What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-30 compared with 2021-03-30 · 900 added, 438 removed, 819 unchanged (62% of the section changed)

16 unchanged sentences

OTHER INFORMATION

On March 28, 2022, Larry Dubose notified the Company that he is resigning from his positions with NetREIT Advisors, LLC and Dubose Advisors, LLC in 2022 and will not stand for re-election at the Annual Meeting, due to his other professional commitments and demands on his time.

However, he will continue to remain an employee of our model home division.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

1 unchanged sentence

and “Executive Officers of the Company”

and “Section 16(a) Beneficial Ownership Reporting Compliance”

and “Section 16(a) B eneficial Ownership Reporting Compliance”

in our definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

2 unchanged sentences

The information required by this item is set forth under the caption “Executive Compensation”

in our definitive Proxy Statement for the 2021 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

in our definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item will be set forth under the caption “Security Ownership of Certain Beneficial Owners and Management”

in our definitive Proxy Statement for the 2021 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

in our definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

1 unchanged sentence

in our definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

PRINCIPAL ACCOUNTING FEES AND SERVICES

PRINCIPAL ACCOUNT ING FEES AND SERVICES

The information required by this item is set forth under the caption “Independent Registered Public Accounting Firm Fees and Services”

in our definitive Proxy Statement for the 2021 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

in our definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

12 unchanged sentences

Articles of Amendment and Restatement of the Articles of Incorporation, dated as of July 30, 2010 (incorporated by reference to Exhibit 3.01 of the Company’s Current Report on Form 8-K filed on August 10, 2010).

Articles of Amendment effecting the Company’s name change, dated as of October 18, 2017 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on October 19, 2017).

Articles Supplementary filed on August 4, 2014 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on August 8, 2014).

Articles of Amendment effecting the reverse stock split (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on July 31, 2020).

Articles Supplementary classifying and designating the Series C Common Stock, dated July 29 2020 (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on July 31, 2020).

Articles Supplementary classifying and designating the Series C Common Stock (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on July 31, 2020).

Articles of Amendment of Presidio Property Trust, Inc.

(incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on October 19, 2017).

Articles Supplementary classifying and designating 805,000 shares of the Series D Preferred Stock (incorporated by reference to the Company’s Form 8-A12B filed on June 9, 2021).

Articles Supplementary classifying and designating an additional 115,000 shares of the Series D Preferred Stock (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on June 15, 2021).

Second Amended and Restated Bylaws of Presidio Property Trust, Inc.

2 unchanged sentences

Description of Securities*

Form of Common Stock Warrant (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on July 14, 2021).

Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on July 14, 2021).

Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.3 of the Company’s Current Report on Form 8-K filed on July 14, 2021).

Form of Warrant (incorporated by reference to Exhibit 4.5 of the Company’s Registration Statement on Form S-11 filed on November 9, 2021).

Form of Warrant Agent Agreement (incorporated by reference to Exhibit 4.6 of the Company’s Registration Statement on Form S-11 filed on November 9, 2021).

1999 Flexible Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form 10-12B filed on May 6, 2008).

Employment Agreement for Mr.

Heilbron, effective as of October 18, 2017.*

Dividend Reinvestment Plan (incorporated by reference to Exhibit 10.2 of the Company ’

s Registration Statement on Form 10-12B filed on May 6, 2008).

Promissory Note, dated as of September 17, 2019, by and between Presidio Property Trust, Inc.

2 unchanged sentences

and Polar Multi-Strategy Master Fund (incorporated by reference to Exhibit 1.2 of the Company’s Current Report on Form 8-K filed on September 23, 2019).

Form of Indemnification Agreement entered into between the Company and each of its directors and executive officers (incorporated by reference to Exhibit 10.10 of the Company’s Registration Statement on Form S-11 filed on September 18, 2017).

Form of Restricted Stock Agreement under 1999 Flexible Incentive Plan (incorporated by reference to Exhibit 10.23 of the Company’s Registration Statement on Form S-11 filed on September 18, 2017).

Employment Agreement for Mr.

Heilbron, effective as of October 18, 2017 (incorporated by reference to Exhibit 10.2 of the Company’s Annual Report on Form 10-K filed on March 30, 2021).

Purchase and Sale Agreement and Joint Escrow Instructions among NetREIT Highland, LLC, NetREIT Joshua, LLC, NetREIT Casa Grande, LP, NetREIT Sunrise, LLC, NetREIT, Inc.

and Sparky’s Storage 18 (CA) LP, dated as of February 6, 2015;

as amended by the First Amendment dated February 25, 2015, and the Second Amendment dated April 2, 2015 (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on April 15, 2015).

Form of Restricted Stock Agreement under 1999 Flexible Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form 10-12B filed on May 6, 2008).

Presidio Property Trust, Inc.

2017 Incentive Award Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on October 19, 2017).

Form of Restricted Stock Agreement under 2017 Incentive Award Plan (incorporated by reference to Exhibit 10.25 of the Company’s Registration Statement on Form S-11 filed on January 17, 2019).

Code of Ethics *

Form of Restricted Stock Agreement under 2017 Incentive Award Plan (incorporated by reference to Exhibit 10.25 of the Company’s Registration Statement on Form S-11/A filed on January 17, 2018).

Form of Placement Agency Agreement, dated as of July 12, 2021, by and between the Company and the Placement Agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on July 14, 2021).

Form of Securities Purchase Agreement, dated as of July 12, 2021, by and between the Company and the Purchaser (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on July 14, 2021).

At-The-Market Offering Agreement dated November 8, 2021, by and between Presidio Property Trust, Inc.

and The Benchmark Company, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on November 9, 2021).

