incurred. 2022 Credit Facility —In December 2022 the Company refinanced its 2018 credit facility and replaced it with a new 2022 credit facility, entered into with a bank syndicate, that includes a $ 56.2 million term loan (the “2022 Credit Facility Term Loan”) as well as a revolver allowing the Company to borrow up to $ 150.0 million (the “2022 Credit Facility Revolver”), both of which are collectively subject to a borrowing base calculation. The 2022 credit facility is secured by properties in the Company’s real estate portfolio: six office properties and one hotel property (as well as the hotel’s adjacent parking garage and retail property). The 2022 credit facility bears interest at (A) the base rate plus 1.50 % or (B) SOFR plus 2.60 %. As of December 31, 2022, the variable interest rate was 6.93 %. The 2022 Credit Facility Revolver is also subject to an unused commitment fee of 0.15 % or 0.25 % depending on the amount of aggregate unused commitments. The 2022 credit facility guaranteed by the Company and the Company is subject to certain financial maintenance covenants. The 2022 credit facility matures in December 2025 and provides for two one-year extension options under certain conditions, including providing notice of the election and paying an extension fee of 0.15 % of each lender’s commitment being extended on the effective date of such extension. As of December 31, 2022, $ 56.2 million was outstanding on the 2022 Credit Facility Term Loan and no amount was outstanding on the 2022 Credit Facility Revolver, while $ 150.0 million was available for future borrowings. Junior Subordinated Notes —The Company has junior subordinated notes with a variable interest rate which resets quarterly based on the three-month LIBOR plus 3.25 %, with quarterly interest only payments. The junior subordinated balance is due at maturity on March 30, 2035. The junior subordinated notes may be redeemed at par at the Company’s option. SBA 7(a) Loan-Backed Notes —On May 30, 2018, the Company completed a securitization of the unguaranteed portion of certain of its SBA 7(a) loans receivable with the issuance of $ 38.2 million of unguaranteed SBA 7(a) loan-backed notes. The SBA 7(a) loan-backed notes are secured by deeds of trust or mortgages and are collateralized solely by the right to receive payments and other recoveries attributable to the unguaranteed portions of certain of the Company’s SBA 7(a) loans receivable. The SBA 7(a) loan-backed notes had monthly payments due as payments on the collateralized loans were received. As of December 31, 2022 all of the SBA 7(a) loan-backed notes had been paid off. The SBA 7(a) loan-backed notes bore interest at the lower of the one-month LIBOR plus 1.40 % or the prime rate less 1.08 %. As of December 31, 2021, the variable interest rate was 1.49 %. The Company reflected the SBA 7(a) loans receivable as assets on its consolidated balance sheets and the SBA 7(a) loan-backed notes as debt on its consolidated balance sheets. The restricted cash on the Company’s consolidated balance sheets included funds related to the Company’s SBA 7(a) loan-backed notes of $ 0 and $ 1.9 million, as of December 31, 2022 and 2021, respectively. Paycheck Protection Program Liquidity Facility —In June 2020, the Company commenced borrowing funds from the Federal Reserve through the PPP Liquidity Facility (the “PPPLF”) to finance all the loans the Company originated under the PPP. Advances under the PPPLF carried an interest rate of 0.35 %, were made on a dollar-for-dollar basis based on the amount of loans originated under the PPP and were secured by loans made by the Company under the PPP. The maturity date of PPPLF borrowings was the same as the maturity date of the loans pledged to secure the extension of credit, generally two years. As of December 31, 2022 and 2021, $ 0 and $ 5.0 million, respectively, was outstanding under the PPPLF. As the PPP has ended all borrowings from the Federal Reserve have been repaid in full as of December 31, 2022. Deferred debt issuance costs, which represent legal and third-party fees incurred in connection with the Company’s borrowing activities, are capitalized and amortized to interest expense on a straight-line basis over the life of the related loan, approximating the effective interest method. Deferred debt issuance costs are presented net of accumulated amortization and are a reduction to total debt. As of December 31, 2022 and 2021, accrued interest and unused commitment fees payable of $ 562,000 and $ 467,000 , respectively, are included in accounts payable and accrued expenses. F-24 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) Future principal payments on the Company’s debt (face value) as of December 31, 2022 are as follows: Years Ending December 31, Mortgage Payable Secured Borrowings Principal (1) 2022 Credit Facility Junior Subordinated Notes Total (in thousands) 2023 $ — $ 303 $ — $ — $ 303 2024 — 321 — — 321 2025 — 341 56,230 — 56,571 2026 97,100 361 — — 97,461 2027 — 383 — — 383 Thereafter — 4,270 — 27,070 31,340 $ 97,100 $ 5,979 $ 56,230 $ 27,070 $ 186,379 (1) Principal payments on secured borrowings are generally dependent upon cash flows received from the underlying loans. The Company’s estimate of their repayment is based on scheduled payments on the underlying loans. The Company’s estimate will differ from actual amounts to the extent the Company experiences prepayments and or loan liquidations or charge-offs. No payment is due unless payments are received from the borrowers on the underlying loans. 8. STOCK-BASED COMPENSATION PLANS On April 3, 2015, the Company’s board of directors (the “Board of Directors”) unanimously approved the Company’s 2015 Equity Incentive Plan (the “2015 Equity Incentive Plan”), which was approved by the Company’s stockholders. Under the 2015 Equity Incentive Plan, the Company granted awards of restricted shares of Common Stock to each of the independent members of the Board of Directors. A summary of the Company’s restricted shares as of December 31, 2022 and 2021 and the changes during the years ended is as follows: Weighted Number Average Grant of Date Fair Value Shares (1) Per Share (1) Balance, December 31, 2020 21,912 $ 10.04 Granted 20,332 $ 10.82 Vested ( 21,912 ) $ 10.04 Balance, December 31, 2021 20,332 $ 10.82 Granted 30,984 $ 7.10 Vested ( 20,332 ) $ 10.82 Balance, December 31, 2022 30,984 $ 7.10 (1) Amounts have been adjusted to give retroactive effect to the Reverse Stock Split. Compensation expense related to these restricted shares of Common Stock is recognized over the vesting period, and generally vests based on one year of continuous service. The Company recorded compensation expense related to these restricted shares of Common Stoc k in the amount of $ 202,000 and $ 220,000 for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, there was $ 92,000 of total unrecognized compensation expense related to shares of Common Stock which will be recognized ratably over the remaining vesting period. F-25 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) 9. EARNINGS PER SHARE (“EPS”) The computations of basic EPS are based on the Company’s weighted average shares outstanding. In order to calculate the diluted weighted average number of shares of Common Stock outstanding for the year ended December 31, 2022, the basic weighted average number of shares of Common Stock outstanding was increased by 1,000 to reflect the dilutive effect of certain shares of the Company’s Series D Preferred Stock. No shares of Series A Preferred Stock, Series A1 Preferred Stock, or Series L Preferred Stock outstanding as of December 31, 2022 or 2021 were included in the computation of diluted EPS because they had no dilutive effect. Outstanding Series A Preferred Warrants were not included in the computation of diluted EPS for the years ended December 31, 2022 and 2021 because their impact was either anti-dilutive or such warrants were not exercisable during such periods (Note 11). EPS for the year-to-date period may differ from the sum of quarterly EPS amounts due to the required method for computing EPS in the respective periods. In addition, EPS is calculated independently for each component and may not be additive due to rounding. The following table reconciles the numerator and denominator used in computing the Company’s basic and diluted per-share amounts for net loss attributable to common stockholders for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 (in thousands, except per share amounts) Numerator: Net loss attributable to common stockholders $ ( 25,785 ) $ ( 19,979 ) Redeemable preferred stock dividends declared on dilutive shares ( 9 ) — Diluted net (loss) income attributable to common stockholders $ ( 25,794 ) $ ( 19,979 ) Denominator: Basic weighted average shares of Common Stock outstanding 23,153 19,187 Effect of dilutive securities—contingently issuable shares 1 — Diluted weighted average shares and common stock equivalents outstanding 23,154 19,187 Net (loss) income attributable to common stockholders per share: Basic $ ( 1.11 ) $ ( 1.04 ) Diluted $ ( 1.11 ) $ ( 1.04 ) F-26 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) 10. REDEEMABLE PREFERRED STOCK The table below provides information regarding the issuances, reclassifications and redemptions of each class of the Company’s preferred stock in permanent equity during the years ended December 31, 2022 and 2021 (dollar amounts in thousands): Preferred Stock Series A1 Series A Series D Series L Total Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balances, December 31, 2020 — $ — 4,377,762 $ 108,729 19,145 $ 473 5,387,160 $ 152,834 9,784,067 $ 262,036 Issuance of Series D Preferred Stock — — — — 37,712 923 — — 37,712 923 Reclassification of Series A Preferred Stock to permanent equity — — 2,006,456 50,508 — — — — 2,006,456 50,508 Redemption of Series A Preferred Stock — — ( 112,881 ) ( 2,806 ) — — — — ( 112,881 ) ( 2,806 ) Balances, December 31, 2021 — $ — 6,271,337 $ 156,431 56,857 $ 1,396 5,387,160 $ 152,834 11,715,354 $ 310,661 Issuance of A1 Preferred Stock 5,966,077 147,761 — $ — — — — — 5,966,077 147,761 Redemption of Series A1 Preferred Stock ( 9,930 ) ( 247 ) — — — — — — ( 9,930 ) ( 247 ) Redemption of Series D Preferred Stock — — — — ( 8,000 ) ( 196 ) — — ( 8,000 ) ( 196 ) Repurchase of Series L Preferred Stock — — — — — — ( 5,387,160 ) ( 152,834 ) ( 5,387,160 ) ( 152,834 ) Reclassification of Series A Preferred stock to Perm Equity — — 1,630,765 40,998 — — — — 1,630,765 40,998 Redemption of Series A Preferred Stock — — ( 336,753 ) ( 8,381 ) — — — — ( 336,753 ) ( 8,381 ) Balances, December 31, 2022 5,956,147 $ 147,514 7,565,349 $ 189,048 48,857 $ 1,200 — $ — 13,570,353 $ 337,762 Series A1 Preferred Stock —Since June 2022, the Company has been conducting a continuous public offering with respect to shares of its Series A1 Preferred Stock, par value $ 0.001 per share with an initial stated value of $ 25.00 per share, subject to adjustment. Shares of Series A1 Preferred Stock are recorded in permanent equity at the time of their issuance. As of December 31, 2022, the Company had issued in registered public offerings 5,766,077 shares of the Series A1 Preferred Stock and received gross proceeds of $ 142.8 million and additionally, had issued 200,000 shares of Series A1 Preferred Stock as payment for services to the CIM Service Provider, LLC (the “Administrator”), for which no cash proceeds were received. In connection with such issuance, $ 10.5 million of costs specifically identifiable to the offering of Series A1 Preferred Stock was allocated to the Series A1 Preferred Stock. Such costs include commissions, dealer manager fees and other offering fees and expenses but do not include non-issuance-specific costs of $ 9.5 million related to the Company’s offering of Series A Preferred Stock, Series A Preferred Warrants, Series A1 Preferred Stock and Series D Preferred Stock. As of December 31, 2022, the Company had reclassified and allocated $ 1.9 million from deferred charges to Series A1 Preferred Stock as a reduction to the gross proceeds received. Such reclassification was based on the cumulative number of securities issued relative to the maximum number of securities expected to be issued under the offering. As of December 31, 2022, there were 5,956,147 shares of Series A1 Preferred Stock outstanding and 9,930 shares of Series A1 Preferred Stock had been redeemed. Series A Preferred Stock —The Company conducted a continuous public offering of Series A Preferred Stock (with each issued share of Series A Preferred Stock initially accompanied by one warrant (“Series A Preferred Warrant”) to purchase 0.25 of a share of Common Stock, subject to adjustment) from October 2016 through January 2020. Proceeds and expenses from the sale were allocated to the Series A Preferred Stock and Series A Preferred Warrants using their relative fair values on the date of issuance. F-27 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) From February 2020 through June 2022, the Company conducted a continuous public offering with respect to shares of the Company’s Series A Preferred Stock, which, since February 2020, was no longer being issued as a unit with an accompanying Series A Preferred Warrant. In June 2022, the Company concluded the offering of Series A Preferred Stock. As of December 31, 2022, the Company had issued in registered public offerings 8,251,657 shares of Series A Preferred Stock and 4,603,287 Series A Preferred Warrants and received gross proceeds of $ 205.4 million and $ 761,000 , respectively, and additionally, had issued 568,681 shares of Series A Preferred Stock as payment for services to the CIM Service Provider, LLC (the “Administrator”), for which no cash proceeds were received. In connection with the cumulative issuance of Series A Preferred Stock Series A Preferred Warrants, $ 17.0 million and $ 142,000 of costs specifically identifiable to the offering of the Series A Preferred Stock and Series A Preferred Warrants, respectively, were allocated to the Series A Preferred Stock and Series A Preferred Warrants, respectively. Such costs include commissions, dealer manager fees and other offering fees and expenses but do not include non-issuance-specific costs of $ 9.5 million related to the Company’s offering of Series A Preferred Stock, Series A Preferred Warrants, Series A1 Preferred Stock and Series D Preferred Stock. As of December 31, 2022, the Company had reclassified and allocated $ 1.9 million and $ 5,000 from deferred charges to Series A Preferred Stock and Series A Preferred Warrants, respectively, as a reduction to the gross proceeds received. Such reclassification was based on the cumulative number of securities issued relative to the maximum number of securities expected to be issued under the offering. Net proceeds from the issuance of shares of Series A Preferred Stock were initially recorded in temporary equity at an amount equal to the gross proceeds allocated to such shares of Series A Preferred Stock minus the costs specifically identifiable to the issuance of such shares and the non-issuance specific offering costs allocated to such shares. If the net proceeds from the issuance of shares of Series A Preferred Stock were less than the redemption value of such shares at the time they were issued, or if the redemption value of such shares subsequently becomes greater than the carrying value of such shares, an adjustment was recorded to increase the carrying amount of such shares to their redemption value as of the balance sheet date. Such adjustment was considered a deemed dividend for purposes of calculating basic and diluted EPS. During the years ended December 31, 2022 and December 31, 2021, the Company recorded redeemable preferred stock deemed dividends of $ 19,000 and $ 253,000 , respectively, related to such adjustments. On the first anniversary of the issuance of a particular share of Series A Preferred Stock, the Company reclassifies such share of Series A Preferred Stock from temporary equity to permanent equity because the feature giving rise to temporary equity classification, the requirement to satisfy redemption requests in cash, lapses on the first anniversary date. As of December 31, 2022, the Company had reclassified an aggregate of $ 184.0 million in net proceeds from temporary equity to permanent equity. As of December 31, 2022, there were 8,259,090 shares of Series A Preferred Stock outstanding and 561,248 shares of Series A Preferred Stock had been redeemed. Series D Preferred Stock —From February 2020 through June 2022, the Company conducted a continuous public offering with respect to shares of its Series D Preferred Stock, par value $ 0.001 per share, subject to adjustment. The selling price of the Series D Preferred Stock was $ 25.00 per share for all sales that occurred from the beginning of the offering to and including June 28, 2020 and $ 24.50 per share thereafter. Shares of Series D Preferred Stock were recorded in permanent equity at the time of their issuance. In June 2022, the Company concluded the offering of its Series D Preferred Stock. As of December 31, 2022, the Company had issued in registered public offerings 56,857 shares of Series D Preferred Stock and received gross proceeds of $ 1.4 million. In connection with such issuance, $ 33,000 of costs specifically identifiable to the offering of Series D Preferred Stock were allocated to the Series D Preferred Stock. Such costs include commissions, dealer manager fees and other offering fees and expenses but do not include non-issuance-specific costs of $ 9.5 million related to the Company’s offering of Series A Preferred Stock, Series A Preferred Warrants, Series A1 Preferred Stock and Series D Preferred Stock. As of December 31, 2022, the Company had reclassified and allocated $ 13,000 from deferred charges to Series D Preferred Stock as a reduction to the gross proceeds received. Such reclassification was based on the cumulative number of securities issued relative to the maximum number of securities expected to be issued under the offering. As of December 31, 2022, there were 48,857 shares of Series D Preferred Stock outstanding and 8,000 shares of Series D Preferred Stock had been redeemed. Series L Preferred Stock —On November 21, 2017, the Company issued 8,080,740 shares of Series L Preferred Stock having an initial stated value of $ 28.37 per share (“Series L Preferred Stock Stated Value”), subject to adjustment. The F-28 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) Company received gross proceeds of $ 229.3 million from the sale of the Series L Preferred Stock, which was reduced by issuance-specific offering costs, such as commissions, dealer manager fees, and other offering fees and expenses, totaling $ 15.9 million, a discount of $ 2.9 million, and non-issuance-specific costs of $ 2.5 million. These fees have been recorded as a reduction to the gross proceeds in permanent equity. On September 15, 2022, the Company repurchased 2,435,284 shares of its Series L Preferred Stock in a privately negotiated transaction (the “Series L Repurchase”). The shares were repurchased at a purchase price of $ 27.40 per share (a 3.4 % discount to the stated value of $ 28.37 per share) plus $ 1.12 per share of accrued and unpaid dividends (or $ 2.7 million accrued and unpaid dividends in the aggregate). The total cost to complete the Series L Repurchase, including transactions costs of $ 700,000 (or $ 0.29 per share), was $ 70.1 million. In connection with the Series L Repurchase, the Company recognized redeemable preferred stock redemptions of $ 4.8 million on its consolidated statement of operations for the year ended December 31, 2022. The $ 4.8 million of redeemable preferred stock redemptions represents the difference between the repurchase price (including $ 0.29 per share of transaction costs) and the carrying value of the repurchased Series L Preferred Stock (representing the stated value of $ 28.37 per share reduced by $ 2.65 per share of stock offering costs). Refer to Note 13 for a discussion of certain payments the Company has made in shares of