Ninth Amendment to Loan Agreement signed August 19, 2021 (incorporated by reference to Exhibit 1.1 of the Company’s Current Report on Form 8-K filed on August 25, 2021).

Loan Agreement dated February 26, 2016, together with Second Amendment to Loan Agreement dated as of June 29, 2016, Third Amendment to Loan Agreement dated as of April 11, 2017, Joinder and Fourth Amendment to Loan Agreement dated as of February 20, 2018, Fifth Amendment to Loan Agreement dated as of April 11, 2018, Joinder and Sixth Amendment to Loan Agreement dated as of April 11, 2019, Joinder and Seventh Amendment to Loan Agreement dated as May 22, 2020 and Eighth Amendment to Loan Agreement dated as of June 26, 2020 (incorporated by reference to Exhibit 1.2 of the Company’s Current Report on Form 8-K filed on August 25, 2021).

Code of Ethics (incorporated by reference to Exhibit 14 of the Company’s Annual Report on Form 10-K filed on March 30, 2021).

Subsidiaries of the Registrant*

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1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

Inline XBRL Instance Document (the I nstance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

Inline XBRL Taxonomy Extension Schema Document 

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(Principal Accounting Officer)

Director, 

President, Dubose Advisors, LLC, Chief Financial Officer,

March 30, 2021

NetREIT Dubose Model Home REIT, Inc.

/s/ Jennifer A.

5 unchanged sentences

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  (PCAOB ID 23 )

FINANCIAL STATEMENTS:

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We have audited the accompanying consolidated balance sheets of Presidio Property Trust, Inc.

and Subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, equity and cash flows for the years then ended, the related notes to the consolidated financial statements, and schedule in Item 15 (a), Schedule III –

and Subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, equity and cash flows for the years then ended, the related notes to the consolidated financial statements, and schedule in Item 15 (2), Schedule III –

Real Estate and Accumulated Depreciation and Amortization (collectively, the financial statements).

15 unchanged sentences

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

REAL ESTATE ASSET AND LEASE INTANGIBLE IMPAIRMENT ASSESSMENT

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:

(i) relates to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the 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.

REAL ESTATE ASSETS AND LEASE INTANGIBLES IMPAIRMENT ASSESSMENT

Critical Audit Matter Description

As described in Notes 4 and 14 to the consolidated financial statements, the Company’s consolidated real estate assets balance (including real estate properties and lease intangibles) was approximately $166.3 million at December 31, 2020.

Real estate asset and lease intangibles are tested for impairment at least annually at the individual real estate property level.

As described in Notes 4 and 12, to the  financial statements, the Company’s consolidated real   estate assets balance (including real estate properties and lease intangibles) was approximately $138 million at December 31, 2021.

Real estate assets and lease intangibles are tested for impairment at least annually at the individual real estate property level.

Management continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable or realized.

1 unchanged sentence

In some instances, there may be various potential outcomes for an investment and its potential future cash flows.

In these instances, the undiscounted future cash flows used to assess recoverability are based on several assumptions and are probability-weighted based on management’s best estimates as of the date of evaluation.

In these instances, the undiscounted future cash flows used to assess recoverability are based on several assumptions and are probability‐

weighted based on management’s best estimates as of the date of evaluation.

These assumptions include, among others, cash flow projections, discount rates, market capitalization rates, and recent sales data for comparable properties.

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Evaluating whether the assumptions used were reasonable by considering the past performance of real estate properties, management’s assumptions about market demand and market leasing rates and lease terms, and whether such assumptions were consistent with evidence obtained in other areas of the audit.

Obtaining marketing materials or letters of intent for specific real estate properties deemed by management to qualify for held-for-sale treatment and comparing estimated sales prices to current property book values.

Obtaining marketing materials or letters of intent for specific real estate properties deemed by management to qualify for held‐for‐sale treatment and comparing estimated sales prices to current property book values.

/s/ Baker Tilly US, LLP   

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7,500,086  

12,238,692  

Accounts payable and accrued liabilities

4 unchanged sentences

2,548,686  

Dividends payable preferred stock

179,685  

Lease liability, net

8 unchanged sentences

Commitments and contingencies (Note 9)

Series A Common Stock, $ 0.01 par value, shares authorized:

Series D Preferred Stock, $0.01 par value per share;

1,000,000 shares authorized;

920,000 and 0 shares issued and outstanding (liquidation preference $ 25.00 per share) as of December 31, 2021 and December 31, 2020, respectively

Series A Common Stock, $0.01 par value per share, shares authorized:

100,000,000 ;

9,508,363 and 8,881,842 shares were both issued and outstanding at December 31, 2020 and December 31, 2019, respectively

11,599,720 shares and 9,508,363 shares were issued and outstanding at December 31, 2021 and December 31, 2020, respectively

115,997  

23 unchanged sentences

Rental income

$ 18,420,257  

$ 23,444,119  

Fees and other income

810,852  

907,673  

Total revenue

19,231,109  

24,351,792  

Costs and expenses:

Rental operating costs

6,183,189  

8,818,283  

General and administrative

6,225,510  

5,751,754  

Depreciation and amortization

5,397,498  

6,274,321  

Impairment of real estate assets

608,000  

1,730,851  

Total costs and expenses

18,414,197  

22,575,209  

Other income (expense):

Interest expense-Series B preferred stock

Interest expense-mortgage notes

( 4,542,712 )  

( 6,097,834 )

Interest expense - note payable

( 279,373 )  

( 2,715,233 )

Interest and other income (expense), net

( 3,417 )  

Gain on sales of real estate, net

2,487,528  

1,245,460  

Gain on extinguishment of government debt

10,000  

451,785  

Deferred offering costs

Acquisition costs

Income tax expense

Income tax credit (expense)

47,620  

Total other income (expense), net

Net (loss) income

Loss attributable to noncontrolling interests

( 2,280,354 )  

( 8,037,981 )

( 1,463,442 )  

( 6,261,398 )

Income attributable to noncontrolling interests

( 2,162,140 )  

( 1,412,507 )

Net loss attributable to Presidio Property Trust, Inc.