Common Stock and in shares of Preferred Stock and may make in shares of Preferred Stock in lieu of cash payments in order to remain in compliance with the Series L Preferred Stock Minimum Fixed Charge Coverage Ratio. Dividends —With respect to the payment of dividends, the Series A1 Preferred Stock, the Series A Preferred Stock and Series D Preferred Stock rank on parity with respect to each other and senior to the Common Stock. With respect to the distribution of amounts upon liquidation, dissolution or winding-up, the Series A1 Preferred Stock, the Series A Preferred Stock and the Series D Preferred Stock rank on parity with respect to each other and senior to the Common Stock. Holders of Series A1 Preferred Stock are entitled to receive, if, as and when authorized by the Company’s Board of Directors, and declared by the Company out of legally available funds, cumulative cash dividends (the “Series A1 Dividend”) on each share of Series A1 Preferred Stock at the greater of (i) an annual rate of 6.0 % of the Series A1 Preferred Stock Stated Value (i.e., the equivalent of $ 0.3750 per share per quarter) and (ii) the Federal Funds (Effective) Rate for such quarter and plus 2.5 % of the Series A1 Preferred Stock Stated Value divided by four, up to a maximum of 2.5 % of the Series A1 Preferred Stock Stated Value per quarter. Holders of Series A Preferred Stock are entitled to receive, if, as and when authorized by the Company’s Board of Directors, and declared by the Company out of legally available funds, cumulative cash dividends on each share of Series A Preferred Stock at an annual rate of 5.50 % of the Series A Preferred Stock Stated Value (i.e., the equivalent of $ 0.34375 per share per quarter) (the “Series A Dividend”). Holders of Series D Preferred Stock are entitled to receive, if, as and when authorized by the Company’s Board of Directors, and declared by the Company out of legally available funds, cumulative cash dividends on each share of Series D Preferred Stock at an annual rate of 5.65 % of the Series D Preferred Stock Stated Value (i.e., the equivalent of $ 0.35313 per share per quarter) (the “Series D Dividend”). Dividends on each share of Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock begin accruing on, and are cumulative from, the date of issuance. The Company expects to pay the Series A1 Dividend, Series A Dividend and Series D Dividend in arrears on a monthly basis in accordance with the foregoing provisions, unless the Company’s results of operations, general financing conditions, general economic conditions, applicable requirements of the MGCL or other factors make it imprudent to do so. The timing and amount of the Series A1 Dividend, Series A Dividend and the Series D Dividend will be determined by the Company’s Board of Directors, in its sole discretion, and may vary from time to time. During the year ended December 31, 2022, the Company paid $ 1.8 million, $ 11.4 million, $ 78,000 and $ 11.1 million of cash dividends on its Series A1 Preferred Stock, Series A Preferred Stock, Series D Preferred Stock and Series L Preferred Stock, respectively. During the year ended December 31, 2021, the Company paid $ 9.6 million, $ 50,000 and $ 8.4 million of cash dividends on its Series A Preferred Stock, Series D Preferred Stock and Series L Preferred Stock, respectively. Redemptions —The Company’s Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock are redeemable at the option of the holder or the Company. The redemption schedule of the Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock allows redemptions at the option of the holder of Series A1 Preferred Stock, Series A Preferred Stock or Series D Preferred Stock from the date of original issuance of any such shares at the Series A1 Preferred Stock Stated Value, Series A Preferred Stock Stated Value or Series D Preferred Stock Stated Value, respectively, less a redemption fee applicable prior to the fifth anniversary of the issuance of such shares, plus accrued and unpaid dividends. The Company has the right to redeem the Series A1 Preferred Stock after the date that is twenty-four months following the F-29 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) original issuance of such shares of Series A1 Preferred Stock at the Series A1 Preferred Stock Stated Value, plus accrued and unpaid dividends. The Company has the right to redeem the Series A Preferred Stock or Series D Preferred Stock after the fifth anniversary of the date of original issuance of such shares at the Series A Preferred Stock Stated Value or Series D Preferred Stock Stated Value, respectively, plus accrued and unpaid dividends. With respect to redemptions of the Series A1 Preferred Stock, Series A Preferred Stock or Series D Preferred Stock, at the Company’s discretion, the redemption price will be paid in cash and/or in Common Stock based on the volume weighted average price of the Company’s Common Stock for the 20 trading days prior to the redemption; provided that the redemption price of any shares of Series A Preferred Stock redeemed prior to the first anniversary of the date of original issuance of such shares must be paid in cash. From and after the fifth anniversary of the date of original issuance of the Series L Preferred Stock, each holder had the right to require the Company to redeem, and the Company also had the option to redeem (subject to certain conditions), such shares of Series L Preferred Stock at a redemption price equal to the Series L Preferred Stock Stated Value, plus, provided certain conditions are met, all accrued and unpaid distributions. As announced on December 23, 2022, the Company redeemed all remaining outstanding shares of its Series L Preferred Stock in cash on January 25, 2023 at its stated value of $ 28.37 . The total cost to complete the Series L Redemption, including transaction costs of $ 93,000 (or $ 0.03 per share), was $ 83.8 million. In connection with the Series L Redemption, the Company recognized redeemable preferred stock redemptions of $ 7.9 million on its consolidated statement of operations for the year ended December 31, 2022. The $ 7.9 million of redeemable preferred stock redemptions represents the difference between the repurchase price (including $ 0.03 per share of transaction costs) and the carrying the value of the repurchased Series L Preferred Stock (representing the stated value of $ 28.37 per share reduced by $ 2.65 per share of stock offering costs). As of December 31, 2022, $ 83.8 million was recorded in accounts payable and accrued expenses on the Company’s consolidated balance sheet in connection with the Series L Redemption. The accrued and unpaid dividends on the redeemed shares of Series L Preferred Stock through December 31, 2022 of $ 1.56 per share (or $ 4.6 million accrued and unpaid dividends in the aggregate) were also paid on January 25, 2023. No additional dividends will be owed on the redeemed shares of Series L Preferred Stock subsequent to December 31, 2022. 11. STOCKHOLDERS’ EQUITY Dividends Holders of the Company’s Common Stock are entitled to receive dividends, if, as and when authorized by the Board of Directors and declared by the Company out of legally available funds. In determining the Company’s dividend policy, the Board of Directors considers many factors including the amount of cash resources available for dividend distributions, capital spending plans, cash flow, the Company’s financial position, applicable requirements of the MGCL, any applicable contractual restrictions, and future growth in NAV and cash flow per share prospects. Consequently, the dividend rate on a quarterly basis does not necessarily correlate directly to any individual factor. Cash dividends per share of Common Stock paid in respect of the years ended December 31, 2022 and 2021 consist of the following: Declaration Date Payment Date Type Cash Dividend Per Share of Common Stock September 22, 2022 October 17, 2022 Regular Quarterly $ 0.085 June 10, 2022 July 5, 2022 Regular Quarterly $ 0.085 March 8, 2022 April 1, 2022 Regular Quarterly $ 0.085 December 9, 2021 January 5, 2022 Regular Quarterly $ 0.075 September 7, 2021 September 29, 2021 Regular Quarterly $ 0.075 June 7, 2021 June 30, 2021 Regular Quarterly $ 0.075 March 5, 2021 March 30, 2021 Regular Quarterly $ 0.075 On December 15, 2022, the Company declared a cash dividend of $ 0.085 per share of its Common Stock, which was paid on January 9, 2023 to stockholders of record at the close of business on December 27, 2022. On March 20, 2023, the Company declared a cash dividend of $ 0.085 per share of its Common Stock, to be paid on April 11, 2023 to stockholders of record at the close of business on March 30, 2023. F-30 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) Rights Offering During the year ended December 31, 2021, the Company conducted the Rights Offering pursuant to which the Company issued an aggregate of 8,521,589 shares of Common Stock at a subscription price of $ 9.25 per share for aggregate gross proceeds of $ 78.8 million. Offering costs of $ 1.9 million were incurred in connection with the Rights Offering and recorded as a reduction to additional paid-in capital. Series A Preferred Warrants Prior to February 2020, the Series A Preferred Stock was sold as a unit that included one share of Series A Preferred Stock and one Series A Preferred Warrant that could be exercised to purchase 0.25 of a share of Common Stock. The Series A Preferred Warrants are exercisable beginning on the first anniversary of the date of their original issuance until and including the fifth anniversary of the date of such issuance. At the time of issuance, the exercise price of each Series A Preferred Warrant was at a 15.0 % premium to the per share estimated NAV of the Company’s Common Stock then most recently published and designated as the applicable NAV. However, in accordance with the terms of the Series A Preferred Warrants, the exercise price of each Series A Preferred Warrant issued prior to the Reverse Stock Split was automatically adjusted to reflect the effect of the Reverse Stock Split and, in the discretion of the Company’s Board of Directors, the exercise price and the number of shares issuable upon exercise of each Series A Preferred Warrant issued prior to the Special Dividend was adjusted to reflect the effect of the Special Dividend. Proceeds and expenses from the sale of the Series A Preferred Stock and Series A Preferred Warrants were allocated to the Series A Preferred Stock and Series A Preferred Warrants using their relative fair values on the date of issuance. As of December 31, 2022, the Company had 3,316,118 Series A Preferred Warrants outstanding to purchase 858,208 shares of Common Stock and allocated net proceeds of $ 484,000 after specifically identifiable offering costs and allocated general offering costs, to the Series A Preferred Warrants in permanent equity. Share Repurchase Program In May 2022, the Company’s Board of Directors approved a repurchase program of up to $ 10.0 million of the Company’s Common Stock (the “SRP”). Under the SRP, the Company, in its discretion, may purchase shares of its Common Stock from time to time in the open market or in privately negotiated transactions. The amount and timing of purchases of shares will depend on a number of factors, including, without limitation, the price and availability of shares, trading volume, general market conditions and compliance with applicable securities law. The SRP has no termination date and may be suspended or discontinued at any time. As of December 31, 2022, share repurchases executed under the SRP were as follows: Period Shares Repurchased Average price paid per share Cost of shares repurchased (in thousands) June 2022 41,374 $ 7.32 $ 303 August 2022 33,374 $ 7.15 $ 239 September 2022 587,714 $ 7.10 $ 4,173 Total as of December 31, 2022 662,462 $ 4,715 12. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company determines the estimated fair value of financial assets and liabilities utilizing a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. The hierarchy for inputs used in measuring fair value is as follows: Level 1 Inputs —Quoted prices in active markets for identical assets or liabilities Level 2 Inputs —Observable inputs other than quoted prices in active markets for identical assets and liabilities Level 3 Inputs —Unobservable inputs F-31 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. Management’s estimation of the fair value of the Company’s financial instruments is based on a Level 3 valuation in the fair value hierarchy established for disclosure of how a company values its financial instruments. In general, quoted market prices from active markets for the identical financial instrument (Level 1 inputs), if available, should be used to value a financial instrument. If quoted prices are not available for the identical financial instrument, then a determination should be made if Level 2 inputs are available. Level 2 inputs include quoted prices for similar financial instruments in active markets for identical or similar financial instruments in markets that are not active (i.e., markets in which there are few transactions for the financial instruments, the prices are not current, price quotations vary substantially, or in which little information is released publicly). There is limited reliable market information for the Company’s financial instruments and the Company utilizes other methodologies based on unobservable inputs for valuation purposes since there are no Level 1 or Level 2 inputs available. Accordingly, Level 3 inputs are used to measure fair value. In general, estimates of fair value may differ from the carrying amounts of the financial assets and liabilities primarily as a result of the effects of discounting future cash flows. Considerable judgment is required to interpret market data and develop estimates of fair value. Accordingly, the estimates presented are made at a point in time and may not be indicative of the amounts the Company could realize in a current market exchange. The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities. Debt —The carrying amounts of the Company’s secured borrowings—government guaranteed loans, SBA 7(a) loan-backed notes, 2022 Credit Facility and borrowed funds from the Federal Reserve through the PPPLF approximate their fair values, as the interest rates on these securities are variable and approximate current market interest rates. The Company determines the fair value of mortgage notes payable and junior subordinated notes by performing discounted cash flow analyses using an appropriate market discount rate. The Company calculates the market discount rate for its mortgage notes payable by obtaining period-end treasury or swap rates, as applicable, for maturities that correspond to the maturities of the Company’s debt and then adding an appropriate credit spread. These credit spreads take into account factors such as the Company’s credit standing, the maturity of the debt, whether the debt is secured or unsecured, and the loan-to-value ratios of the debt. When estimating the fair value of the Company’s mortgages payable as of December 31, 2022 and 2021, the Company used a rate of 6.48 % and 3.22 %, respectively. The rate used to estimate the fair value of the Company’s junior subordinated notes was 9.02 % and 4.46 % as of December 31, 2022 and 2021, respectively. Loans Receivable —The Company determines the fair value of loans receivable by performing a present value analysis for the anticipated future cash flows using an appropriate market discount rate taking into consideration the credit risk and using an anticipated prepayment rate. The value of the government guaranteed portions of loans held for sale is based primarily on the anticipated proceeds to be received upon sale. The following summarizes the ranges of discount rates and prepayment rates used to arrive at the estimated fair values of the Company’s loans receivable: Year Ended December 31, 2022 2021 Discount Rate Prepayment Rate Discount Rate Prepayment Rate SBA 7(a) loans receivable, subject to credit risk 11.00 % - 11.25 % 5.00 % - 17.00 % 6.25 % - 8.25 % 5.00 % - 17.50 % SBA 7(a) loans receivable, subject to loan-backed notes N/A N/A 5.75 % - 7.75 % 5.00 % - 17.50 % SBA 7(a) loans receivable, subject to secured borrowings 11.00 % - 11.25 % 5.00 % - 17.00 % 7.00 % - 7.75 % 5.00 % - 17.50 % SBA 7(a) loans receivable, paycheck protection program N/A N/A 1.00 % N/A Other Financial Instruments —The carrying amounts of the Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued expenses approximate their fair values due to their short-term maturities at December 31, 2022 and 2021. Due to the short-term maturities of these instruments, Level 1 inputs are utilized to estimate the fair value of these financial instruments. F-32 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) The estimated fair values of those financial instruments which are not recorded at fair value on a recurring basis on the Company’s consolidated balance sheets are as follows: December 31, 2022 December 31, 2021 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value Level (in thousands) Assets: SBA 7(a) loans receivable, paycheck protection program $ — $ — $ 4,903 $ 5,050 3 SBA 7(a) loans receivable, subject to loan-backed notes $ — $ — $ 18,077 $ 19,635 3 SBA 7(a) loans receivable, subject to credit risk $ 56,237 $ 58,432 $ 42,416 $ 44,399 3 SBA 7(a) loans receivable, subject to secured borrowings $ 6,158 $ 6,237 $ 6,891 $ 6,976 3 SBA 7(a) loans receivable, held for sale $ 152 $ 126 $ 1,256 $ 1,355 3 Liabilities: Mortgage payable (1) $ 97,100 $ 90,002 $ 97,100 $ 100,838 2, 3 Junior subordinated notes (1) $ 27,070 $ 25,067 $ 27,070 $ 24,378 3 (1) The carrying amounts for the mortgage payable and junior subordinated notes represents the principal outstanding amounts, excluding deferred debt issuance costs and discounts. 13. RELATED-PARTY TRANSACTIONS Asset Management and Other Fees to Related Parties Asset Management Fees; Administrative Fees and Expenses —CIM Urban and CIM Capital, LLC, an affiliate of CIM REIT and CIM Group (“CIM Capital”), have an investment management agreement, pursuant to which CIM Urban engaged CIM Capital to provide certain services to CIM Urban (the “Investment Management Agreement”). CIM Capital has assigned its duties under the Investment Management Agreement to its four wholly-owned subsidiaries: CIM Capital Securities Management, LLC, a securities manager, CIM Capital RE Debt Management, LLC, a debt manager, CIM Capital Controlled Company Management, LLC, a controlled company manager, and CIM Capital Real Property Management, LLC, a real property manager. The “Operator” refers to CIM Capital and its four wholly-owned subsidiaries. The Company and its subsidiaries have a master services agreement (the “Master Services Agreement”) with CIM Service Provider, LLC (the “Administrator”), an affiliate of CIM Group, pursuant to which the Administrator provides, or arranges for other service providers to provide, management and administration services to the Company and its subsidiaries. Pursuant to the Master Services Agreement, the Company appointed an affiliate of CIM Group as the administrator of Urban Partners GP, LLC. F-33 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) On January 5, 2022, the Company and certain of its subsidiaries entered into a Fee Waiver (the “Fee Waiver”) with the Operator and the Administrator with respect to fees that are payable to them. The Fee Waiver is effective retroactively to January 1, 2022 (the “Effective Date”). Pursuant to the Fee Waiver, the Administrator agreed to voluntarily waive any fees in excess of those set forth in the Fee Waiver, to the extent it would otherwise have been entitled to such additional compensation under the Master Service Agreement, and the Operator agreed to voluntarily waive any fees in excess of those set forth in the Fee Waiver, to the extent it would otherwise have been entitled to such additional compensation under the Investment Management Agreement. Following the end of each