$ ( 3,625,582 )  

$ ( 7,673,905 )

Preferred Stock Series D dividends

( 1,173,948 )  

Net loss attributable to Presidio Property Trust, Inc.

common stockholders

Basic and diluted loss per common share

$ ( 4,799,530 )  

$ ( 7,673,905 )

Net loss per share attributable to Presidio Property Trust, Inc.

common stockholders:

Basic & Diluted

$ ( 0.46 )  

Weighted average number of common shares outstanding - basic and diluted

10,340,975  

9,023,914  

See Notes to Consolidated Financial Statements

3 unchanged sentences

Dividends and

Preferred Stock Series D

Stockholders’

Balance, December 31, 2019

( 111,343,840

Dividends paid

Contributions received from noncontrolling interests, net of distributions paid

Repurchase of common stock

Vesting of restricted stock

Balance, December 31, 2019

8,881,842  

$ 88,818  

$ 152,129,120  

$ ( 113,037,144 ) $ 39,180,794  

$ 17,440,394  

$ 56,621,188  

( 7,673,905 )  

1,412,507  

( 6,261,398 )

Shares issued, initial public offering, net of fees

Dividends paid

Shares issued, initial public offering

500,000  

1,999,984  

2,004,984  

Dividends paid to Series A Common Stockholders

( 963,456 )  

Distributions in excess of contributions received

( 2,366,009 )  

Repurchase of common stock

( 3,000 )  

( 30 )  

( 17,970 )  

( 18,000 )  

Share reconciliation adjustment

( 16,080 )  

( 162 )  

Issuance of stock for Limited Partnership interests

Vesting of restricted stock

59,274  

1,247,396  

1,247,990  

( 1,247,990 )  

Vesting of restricted Series A Common Stock

86,327  

1,104,454  

1,105,272  

Balance, December 31, 2020

9,508,363  

95,038  

156,463,146  

( 121,674,505 )  

34,883,679  

15,238,902  

50,122,581  

( 3,625,582 )  

2,162,140  

( 1,463,442 )

Dividends paid to Series A Common Stockholders

( 4,473,399 )  

Dividends to Series D Preferred Stockholders

( 1,173,948 )  

Issuance of Common Stock, net of issuance costs, including warrants exercised with offering *

2,000,000  

20,000  

8,851,879  

8,871,879  

Issuance of Series D Preferred Stock, net of issuance costs

920,000  

20,480,603  

20,489,803  

Distributions in excess of contributions received

( 7,588,197 )  

Repurchase of Common Stock, at cost

( 29,721 )  

( 252 )  

( 110,379 )  

( 110,631 )  

Vesting of restricted Series A Common Stock

121,078  

806,763  

807,974  

Balance, December 31, 2021

920,000 $ 9,200  

11,599,720  

$ 115,997  

$ 186,492,012  

$ ( 130,947,434 ) $ 55,669,775  

$ 9,812,845  

$ 65,482,620  

* See Additional Offerings & Warrants 

in Note 1.

ORGANIZATION AND BASIS OF PRESENTATION

See Notes to Consolidated Financial Statements.

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Cash flows from operating activities:

Net (loss) income

$ ( 1,463,442 )  

$ ( 6,261,398 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

5,397,498  

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization  

6,274,321  

Stock compensation

1,614,228  

Stock compensation  

1,105,272  

Bad debt expense

164,623  

Bad debt expense (recoveries)  

77,898  

Gain on sale of real estate assets, net  

( 2,487,528 )  

( 1,245,460 )

Impairment of real estate assets  

Gain on extinguishment of government debt

( 10,000 )  

Accretion of original issue discount  

Net change in fair value of marketable securities

( 39,429 )  

Impairment of real estate assets

608,000  

Amortization of financing costs  

1,730,851  

Accretion of original issue discount

1,013,405  

Amortization of above-market leases  

Amortization of financing costs

479,853  

1,287,430  

Amortization of below-market leases  

Amortization of above-market leases

42,064  

Straight-line rent adjustment  

50,682  

Amortization of below-market leases

( 60,203 )  

Straight-line rent adjustment

( 231,577 )  

108,998  

Changes in operating assets and liabilities:

Other assets  

190,354  

1,957,641  

Accounts payable and accrued liabilities  

( 1,221,725 )  

Accrued real estate taxes  

( 1,344,636 )

Accrued real estate taxes

( 607,773 )  

3 unchanged sentences

Cash flows from investing activities:

Real estate acquisitions  

( 22,224,826 )  

( 10,161,613 )

Additions to buildings and tenant improvements  

( 1,597,186 )  

( 2,834,373 )

Additions to deferred leasing costs  

Investment in marketable securities

( 3,819,882 )  

Proceeds from sales of real estate, net  

Proceeds from sale of marketable securities

2,380,476  

Additions to deferred leasing costs

( 117,062 )  

Proceeds from sales of real estate, net

49,583,445  

40,849,654  

Net cash provided by investing activities

2 unchanged sentences

Cash flows from financing activities:

Proceeds from mortgage notes payable, net of issuance costs  

11,703,440  

14,152,838  

Proceeds from government debt relief  

451,785  

Repayment of mortgage notes payable  

( 43,069,312 )  

( 36,808,331 )

Proceeds from note payable, net of issuance cost of $ 1.1 million  

Repayment of note payable

( 7,675,598 )  

Repayment of note payable  

( 6,324,401 )

Payment of extension costs, note payable

Payment of deferred offering costs

( 572,458 )  

Payment of extension costs, note payable  

Distributions to noncontrolling interests, net

( 7,588,197 )  

Redemption of mandatorily redeemable preferred stock  

( 2,366,009 )

Payment of deferred offering costs  

Issuance of stock for Initial Public Offering, net of underwriters fees

2,050,000  

(Distributions) contributions to noncontrolling interests, net  

Issuance of Common Stock Series A and warrants, net of offering costs

8,871,879  

Issuance of Preferred Stock Series D, net of offering costs

20,489,803  

Issuance of stock for Initial Public Offering, net of underwriters fees  

Repurchase of common stock

( 110,631 )  

Repurchase of common stock  

Dividends paid to Series D preferred stockholders

( 994,263 )  

Dividends paid to stockholders  

Dividends paid to Series A common stockholders

( 4,473,399 )  

( 2,158,469 )

Net cash used in financing activities

4 unchanged sentences

1,149,642  

Cash, cash equivalents and restricted cash - beginning of period  

11,540,917  

4 unchanged sentences

Supplemental disclosure of cash flow information:

Interest paid-Series B preferred stock  

Interest paid-mortgage notes payable

$ 4,320,174  

Interest paid-mortgage notes payable  

$ 5,892,025  

Interest paid-notes payable

$ 103,861  

Interest paid-notes payable  

$ 778,414  

Unpaid deferred financing costs

$ 15,449  

$ 83,659  

Non-cash financing activities:

Issuance of stock for limited partnership interests  

$ 1,247,990  

Unpaid deferred financing costs  

Dividends payable - Preferred Stock Series D

$ 179,685  

7 unchanged sentences

(“we”, “our”, “us”

or the “Company”) is an internally-managed real estate investment trust (“REIT”).

or the “Company”) is an internally-managed real estate investment trust (“REIT”), with holdings in office, industrial, retail and model home properties.

We were incorporated in the State of California on September 

2 unchanged sentences

to “Presidio Property Trust, Inc.”

Through Presidio Property Trust, Inc., its subsidiaries and its partnerships, we own 14 commercial properties in fee interest and have partial interests in one property through our investments in limited partnerships for which we serve as the general partner.

Through Presidio Property Trust, Inc., its subsidiaries, and its partnerships, we own 

13  commercial properties in fee interest, two  of which we own as a partial interest in various affiliates, in which we serve as general partner, member and/or manager.

The Company or one of its affiliates operate the following partnerships during the periods covered by these consolidated financial statements:

5 unchanged sentences

Unit-based information used herein (such as references to square footage or property occupancy rates) is unaudited.

Initial Public Offering .

October 6, 2020, 

we completed an initial public offering ("IPO"), selling 

500,000  shares of Series A Common Stock at $ 5.00  per share.

Proceeds from our IPO were $ 2.0  million after deducting approximately $ 0.5  million in underwriting discounts, commissions and fees and before giving effect to $ 0.5 million in other expenses relating to the IPO.

Incremental costs of $0.5 million that were directly attributable to issuing new shares were deducted from equity in the Consolidated Statements of Equity, while costs that were not directly related to issuing new shares of $0.5 million were expensed in deferred offering costs in the Consolidated Statements of Operation. We utilized the net proceeds of this offering for general corporate and working capital purposes.

We have elected to be taxed as a REIT under Sections

860 of the Code, for federal income tax purposes.

To maintain our qualification as a REIT, we are required to distribute at least

90% of our REIT taxable income to our stockholders and meet the various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels, and diversity of stock ownership.

Provided we maintain our qualification for taxation as a REIT, we are generally

not subject to corporate-level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities.

If we fail to maintain our qualification as a REIT in any taxable year and are unable to avail ourselves of certain savings provisions set forth in the Code, all our taxable income would be subject to federal income tax at regular corporate rates, including any applicable alternative minimum tax.

We are subject to certain state and local income taxes.

We, together with one of our entities, have elected to treat our subsidiaries as a taxable REIT subsidiary (a “TRS”) for federal income tax purposes.

Certain activities that we undertake must be conducted by a TRS, such as non-customary services for our tenants, and holding assets that we cannot hold directly.

A TRS is subject to federal and state income taxes.

The Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements.

Neither the Company nor its subsidiaries have been assessed any significant interest or penalties for tax positions by any tax jurisdictions.

Reverse Stock Split .

3 unchanged sentences

The financial statements and accompanying footnotes have been retroactively restated to reflect the reverse stock split.

On September 

17, 2019  the Company executed a Promissory Note ("Note") pursuant to which Polar Multi-Strategy Master Fund ("Polar"), executed a loan in the principal amount of $ 14.0 million to the Company.

The Note bears interest at a fixed rate of 8 % per annum and requires monthly interest-only payments.

September 1, 2020, 

we extended the maturity of the Polar Note from 

Initial Public Offering .

October 6, 2020, 

2020  to 

March 31, 2021 ( "Maturity"), as of December 31, 2020  the entire outstanding principal balance of $ 7.7 million and accrued and unpaid interest will be due and payable.

September 30, 2020 

we paid a renewal fee of 

4 % on the unpaid principal balance.