quarter, the Administrator will deliver to the Company (i) a calculation of the cumulative fees earned by the Operator and the Administrator under the methodology prescribed by the Fee Waiver from the Effective Date through the end of such quarter and (ii) a calculation of the cumulative fees that would have been earned by the Operator and the Administrator during such period under the Master Services Agreement and the Investment Management Agreement without giving effect to the Fee Waiver. If, in respect of any quarter, the aggregate fees that are payable under the methodology prescribed by the Fee Waiver exceed the aggregate fees that would have been payable under the Master Services Agreement and the Investment Management Agreement, without giving effect to the Fee Waiver, such quarter will be deemed an “Excess Quarter”. For any quarter following an Excess Quarter, the Company (upon the direction of the independent members of the Board) may, at its option and upon written notice to Administrator, elect to calculate all fees due to the Administrator and the Operator in accordance with the Master Services Agreement and the Investment Management Agreement, without giving effect to the Fee Waiver, from and after such Excess Quarter. Any such election by the Company will be irrevocable, and all fees due to the Administrator and the Operator from and after such election will be calculated in accordance with the Master Services Agreement and the Investment Management Agreement, without giving effect to the Fee Waiver. The fees payable to the Operator and the Administrator are determined as follows under the Fee Waiver. 1. Base Fee: A base asset management fee (the “Base Fee”) is payable quarterly in arrears to the Operator in an amount equal to an annual rate of 1 % (or 0.25 % per quarter) of the average of the “Net Asset Value Attributable to Common Stockholders” as of the first and last day of the applicable quarter. Net Asset Value Attributable to Common stockholders is defined as (a) the sum of the Company’s (1) investments in real estate at fair value, (2) cash, (3) loans receivable at fair value and (4) the book value of the other assets of the Company, excluding deferred costs and net of other liabilities at book value, less (b) the Company’s (i) debt at face value, (ii) outstanding preferred stock at stated value, and (iii) non-controlling interests at book value; provided, that, non-controlling interests in any UPREIT operating partnership relating to the Company shall not be excluded. Subject to applicable laws and regulations under Nasdaq and the TASE and the agreement of the Operator, the Company will pay the Base Fee owed with respect to the first quarter of 2022 in shares of its Series A Preferred Stock and it is likely that the Company will pay some or part of the remainder of the Base Fees incurred during the year ended December 31, 2022 in shares of Series A Preferred Stock. 2. Incentive Fee: An incentive fee (the “Revised Incentive Fee”) is payable quarterly in arrears to the Administrator with respect to the quarterly core funds from operations in excess of a quarterly threshold equal to 1.75 % (i.e., 7.00 % on an annualized basis) of the Company’s “Adjusted Common Equity” (as defined below) for such quarter (“Excess Core FFO”) as follows: (i) no Revised Incentive Fee in any quarter in which the Excess Core FFO is $ 0 ; (ii) 100 % of any Excess Core FFO up to an amount equal to the product of (x) the average of the Adjusted Common Equity as of the first and last day of the applicable quarter and (y) 0.4375 %; and (iii) 20 % of any Excess Core FFO thereafter. Revised Incentive Fees payable for any partial quarter will be appropriately prorated. “Adjusted Common Equity” means Common Equity plus Excluded Depreciation and Amortization. “Common Equity” means Total Stockholders’ Equity minus Excluded Equity. “Total Stockholders’ Equity” means the amount reflected as total stockholders’ equity in accordance with GAAP on the consolidated balance sheet of the Company and its subsidiaries as of the last day of a given quarter. “Excluded Equity” means the sum of all preferred securities of the Company and its subsidiaries classified as permanent equity in accordance with GAAP on the consolidated balance sheet of the Company and its subsidiaries as of the last day of a given quarter. “Excluded Depreciation and Amortization” means, for a given quarter, the amount of all accumulated depreciation and amortization of (i) the Company and its subsidiaries and (ii) to the extent allocable to the Company and its subsidiaries, the unconsolidated affiliates, in each case as of the last day of such quarter that corresponds to the periodic depreciation and amortization expense calculated in each case in accordance with GAAP that is a permitted add back to net income calculated in accordance with GAAP when calculating funds from operations. F-34 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) 3. Capital Gains Fee: A capital gains fee (the “Capital Gains Fee”) is payable quarterly in arrears to the Administrator in an amount equal to (i) 15 % of the cumulative aggregate realized capital gains minus the cumulative aggregate realized capital losses (in each case since the Effective Date), minus (ii) the aggregate capital gains fees paid since the Effective Date. Realized capital gains and realized capital losses are calculated by subtracting from the sales price of a property: (a) any costs incurred to sell such property, and (b) the current gross value of the property (meaning the property’s original acquisition price plus any subsequent, non-reimbursed capital improvements thereon paid for by the Company). In lieu of cash payment of the Base Fee, the Company has issued to the Operator shares of its Series A1 Preferred Stock as payment for the quarterly Base Fee for the nine months ended September 30, 2022. Pursuant to the Investment Management Agreement, the asset management fee prior to January 1, 2022 fee was calculated (without giving effect to the Fee Waiver) as a percentage of the daily average adjusted fair value of CIM Urban’s assets as follows: Daily Average Adjusted Fair Value of CIM Urban’s Assets Quarterly Fee From Greater of To and Including Percentage (in thousands) $ — $ 500,000 0.2500 % $ 500,000 $ 1,000,000 0.2375 % $ 1,000,000 $ 1,500,000 0.2250 % $ 1,500,000 $ 4,000,000 0.2125 % $ 4,000,000 $ 20,000,000 0.1000 % Asset management fees are included in asset management and other fees to related parties in the accompanying consolidated statements of operations. Under the Master Services Agreement, for fiscal quarters prior to April 1, 2020, the Company paid a base service fee (the “Base Service Fee”) to the Administrator initially set at $ 1.0 million per year (subject to an annual escalation by a specified inflation factor beginning on January 1, 2015), payable quarterly in arrears. On May 11, 2020, the Master Services Agreement was amended to replace the Base Service Fee with an incentive fee pursuant to which the Administrator was entitled to receive, on a quarterly basis, 15.00 % of the Company’s quarterly core funds from operations in excess of a quarterly threshold equal to 1.75 % (i.e., 7.00 % on an annualized basis) of the Company’s average Adjusted Common Equity (defined above) for such quarter. The amendment was effective as of April 1, 2020 and was further modified by the Fee Waiver described above. No such incentive fee was paid by the Company. In addition, pursuant to the terms of the Master Services Agreement, the Administrator may receive compensation and or reimbursement for performing certain services for the Company and its subsidiaries that are not covered by the Base Fee. During the years ended December 31, 2022 and 2021, such services performed by the Administrator and its affiliates included accounting, tax, reporting, internal audit, legal, compliance, risk management, IT, human resources, corporate communications, operational and on-going support in connection with the Company’s offering of Preferred Stock. The Administrator’s compensation is based on the salaries and benefits of the employees of the Administrator and or its affiliates who performed these services (allocated based on the percentage of time spent on the affairs of the Company and its subsidiaries). The expense for such services is included in expense reimbursements to related parties—corporate in the accompanying consolidated statements of operations. Property Management Fees and Reimbursements — CIM Management, Inc. and certain of its affiliates (collectively, the “CIM Management Entities”), all affiliates of CIM REIT and CIM Group, provide property management, leasing, and development services to CIM Urban. Property management fees earned by the CIM Management entities and onsite management costs incurred on behalf of CIM Urban are included in rental and other property operating expenses in the accompanying consolidated statements of operations, with the exception of certain onsite management costs which are capitalized in some cases. Leasing commissions earned are capitalized to deferred charges on the accompanying consolidated balance sheets. Construction management fees are capitalized to investments in real estate on the accompanying consolidated balance sheets. F-35 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) Lending Segment Expenses — The Company has a Staffing and Reimbursement Agreement with CIM SBA Staffing, LLC (“CIM SBA”), an affiliate of CIM Group, and the Company’s subsidiary, PMC Commercial Lending, LLC. The agreement provides that CIM SBA will provide personnel and resources to the Company and that the Company will reimburse CIM SBA for the costs and expenses of providing such personnel and resources. The expense for such services is included in expense reimbursements to related parties—lending segment in the accompanying consolidated statements of operations. Offering-Related Fees — CCO Capital, LLC (“CCO Capital”) became the exclusive dealer manager for the Company’s public offering of the Series A Preferred Stock and and Series A Preferred Warrants effective as of May 31, 2019. CCO Capital is a registered broker dealer and is under common control with the Operator and the Administrator. The Company’s offering of the Series A Preferred Warrants ended at the end of January 2020. On January 28, 2020, the Company entered into the Second Amended and Restated Dealer Manager Agreement, pursuant to which CCO Capital acted as the exclusive dealer manager for the Company’s public offering of its Series A Preferred Stock and Series D Preferred Stock. The Second Amended and Restated Dealer Manager Agreement was subsequently amended by the Company and CCO Capital to address changes to, among other things, selling commissions and dealer manager fees. On June 16, 2022, the Company entered into the Third Amended and Restated Dealer Manager Agreement, pursuant to which CCO Capital has been acting as the exclusive dealer manager for the Company’s public offering of its Series A1 Preferred Stock. Thereunder, the Company agreed to compensate CCO Capital, as the dealer manager for the offering, as follows: (1) a dealer manager fee of up to 3.00 % of the selling price of each share of Series A1 Preferred Stock sold and (2) selling commissions of up to 7.00 % of the selling price of each share of Series A1 Preferred Stock sold. The Company has been informed that CCO Capital generally reallows 100 % of the selling commissions on sales of Series A1 Preferred Stock and generally reallows substantially all of the dealer manager fee on sales of Series A1 Preferred Stock to participating broker-dealers. In addition, pursuant to the Third Amended and Restated Dealer Manager Agreement, CCO Capital will no longer solicit or make any offers for the sale of shares of Series A Preferred Stock or Series D Preferred Stock. The Company recorded fees and expense reimbursements as shown in the table below for services provided by related parties related to the services described above during the periods indicated: Year Ended December 31, 2022 2021 (in thousands) Asset Management Fees: Asset management fees (1) $ 3,570 $ 9,030 Property Management Fees and Reimbursements: Property management fees (2) $ 1,747 $ 1,641 Onsite management and other cost reimbursement (3) $ 2,838 $ 2,687 Leasing commissions (4) $ 794 $ 162 Construction management fees (5) $ 398 $ 226 Administrative Fees and Expenses: Expense reimbursements to related parties - corporate $ 1,925 $ 2,050 Lending Segment Expenses: Expense reimbursements to related parties - lending segment (6) $ 1,929 $ 1,921 Offering-Related Fees: Upfront dealer manager and trailing dealer manager fees (7) $ 1,996 $ 690 Non-issuance specific offering costs (8) $ 689 $ 106 (1) The Company issued to the Operator an aggregate of 270,209 shares of its Series A Preferred Stock , in lieu of cash payment of the asset management fees incurred during the year ended December 31, 2021. The Company issued to the Operator 110,285 shares of Series A1 Preferred Stock in lieu of cash payment for the asset management fees incurred during the nine months ended September 30, 2022. (2) Does not include the company’s share of the property management fees from the Unconsolidated Joint Venture of $ 40,000 for the year ended December 31, 2022. F-36 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) (3) Does not include the Company’s share of the onsite management and other cost reimbursements from the Unconsolidated Joint Venture of $ 94,000 for the year ended December 31, 2022. (4) Does not include the Company’s share of the leasing commissions from the Unconsolidated Joint Venture of $ 4,000 for the year ended December 31, 2022. (5) Does not include the Company’s share of the construction management fees from the Unconsolidated Joint Venture of $ 21,000 for the year ended December 31, 2022, respectively. (6) Expense reimbursements to related parties - lending segment do not include personnel costs capitalized to deferred loan origination costs of $ 136,000 and $ 347,000 for the years ended December 31, 2022 and 2021, respectively. (7) Represents fees earned by CCO Capital and allocated to Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock. (8) As of December 31, 2022 and 2021, $ 2.3 million and $ 2.0 million, respectively, was included in deferred costs as reimbursable expenses incurred pursuant to the Master Services Agreement and the then applicable dealer manager agreement with CCO Capital. These non-issuance specific costs are allocated against the gross proceeds from the sale of the Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock on a pro rata basis for each issuance as a percentage of the total offering. As of December 31, 2022 and 2021, due to related parties consisted of the following: December 31, 2022 2021 (in thousands) Asset management fees $ 812 $ 2,244 Property management fees and reimbursements 1,214 320 Expense reimbursements - corporate 466 692 Expense reimbursements - lending segment 124 341 Upfront dealer manager and trailing dealer manager fees 454 638 Non-issuance specific offering costs 17 143 Other amounts due to the CIM Management Entities and certain of its affiliates 68 163 Total due to related parties $ 3,155 $ 4,541 Affiliate Investments In February 2022, the Company invested with the CIM JV Partner, a CIM-managed separate account, in the Unconsolidated Joint Venture, which purchased an office property in Los Angeles, California for a gross purchase price of approximately $ 51.0 million, of which the Company initially contributed approximately $ 22.4 million and the CIM JV Partner initially contributed the remaining balance. See Note 2 and Note 4 for more information. Other On May 15, 2019, CIM Group entered into an approximately 11-year lease for approximately 32,000 rentable square feet with respect to a property owned by the Company. The lease was amended on August 7, 2019 to reduce the rentable square feet to approximately 30,000 rentable square feet. For the years ended December 31, 2022 and 2021, the Company recorded rental and other property income related to this tenant of $ 1.5 million. 14. COMMITMENTS AND CONTINGENCIES Loan Commitments —Commitments to extend credit are agreements to lend to a customer when the terms established in the contract are met. The Company’s outstanding commitments to fund loans were $ 19.9 million as of December 31, 2022, all of which are for prime-based loans to be originated by the Company’s subsidiary engaged in SBA 7(a) Small Business Loan Program lending, the government guaranteed portion of which is intended to be sold. Commitments generally have fixed F-37 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) expiration dates. Since some commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements. General —In connection with the ownership and operation of real estate properties, the Company has certain obligations for the payment of tenant improvement allowances and lease commissions in connection with new leases and renewals. the Company had a total of $ 7.9 million in future obligations under leases to fund tenant improvements and other future construction obligations as of December 31, 2022. As of December 31, 2022, $ 2.5 million was funded to reserve accounts included in restricted cash on the Company’s consolidated balance sheet for these tenant improvement obligations in connection with the mortg age loan agreement entered into in June 2016. Employment Agreements —The Company has an employment agreement with one of its officers. Under certain circumstances, this employment agreement provides for (1) severance payment equal to the annual base salary paid to the officer and (2) death and disability payments in an amount equal to two times and one time, respectively, the annual base salary paid to the officer. Litigation —The Company is not currently involved in any material pending or threatened legal proceedings nor, to the Company’s knowledge, are any material legal proceedings currently threatened against the Company, other than routine litigation arising in the ordinary course of business. In the normal course of business, the Company is periodically party to certain legal actions and proceedings involving matters that are generally incidental to the Company’s business. While the outcome of these legal actions and proceedings cannot be predicted with certainty, in management’s opinion, the resolution of these legal proceedings and actions will not have a material adverse effect on the Company’s business, financial condition, results of operations, cash flow or the Company’s ability to satisfy its debt service obligations or to maintain its level of distributions on Common Stock or Preferred Stock. A subsidiary of the Company is a defendant in a lawsuit in connection with injuries sustained by a third-party contractor at a property previously owned by such subsidiary. While it is possible that a loss may be incurred, the Company is unable to estimate a range of potential losses due to the complexity and current status of the lawsuit. However, the Company maintains insurance coverage to mitigate the impact of adverse exposures in lawsuits of this nature and do not expect this lawsuit to have a material adverse effect on the Company’s business, financial condition, results of operations, cash flow or the Company ability to satisfy its debt service obligations or to maintain the level of distributions on the Company’s Common Stock or Preferred Stock. SBA Related —If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced under the PPP or the SBA 7(a) Small Business Loan Program, the SBA may seek recovery of the principal loss related to the deficiency from the Company. As of December 31, 2022, the Company serviced an aggregate of $ 250.2 million of the guaranteed portion of SBA 7(a) loans . With respect to the guaranteed portion of SBA loans that have been sold, the SBA will first honor its guarantee and then seek compensation from the Company in the event that a loss is deemed to be attributable to technical deficiencies. Based on historical