The final payment due at Maturity includes payment of the outstanding principal and accrued and unpaid interest.

The Company used the proceeds of the Note from Polar to redeem all of the outstanding shares of the Series B Preferred Stock. During March 2021, prior to Maturity, the Polar note was paid in full, from available cash on hand.

Subsequent Events for additional information.

We have $ 10.2 million of mortgage notes payable maturing in 2021 related to the model home properties.

Management expects certain model home properties will be sold and the underlying mortgage notes will be paid off with sales proceeds while other mortgage notes will be refinanced.

We have $ 16.4 million of mortgage notes payable maturing in 2021 related to the commercial properties.

We plan to sell properties or refinance a significant portion of the mortgage notes payable, in the event the commercial property securing the respective mortgage note is not sold on or before maturity.

The Company acquires and operates income producing properties in three business segments including Office/Industrial Properties, Model Home Properties and Retail Properties.

we completed an initial public offering ("IPO"), selling 

500,000  shares of Series A Common Stock at $ 5.00  per share.

Incremental costs of $ 0.5 million that were directly attributable to issuing new shares were deducted from equity in the Consolidated Statements of Equity, while costs that were not directly related to issuing new shares of $ 0.5 million were expensed in deferred offering costs in the Consolidated Statements of Operations. We utilized the net proceeds of this offering for general corporate and working capital purposes.

Additional Offerings & Warrants .

Our Form S- 3 Registration Statement was declared effective by the SEC on April 27, 2021. 

Under this registration statement, we may offer and sell from time to time, in one or more series, subject to limitation that may apply (such as under Rule 415 of the Securities Act of 1933 ) various securities of the Company for total gross proceeds of up to $ 200,000,000 .

On July 12, 2021, we entered into a securities purchase agreement with a single U.S.

institutional investor for the purchase and sale of 1,000,000 shares of our Series A Common Stock (“Common Stock”), warrants (“Common Stock Warrants”) to purchase up to 2,000,000 shares of Series A Common Stock and pre-funded warrants (“Pre-Funded Warrants”) to purchase up to 1,000,000 shares of Series A common stock.

The Common Stock, Pre-Funded Warrants and Common Stock issuable upon exercise of the Pre-Funded Warrants were issued pursuant to a prospectus supplement to the Form S- 3 Registration Statement, with the Common Stock Warrants issued in a concurrent private placement. 

Each share of Common Stock and accompanying Common Stock Warrants were sold together at a combined offering price of $ 5.00 , and each share of Common Stock and accompanying Pre-Funded Warrants were sold together at a combined offering price of $ 4.99 .

The Pre-Funded Warrants were exercised in full during August 2021 at a nominal exercise price of $ 0.01 per share.

The Common Stock Warrants have an exercise price of $ 5.50 per share, were exercisable upon issuance, and will expire five years from the date of issuance. 

In connection with this additional offering, we agreed to issue the Placement Agent Warrants to purchase up to 80,000 shares (the “Placement Agent Warrants”) of Series A Common Stock, representing 4.0 % of the Series A Common Stock and shares of Series A Common Stock issuable upon exercise of the Pre-Funded Warrants. 

The Placement Agent Warrants were issued in August 2021, post exercise of the Pre-Funded Warrants with an exercise price of $ 6.25 and will expire five years from the date of issuance. 

The Company registered for resale Series A Common Stock issuable upon exercise of Common Stock Warrants and Placement Agent Warrants issued in the July 2021 offering pursuant to a registration statement on Form S- 11 that was declared effective by the SEC on September 14, 2021. 

The Company evaluated the accounting guidance in ASC 480 and ASC 815 regarding the classification of the Pre-Funded Warrant, Common Stock Warrants, and Placement Agent Warrants as equity or a liability and determined that they should be classified as permanent equity.  As of December 31, 2021, none of the Common Stock Warrants and Placement Agent Warrants have been exercised.

Preferred Stock Series D .  On June 15, 2021, the Company completed its secondary offering of 800,000 shares of our 

9.375 % Series D Cumulative Redeemable Perpetual Preferred Stock ("Series D Preferred Stock") for cash consideration of $ 25.00 per share to a syndicate of underwriters led by The Benchmark Company, LLC, as representative, resulting in approximately $ 18.1  million in net proceeds, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company.

The Company granted the underwriters a 45 -day option to purchase up to an additional 120,000 shares of Series D Preferred Stock to cover over-allotments, which they exercised on June 17, 2021, resulting in approximately $ 2.7 million in net proceeds, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company. 

In total, the Company issued 920,000 shares of Series D Preferred Stock with net proceeds of approximately $ 20.5 million, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company and deferred offering costs.

The Company intends to use these proceeds for general corporate and working capital purposes and to potentially acquire additional properties.  

On September 17, 2019, the Company issued a Promissory Note (the “Polar Note”) pursuant to which Polar Multi-Strategy Master Fund ("Polar"), provided a loan in the principal amount of $ 14.0 million to the Company.

The Polar Note bore interest at a fixed rate of 8 % per annum and required monthly interest-only payments.

On September 1, 2020, 

we extended the maturity of the Polar Note from October 

1, 2020 to March 31, 2021, at which time the entire outstanding principal balance of $ 8.8 million and accrued and unpaid interest was to be due and payable.

On September 30, 2020, we paid a renewal fee of 4 % on the unpaid principal balance of the Polar Note. The Company used the proceeds of the Polar Note to redeem all the outstanding shares of Series B Preferred Stock. 

As of December 31, 2020, the outstanding principal balance of the Polar Note was approximately $ 7.7 million.

During the first quarter of 2021, prior to maturity, the Polar Note was paid in full primarily from available cash on hand and proceeds of property sales.

 The Company's anticipated future sources of liquidity may include existing cash and cash equivalents, cash flows from operations, refinancing of existing mortgages, future real estate sales, new borrowings, financial aid from government programs instituted as a result of COVID- 19, and the sale of equity or debt securities.  Future capital needs include paying down existing borrowings, maintaining our existing properties, funding tenant improvements, paying lease commissions (to the extent they are not covered by lender-held reserve deposits), and the payment of dividends to our stockholders.

The Company seeks investments that are income producing and help achieve long-term gains in order to pay dividends to our stockholders and may we may seek a revolving line of credit to provide short-term liquidity.

To ensure that we can effectively execute these objectives, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity.

We have 

$ 4.4 million of mortgage notes payable maturing in 2022  related to the model home properties and $ 1.4 million of mortgage notes payable maturing in 2022  related to the commercial properties. 

Management expects certain model homes and commercial properties can be sold, and that the underlying mortgage notes will be paid off with sales proceeds while other mortgage notes can be refinanced, as the Company has historically been able to do in the past. Additional principal payments will be made with cash flows from ongoing operations.

As the Company continues its operations, it may 

re-finance or seek additional financing; however, there can be no assurance that any such re-financing or additional financing will be available to the Company on acceptable terms, if at all.

If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans and/or certain discretionary spending, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

Management believes that the combination of working capital on hand and the ability to refinance commercial and model home mortgages will fund operations through at least the next twelve months from the date of the issuance of these audited financial statements.

The Company acquires and o perates income producing properties in three business segments including Office/Industrial Properties, Model Home Properties and Retail Properties.

“Segments”.

Customer Concentration.

Concentration of credit risk with respect to tenant receivable is limited due to the large number of tenants comprising the Company’s rental revenue.

We had one tenant account for 6.2 % of total rental income for the year ended December 31, 2020  and one single tenant accounted for 6.1 % of total rental income for the year ended December 31, 2019 .

Concentration of credit risk with respect to tenant receivables is limited due to the large number of tenants comprising the Company’s rental revenue.

We had one tenant account for 

8.0 % of total rental income for the year ended December 31, 2021  and one  tenant accounted for 6.2 % of total rental income for the year ended December 31, 2020 .

SIGNIFICANT ACCOUNTING POLICIES

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All significant intercompany balances and transactions have been eliminated in consolidation.

The Company classifies the noncontrolling interests in the NetREIT Partnerships as part of consolidated net income (loss) in 2020  and 2019  and has included the accumulated amount of noncontrolling interests as part of equity since inception in February 2010.

The Company classifies the noncontrolling interests in the NetREIT Partnerships as part of consolidated net income (loss) in 

2021  and 

2020  and has included the accumulated amount of noncontrolling interests as part of equity since inception in

February 2010.

If a change in ownership of a consolidated subsidiary results in loss of control and deconsolidation, any retained ownership interest will be remeasured, with the gain or loss reported in the statement of operations.

Management has evaluated the noncontrolling interests and determined that they do not contain any redemption features.

Management has evaluated the noncontrolling interests and determined that they do

not contain any redemption features.

Use of Estimates .

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The amounts allocated to above or below-market leases are amortized on a straight-line basis as an increase or reduction of rental income over the remaining non-cancelable term of the respective leases.

Amortization of above and below-market rents resulted in a net increase in rental income of approximately $ 0.1 million for the years ended December 31, 2020  and 2019 .

Amortization of above and below-market rents resulted in a net increase in rental income of approximately $ 18,000 and $120,000 for the years ended December 31, 2021  and 2020 , respectively.

The value of in-place leases and unamortized lease origination costs are amortized to expenses over the remaining term of the respective leases, which range from less than a year to ten years.

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The amount allocated to tenant relationships is the benefit resulting from the likelihood of a tenant renewing its lease.

Amortization expense related to these assets was approximately $ 0.4 million and $ 0.6 million for years ended December 31, 2020  and 2019 , respectively.

Amortization expense related to these assets was approximately $ 0.3  million and $ 0.4  million for years ended December 31, 2021  and 2020 , respectively.

Real Estate Held for Sale and Discontinued Operations.

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Mortgage notes payable related to the real estate sold during the current period is classified as “notes payable related to real estate held for sale”

for all prior periods presented in the accompanying condensed consolidated financial statements. Additionally, we record the operating results related to real estate that has been disposed of as discontinued operations for all periods presented if the operations have been eliminated and represent a strategic shift and we will not have any significant continuing involvement in the operations of the property following the sale.

Impairment of Real Estate Assets.

The Company reviews the carrying value of each property on a quarterly basis to determine if circumstances that indicate impairment in the carrying value of the investment exist or that depreciation periods should be modified.

If circumstances support the possibility of impairment, the Company prepares a projection of the undiscounted future cash flows, without interest charges, of the specific property and determines if the investment in such property is recoverable.

If impairment is indicated, the carrying value of the property is written down to its estimated fair value based on the Company’s best estimate of the property’s discounted future cash flows, considering sales and leasing data for comparable properties or sales price if an offer is accepted on the property.

During the year ended December 31, 2020 , the Company determined that an impairment existed in two of its properties (Waterman Plaza and Highland Court) and, as a result, recorded a non-cash asset impairment charge of approximately $ 1.3 million and $ 0.4 million, respectively. There were no impairment charges recorded for the year ended December 31, 2019 . 

for all periods presented if the operations have been eliminated and represent a strategic shift and we will not have any significant continuing involvement in the operations of the property following the sale.