experience, the Company does not expect that this contingency is probable to be asserted. However, if asserted, it could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flow or the Company’s ability to satisfy its debt service obligations or to maintain its level of distributions on Common Stock or Preferred Stock. Environmental Matters —In connection with the ownership and operation of real estate properties, the Company may be potentially liable for costs and damages related to environmental matters, including asbestos-containing materials. The Company has not been notified by any governmental authority of any noncompliance, liability, or other claim in connection with any of the properties, and the Company is not aware of any other environmental condition with respect to any of the properties that management believes will have a material adverse effect on the Company’s business, financial condition, results of operations, cash flow or the Company’s ability to satisfy its debt service obligations or to maintain its level of distributions on Common Stock or Preferred Stock. F-38 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) 15. LEASES Future minimum rental revenue under long-term operating leases as of December 31, 2022, excluding tenant reimbursements of certain costs, are as follows (excludes unconsolidated properties, in thousands): Years Ending December 31, Total 2023 $ 46,119 2024 45,365 2025 29,164 2026 21,441 2027 15,051 Thereafter 52,711 $ 209,851 16. INCOME TAXES The Company has elected to be taxed as a REIT under the Code. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that the Company distributes at least 90% of its taxable income to its stockholders. As a REIT, the Company generally will not be subject to corporate level federal income tax on net income that is currently distributed to stockholders. The Company has wholly-owned TRS’s which are subject to federal and state income taxes. The income generated from the TRS’s is taxed at normal corporate rates. The provision for income taxes results in effective tax rates that differ from federal and state statutory rates. A reconciliation of the provision for income tax attributable to the TRSs’ income from continuing operations computed at federal statutory rates to the income tax provision reported in the financial statements is as follows: Year Ended December 31, 2022 2021 (in thousands) Income from continuing operations before income taxes for TRSs $ 6,128 $ 9,242 Expected federal income tax provision $ 1,287 $ 1,941 State income taxes 43 ( 40 ) Change in valuation allowance 300 ( 273 ) Other ( 499 ) 1,364 Income tax provision $ 1,131 $ 2,992 F-39 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) The components of the Company’s net deferred tax asset, which are included in other assets, are as follows: December 31, 2022 2021 (in thousands) Deferred tax assets: Net operating losses $ 2,664 $ 2,367 Secured borrowings—government guaranteed loans 54 64 Other 145 153 Total gross deferred tax assets 2,863 2,584 Valuation allowance ( 2,670 ) ( 2,370 ) 193 214 Deferred tax liabilities: Loans receivable ( 71 ) ( 96 ) ( 71 ) ( 96 ) Deferred tax asset, net $ 122 $ 118 The net operating loss carryforwards as of December 31, 2022 and 2021 were generated by TRSs and are available to offset future taxable income of these TRSs. The increase in the valuation allowance recorded in 2022 was $ 300,000 . The periods subject to examination for the Company’s federal and state income tax returns are 2019 through 2022. As of December 31, 2022 and 2021, no reserves for uncertain tax positions have been established and the Company does not anticipate any material changes in the amount of unrecognized tax benefits recorded to occur within the next 12 months. The Tax Cuts and Jobs Act of 2017, signed into law in late December 2017, made sweeping changes to provisions of the Code applicable to businesses. The CARES Act, signed into law in March 2020, made additional changes to provisions on the Code applicable to the businesses. Management has reviewed these statutory changes and determined that the impact to the Company’s consolidated financial statements is not material. 17. SEGMENT DISCLOSURE The Company’s reportable segments during the years ended December 31, 2022 and 2021 consist of two types of commercial real estate properties, namely, office and hotel, as well as a segment for the Company’s lending business. Management internally evaluates the operating performance and financial results of the segments based on net operating income. The Company also has certain general and administrative level activities, including public company expenses, legal, accounting, and tax preparation that are not considered separate operating segments. The reportable segments are accounted for on the same basis of accounting as described in Note 2. For the Company’s real estate segments, the Company defines net operating income (loss) as rental and other property income and expense reimbursements less property related expenses, and excludes non-property income and expenses, interest expense, depreciation and amortization, corporate related general and administrative expenses, gain (loss) on sale of real estate, gain (loss) on early extinguishment of debt, impairment of real estate, transaction costs, and provision (benefit) for income taxes. For the Company’s lending segment, the Company defines net operating income as interest income net of interest expense and general overhead expenses. F-40 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) The net operating income (loss) of the Company’s segments for the years ended December 31, 2022 and 2021 is as follows: Year Ended December 31, 2022 2021 (in thousands) Office: Revenues $ 55,928 $ 53,289 Property expenses: Operating 26,537 23,431 General and administrative 225 347 Total property expenses 26,762 23,778 Income from unconsolidated entity 164 — Segment net operating income—office 29,330 29,511 Hotel: Revenues 35,213 17,849 Property expenses: Operating 23,989 15,841 General and administrative 110 128 Total property expenses 24,099 15,969 Segment net operating income—hotel 11,114 1,880 Lending: Revenues 10,765 19,787 Lending expenses: Interest expense 552 408 Expense reimbursements to related parties—lending segment 1,929 1,921 General and administrative 1,904 1,788 Total lending expenses 4,385 4,117 Segment net operating income—lending 6,380 15,670 Total segment net operating income $ 46,824 $ 47,061 F-41 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) A reconciliation of the Company’s segment net operating income to net income attributable to the Company for the years ended December 31, 2022 and 2021 is as follows: Year Ended December 31, 2022 2021 (in thousands) Total segment net operating income $ 46,824 $ 47,061 Interest and other income — 1 Asset management and other fees to related parties ( 3,570 ) ( 9,030 ) Expense reimbursements to related parties—corporate ( 1,925 ) ( 2,050 ) Interest expense ( 9,052 ) ( 9,005 ) General and administrative ( 4,630 ) ( 4,581 ) Transaction costs ( 223 ) ( 143 ) Depreciation and amortization ( 20,348 ) ( 20,112 ) Income before provision for income taxes 7,076 2,141 Provision for income taxes ( 1,131 ) ( 2,992 ) Net income (loss) 5,945 ( 851 ) Net (income) loss attributable to noncontrolling interests ( 27 ) 1 Net income (loss) attributable to the Company $ 5,918 $ ( 850 ) The condensed assets for each of the segments as of December 31, 2022 and 2021, along with capital expenditures and loan originations for the years ended December 31, 2022 and 2021 are as follows: December 31, 2022 2021 (in thousands) Condensed assets: Office $ 471,677 $ 449,843 Hotel 99,082 101,308 Lending 76,148 96,729 Non-segment assets (1) 43,341 12,986 Total assets $ 690,248 $ 660,866 Year Ended December 31, 2022 2021 (in thousands) Capital expenditures (2) and loan originations: Office $ 9,094 $ 5,714 Hotel 414 193 Total capital expenditures 9,508 5,907 Loan originations 40,619 133,290 Total capital expenditures and loan originations $ 50,127 $ 139,197 (1) Includes investments in real estate of $ 9.9 million representing three development sites which the Company intends to develop into multifamily assets. (2) Represents additions and improvements to real estate investments, excluding acquisitions. Includes the activity for dispositions through their respective disposition dates. F-42 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) 18. SUBSEQUENT EVENTS Property Acquisitions On January 31, 2023, the Company acquired an 89.42 % interest in each of Channel House, an 8-story apartment building with 333 units in Jack London Square, Oakland, California, land parcel F-3 and land parcel Site D, in each case located in Oakland, California, from related party entities also managed by CIM Group (collectively the “JLS Sellers”) for $ 120.4 million, $ 200,000 and $ 2.2 million, respectively (including, in the case of Channel House, an assumption of a mortgage of $ 103.0 million). The purchase price is based on bids received by the JLS Sellers in connection with a marketed sales process and is subject to customary post-closing adjustments and does not include transaction costs relating to the acquisition. CMCT’s knowledge of the asset, the market in which it is located and the ability of CMCT to close the transaction rapidly and with certainty were key factors in securing this opportunity. In March, 2023, the Company made a principal payment of $ 16.0 million on the Channel House mortgage. On February 17, 2023, an indirect wholly owned subsidiary of the Company announced the closing of a co-investment transaction pursuant to which three international co-investors acquired an 80 % interest in a property owned by such subsidiary located at 4750 Wilshire Blvd in Los Angeles (“4750 Wilshire”) for an aggregate of approximately $ 34.4 million, excluding transaction costs. The Company intends to convert two out of the three floors of 4750 Wilshire into for-lease multifamily units. The total cost of the conversion is expected to