Impairments of Real Estate Assets.

We regularly review for impairment on a property-by-property basis.

Impairment is recognized on a property held for use when the expected undiscounted cash flows for a property are less than the carrying amount at which time the property is written-down to fair value.

The calculation of both discounted and undiscounted cash flows requires management to make estimates of future cash flows including but not limited to revenues, operating expenses, required maintenance and development expenditures, market conditions, demand for space by tenants and rental rates over long periods.

Since our properties typically have a long life, the assumptions used to estimate the future recoverability of carrying value requires significant management judgment.

Actual results could be significantly different from the estimates.

These estimates have a direct impact on net income because recording an impairment charge results in a negative adjustment to net income.

The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods.

Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell.

Although our strategy is to hold our properties over the long-term, if our strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized to reduce the property to fair value and such loss could be material.

During the year ended December 31, 2020 , the Company determined that an impairment existed in two of its properties (Waterman Plaza and Highland Court) and, as a result, recorded a non-cash asset impairment charge of approximately $ 1.3 million and $ 0.4 million, respectively.  During the fourth quarter of 2020, the Company recorded its Highland Court property (“Highland Court”) as held for sale and subsequently entered into a purchase and sale agreement (“PSA”) with an unrelated third -party. 

Highland Court had a book value of approximately $ 10.5 million prior to entering into the PSA. The final selling price as agreed upon in the PSA was approximately $ 10.2 million.

As such, the Company recorded a $ 0.3 million non-cash impairment in the accompanying condensed consolidated statement of operations at 

March 31, 

The sale was completed in May 2021. 

During the three months ended December 31, 2021, the Company recorded an impairment of 300 N.P.

totaling approximately $ 0.3 million in connection with an updated appraisal.

Intangible Assets . 

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Indefinite-lived assets are not amortized.

Amortization expense of intangible assets that are not deemed to have an indefinite useful life was approximately $ 0.2 million and $ 0.3 million, respectively, for the years ended December 31, 2020  and 2019  and is included in depreciation and amortization in the accompanying consolidated statements of operation.

Amortization expense of intangible assets that are not deemed to have an indefinite useful life was approximately $ 0.2  million, for each of the years ended December 31, 2021  and 2020  and is included in depreciation and amortization in the accompanying consolidated statements of operation.

The Company is required to perform a test for impairment of goodwill and other definite and indefinite lived assets at least annually, and more frequently as circumstances warrant.

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The Company records depreciation and amortization expense using the straight-line method over the useful lives of the respective assets.

The cost of buildings are depreciated over estimated useful lives of 39 years, the costs of improvements are amortized over the shorter of the estimated life of the asset or term of the tenant lease (which range from 1 to 10 years), the costs associated with acquired tenant intangibles over the remaining lease term and the cost of furniture, fixtures and equipment are depreciated over 4 to 5 years.

Depreciation and amortization expense for the years ended December 31, 2020  and 2019  was approximately $ 6.3 million and $ 7.4 million, respectively, and is included in depreciation and amortization in the accompanying consolidated statements of operations.

The costs of buildings are depreciated over estimated useful lives of 39 years, the costs of improvements are amortized over the shorter of the estimated life of the asset or term of the tenant lease (which range from 1 to 10 years), the costs associated with acquired tenant intangibles over the remaining lease term and the cost of furniture, fixtures and equipment are depreciated over 4 to 5 years.

Depreciation and amortization expense for the years ended December 31, 2021  and 2020  was approximately $ 5.4  million and $ 6.3  million, respectively, and is included in depreciation and amortization in the accompanying consolidated statements of operations.

Cash, Cash Equivalents and Restricted Cash.

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The funds in escrow are for payment of property taxes, insurance, leasing costs and capital expenditures.

As of December 31, 2020 , the Company has approximately $ 4.1 million of restricted cash.

Account Receivables.

As of December 31, 2021 , the Company has approximately $ 4.7 million of restricted cash.

Accounts Receivables.

The Company periodically evaluates the collectability of amounts due from tenants and maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements.

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Costs incurred, including legal fees, origination fees, and administrative fees, in connection with debt financing are capitalized as deferred financing costs, are amortized using the straight line method, which approximates the effective interest method, over the contractual term of the respective loans and recorded as an offset to the carrying value of the debt.

At December 31, 2020  and 2019 , unamortized deferred financing costs related to mortgage notes payable were approximately $ 0.8 million and $ 1.1 million.

In 2019, the Company incurred debt financing costs related to the execution of the Polar Note (see note 8.

Note Payable).

At December 31, 2020 , unamortized deferred financing cost related to the Polar Note were approximately $ 0.2 million.

For the years ended December 31, 2020  and 2019 , total amortization expense related to the mortgage notes payable deferred financing costs was approximately $ 0.4 million and $ 0.5 million, respectively, and total amortization expense related to the Series B Preferred Stock costs was approximately $ 0.1 million during fiscal 2019.

For the years ended December 31, 2020  and 2019 , total amortization expense related to the Polar Note costs was approximately $ 0.9 million and $ 0.4 million, respectively.

At December 31, 2021  and 2020 , unamortized deferred financing costs related to mortgage notes payable were approximately $ 0 and $ 0.2 million.

For the years ended December 31, 2021  and 2020 , total amortization expense related to the mortgage notes payable deferred financing costs was approximately $ 0.2  million and $ 0.9 million, respectively.

Amortization of deferred financing costs are included in interest expense in the accompanying consolidated statements of operations.

Deferred Offering Costs. 

Deferred offering costs represent legal, accounting and other direct costs related to our public offerings.