be approximately $ 31.0 million, which will be financed by a combination of equity contributions from the Company and co-investors as well as a $ 38.5 million mortgage from a bank Pursuant to the co-investment agreement, each co-investor will pay an on-going management fee to the Company. In addition, the Company may earn incentive fees from co-investors based on the performance of 4750 Wilshire after conversion. The Company will account for its retained ownership interest in the 4750 Wilshire Project as an equity method investment. On February 28, 2023, the Company and a co-investor acquired from an unrelated third-party a 100 % fee-simple interest in a 75 -unit four-story multifamily property located in the Echo Park neighborhood of Los Angeles, California for a purchase price of $ 19.1 million, excluding transaction costs. The Company owns 50 % of this property. A mortgage of $ 9.6 million on the property was obtained in connection with the acquisition. The Company will account for its ownership interest as an equity method investment. On March 9, 2023, our lending division completed a securitization of the unguaranteed portion of certain of our SBA 7(a) loans receivable with the issuance of $ 54.1 million of unguaranteed SBA 7(a) loan-backed notes (with net proceeds of approximately $ 43.3 million, after payment of fees and expenses in connection with the securitization and the funding of a reserve account and an escrow account). The SBA 7(a) loan-backed notes are collateralized by the right to receive payments and other recoveries attributable to the unguaranteed portions of certain of our SBA 7(a) loans receivable. The SBA 7(a) loan-backed notes mature on March 20, 2048, with monthly payments due as payments on the collateralized loans are received. The SBA 7(a) loan-backed notes bear interest at a per annum rate equal to the lesser of (i) 30-day average compounded SOFR plus 2.90 % and (ii) prime rate minus 0.35 %. The annual interest rate for the first interest payment date shall be 7.40 %. We reflect the SBA 7(a) loans receivable as assets on our consolidated balance sheet and the SBA 7(a) loan-backed notes as debt on our consolidated balance sheet. On March 28, 2023, an indirect wholly-owned subsidiary of the Company acquired a 98.05 % interest in Eleven Fifty Clay, a 16-story apartment building with 288 units in downtown Oakland, California, from a related party also managed by CIM Group (the “Clay Seller”). The purchase price is $ 142.7 million (including an assumption of a mortgage of $ 78.3 million), exclusive of transactions costs. The purchase price is based on bids received by the Clay Seller in connection with a marketed sales process and will be subject to customary adjustments at closing. CMCT’s knowledge of the asset, the market in which it is located and the ability of CMCT to close the transaction rapidly and with certainty were key factors in securing this opportunity. F-43 Table of Contents CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021 (Continued) Dividend Declaration On March 20, 2023, the Company declared a cash dividend of $ 0.085 per share of its Common Stock, to be paid on April 11, 2023 to stockholders of record at the close of business on March 30, 2023. F-44 Schedule III—Real Estate and Accumulated Depreciation December 31, 2022 (in thousands) Initial Cost Net Improvements (Write-Offs) Since Acquisition Gross Amount at Which Carried (2) Property Name, City and State Encumbrances Land Building and Improvements Land Building and Improvements Total Acc. Deprec. Year Built / Renovated Year of Acquisition Office 3601 S Congress Avenue (1) Austin, TX $ — (1) $ 9,569 $ 18,593 $ 14,584 $ 9,569 $ 33,177 $ 42,746 $ 8,985 1918 / 2001 & 2020 2007 1 Kaiser Plaza Oakland, CA $ 97,100 9,261 113,619 19,058 9,261 132,677 141,938 56,435 1970 / 2008 2008 2 Kaiser Plaza Parking Lot (1) Oakland, CA — (1) 10,931 110 3,665 10,931 3,775 14,706 — N/A 2015 11600 Wilshire Boulevard (1) Los Angeles, CA — (1) 3,477 18,522 2,449 3,477 20,971 24,448 7,267 1955 2010 11620 Wilshire Boulevard (1) Los Angeles, CA — (1) 7,672 51,999 6,989 7,672 58,988 66,660 19,721 1976 2010 4750 Wilshire Boulevard Los Angeles, CA — (1) 16,633 28,985 6,533 16,633 35,518 52,151 7,476 1984 / 2014 2014 Lindblade Media Center Los Angeles, CA — (1) 6,342 11,568 491 6,342 12,059 18,401 2,658 1930 & 1957 / 2010 2014 1037 N Sycamore Los Angeles, CA — (1) 1,839 1,094 113 1,839 1,207 3,046 45 2000 / 2021 2021 1130 Howard Street (1) San Francisco, CA — (1) 8,290 10,480 ( 45 ) 8,290 10,435 18,725 1,421 1930 / 2016 & 2017 2017 9460 Wilshire Boulevard (1) Los Angeles, CA — (1) 52,199 76,730 2,250 52,199 78,980 131,179 10,437 1959 / 2008 2018 1021 E 7th Street Austin, TX — (1) 4,976 733 — 4,976 733 5,709 221 1972 / 2001 2020 3101 S Western Avenue Los Angeles, CA — (1) 2,279 — 620 2,279 620 2,899 — N/A 2022 3022 S Western Avenue Los Angeles, CA — (1) 5,637 156 439 5,637 595 6,232 5 N/A 2022 1007 E 7th Street Austin, TX — (1) 1,866 6 138 1,866 144 2,010 23 1920 2022 3109 S Western Avenue Los Angeles, CA — (1) 709 2 23 709 25 734 — N/A 2022 Hotel Sheraton Grand Hotel (1) Sacramento, CA — (1) 3,497 107,447 67 3,497 107,514 111,011 39,566 2001 2008 Sheraton Grand Hotel Parking & Retail (1) Sacramento, CA — 6,550 10,996 272 6,550 11,268 17,818 4,147 2001 2008 $ 97,100 $ 151,727 $ 451,040 $ 57,646 $ 151,727 $ 508,686 $ 660,413 $ 158,407 (1) These properties collateralize the revolving credit facility, which had a $ 56.2 million outstanding balance as of December 31, 2022. F-45 (2) The aggregate gross cost of property included above for federal income tax purposes approximates $ 714.3 million (unaudited) as of December 31, 2022. Schedule III—Real Estate and Accumulated Depreciation (Continued) December 31, 2022 (in thousands) The following table reconciles the Company’s investments in real estate from January 1, 2021 to December 31, 2022: Year Ended December 31, 2022 2021 (in thousands) Investments in Real Estate Balance, beginning of period $ 642,702 $ 637,205 Additions: Improvements 10,548 5,907 Property acquisitions 10,756 2,933 Deductions: Retirements ( 3,593 ) ( 3,343 ) Balance, end of period $ 660,413 $ 642,702 The following table reconciles the accumulated depreciation from January 1, 2021 to December 31, 2022: Year Ended December 31, 2022 2021 (in thousands) Accumulated Depreciation Balance, beginning of period $ ( 144,718 ) $ ( 131,165 ) Additions: depreciation ( 17,282 ) ( 16,896 ) Deductions: Assets held for sale — — Asset sales — — Retirements 3,593 3,343 Balance, end of period $ ( 158,407 ) $ ( 144,718 ) F-46 Schedule IV—Mortgage Loans on Real Estate December 31, 2022 (dollars in thousands, except footnotes) Principal Amount of Loans Subject Geographic Number Final Carrying to Delinquent Dispersion of of Size of Loans Maturity Amount of Principal or Collateral Loans From To Interest Rate Date Range Mortgages (1) “Interest” SBA 7(a) Loans - States 2% or greater (2) (3) : Ohio 21 $ 60 $ 880 7.75 % to 9.00 % 01/30/38 — 10/12/47 $ 8,208 $ — Texas 20 $ 5 $ 860 7.75 % to 9.00 % 05/22/23 — 01/26/47 6,553 — Indiana 12 $ 90 $ 950 7.75 % to 9.00 % 05/14/36 — 08/26/46 4,617 — Michigan 14 $ 80 $ 950 7.75 % to 9.00 % 12/10/34 — 10/27/46 4,075 — Florida 11 $ 20 $ 1,040 8.00 % to 9.00 % 06/29/32 — 05/19/47 3,942 — West Virginia 7 $ 50 $ 860 7.75 % to 9.00 % 09/25/31 — 09/07/47 2,421 — Louisiana 7 $ 60 $ 580 8.00 % to 9.00 % 11/22/31 — 05/26/47 2,158 — Pennsylvania 4 $ 300 $ 670 8.00 % to 9.00 % 03/05/40 — 11/29/43 2,016 — Kentucky 9 $ 5 $ 440 8.00 % to 9.00 % 11/11/32 — 03/23/47 1,963 — Illinois 11 $ 50 $ 290 8.00 % to 9.00 % 09/08/39 — 10/26/47 1,876 — North Carolina 7 $ 60 $ 770 8.00 % to 9.00 % 09/08/32 — 04/25/47 1,793 — New Mexico 5 $ 90 $ 760 7.75 % to 9.00 % 11/17/34 — 08/09/46 1,689 — Virginia 5 $ 110 $ 640 8.00 % to 8.75 % 12/27/44 — 12/15/47 1,497 — Alabama 7 $ 20 $ 470 8.00 % to 8.75 % 07/27/25 — 09/10/46 1,427 — Georgia 6 $ 110 $ 320 8.25 % to 9.00 % 12/28/34 — 08/11/47 1,347 — South Carolina 4 $ 270 $ 380 8.00 % to 9.00 % 11/06/40 — 07/30/44 1,284 — Tennessee 4 $ 140 $ 440 8.50 % to 8.75 % 06/01/43 — 08/31/46 1,226 — Wisconsin 5 $ 100 $ 500 8.00 % to 9.00 % 03/05/32 — 06/09/46 1,167 — Colorado 3 $ 310 $ 510 7.75 % to 8.50 % 02/17/41 — 09/15/45 1,154 — Other (4) 31 $ 30 $ 520 6.00 % to 9.00 % 07/26/26 — 11/11/47 7,144 104 Government guaranteed portions (5) 117 — SBA 7(a) loans, subject to secured borrowings (6) 5,979 — Total reserves ( 1,106 ) — 193 $ 62,547 (7) $ 104 (1) Excludes general reserves of $ 1,021,000 since not specifically identified. (2) Includes $ 551,000 of loans with subordinate lien positions. (3) Interest rates are variable at spreads over the prime rate unless otherwise noted. (4) Includes a loan with a retained face value of $ 85,000 , a valuation reserve of $ 85,000 and a fixed interest rate of 6.00 %. (5) Represents the government guaranteed portions of the Company’s SBA 7(a) loans detailed above retained by us. As there is no risk of loss to us related to these portions of the guaranteed loans, the geographic information is not presented as it is not meaningful. (6) Represents the guaranteed portion of SBA 7(a) loans which were sold with the proceeds received from the sale reflected as secured borrowings. For Federal income tax purposes, these proceeds are treated as sales and reduce the carrying value of loans receivable. (7) For Federal income tax purposes, the aggregate cost basis of the Company’s loans was approximately $ 56.2 million (unaudited). F-47 Schedule IV—Mortgage Loans on Real Estate (Continued) December 31, 2022 (in thousands) Year Ended December 31, 2022 2021 Balance, beginning of period $ 73,543 $ 83,135 Additions during period: New loans 40,619 133,290 Other - deferral of loan origination costs 1,086 2,559 Other - accretion of loan discounts, net of amortization of deferred origination costs 1,836 1,424 Deductions during period: Collections of principal ( 20,250 ) ( 32,370 ) Cost of mortgages sold, net ( 34,124 ) ( 114,437 ) Other - bad debt expense ( 163 ) ( 58 ) Balance, end of period $ 62,547 $ 73,543 F-48