As of December 31, 2020 , we have incurred an aggregate of $ 0.1 million in direct costs related to our offering of common and preferred stock in connection with the S- 3 filed on December 29, 2020.

These costs were deferred and recorded as a long-term asset at December 31, 2020 .

Approximately $ 0.5 million in previously deferred costs were expensed in our Consolidated Statement of Operations upon effectiveness of our IPO.

Deferred offering costs represent legal, accounting and other direct costs related to our offerings.

As of December 31, 2021 , we have incurred an aggregate of $ 0.1 million in direct costs related to our offering of common and preferred stock in connection with the 

sponsorship, through our wholly-owned subsidiary Murphy Canyon Acquisition Sponsor, LLC (the “Sponsor”), of a special purpose acquisition company (“SPAC”) initial public offering.

 These costs were deferred and recorded as a long-term asset at December 31, 2021 .  

December 31, 2020, we had incurred an aggregate of $ 0.1  million in direct costs related to our offering of common and preferred stock in connection with the S- 3  filed on 

December 29, 2020. 

These costs were deferred and recorded as a long-term asset at 

December 31, 2020.

Approximately $ 0.5  million in previously deferred costs were expensed in our Consolidated Statement of Operations upon effectiveness of our IPO in October 2020.

Income Taxes.

  We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code (the “Code”), for federal income tax purposes.

  We have elected to be taxed as a REIT under Sections 856 through 860 of the Code, for federal income tax purposes.

To maintain our qualification as a REIT, we are required to distribute at least 90 % of our REIT taxable income to our stockholders and meet the various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock ownership.

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We are subject to certain state and local income taxes.

As of December 31, 2020 , we have estimated approximately $ 11.0 million of Federal net operating losses (NOLs) carryforwards to offset potential future federal tax obligations.

As of December 31, 2021 , we have estimated approximately $ 18.0 million of Federal net operating loss (NOLs) carryforwards to offset potential future federal tax obligations.

We may not generate sufficient taxable income in future periods to be able to realize fully the tax benefits of our NOL carry-forwards.

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The Company estimated the fair value for the impaired real estate asset held for investment based on an estimated sales price, less estimated costs to sell.  Management believes that the recorded and fair values of notes payable are approximately the carrying value as of December 31, 2021  and 2020 .

When available, we utilize quoted market prices from independent third -party sources to determine fair value and classify such items in Level 1 or Level 2 .

 In instances where the market for a financial instrument is not  active, regardless of the availability of a nonbinding quoted market price, observable inputs might not  be relevant and could require us to make a significant adjustment to derive a fair value measurement.

Additionally, in an inactive market, a market price quoted from an independent third -party may 

rely more on models with inputs based on information available only to that independent third -party.

When we determine the market for a financial instrument owned by us to be illiquid or when market transactions for similar instruments do not  appear orderly, we use several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establish a fair value by assigning weights to the various valuation sources. 

As of December 31, 2021  and 2020 ,our marketable securities presented on the balance sheet were measured at fair value using Level 1 market prices and totaled approximately $ 1.5 million (cost basis of approximately $ 1.6 million) and $ 0.1 million (cost basis of approximately $ 0.1 million), respectively.  There were no  financial liabilities measured at fair value as of 

December 31, 2021  and 2020 .

Additionally, when determining the fair value of a liability in circumstances in which a quoted price in an active market for an identical liability is not  available, we measure fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.  Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values.

In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not  be realized in an immediate settlement of the instrument.

Sales of Real Estate Assets . 

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In some cases, the ultimate resolution of these claims can exceed one year.

When a tenant is in bankruptcy, we will record a bad debt reserve for the tenant’s receivable balance and generally will not recognize subsequent rental revenue until cash is received or until the tenant is no longer in bankruptcy and has the ability to make rental payments.

Income (Loss) per Common Share.

Basic income (loss) per common share (Basic EPS) is computed by dividing net income (loss) available to common shareholders (Numerator) by the weighted average number of common shares outstanding (Denominator) during the period.

Diluted loss per common share (Diluted EPS) is similar to the computation of Basic EPS except that the Denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued.

Diluted loss per common share (Diluted EPS) is similar to the c

omputation of Basic EPS except that the Denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued.

In addition, in computing the dilutive effect of convertible securities, the Numerator is adjusted to add back the after-tax amount of interest recognized in the period associated with any convertible debt.

The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net earnings per share.

For the years ended December 31, 2020  and 2019, the basic and diluted net loss per share are equivalent at $( 0.85 ) and ($ 0.07 ) per share because the Company had incurred a net loss causing any potentially dilutive securities to be anti-dilutive. 

The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net earnings per share.  For the years ended

December 31, 2021

, the basic and diluted net loss per share are equivalent at 

 per share becau se the Company had incurred a net loss causing any potentially dilutive securities to be anti-dilutive.

Recently Issued Accounting Pronouncements.

March 2020, 

the FASB issued Accounting Standards Update (“ASU”) 

2020 - 04,  Reference Rate Reform which provides optional expedients and exceptions in order to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as it relates to contracts, hedging relationships and other transactions by allowing companies to modify contracts that previously contained LIBOR rates without evaluating whether the modification constituted a new contract.

The expedients and exceptions provided by the amendments do 

not  apply to contract modifications made and hedging relationships entered into or evaluated after 

December 31, 2022 

and are used on a prospective basis upon adoption.

The Company adopted this guidance as of 

March 2020 

no  impact to the financial statements.

June 2017, 

the FASB issued ASU 

2016 - 13,  Financial Instruments –

Credit Losses, amended in 

February 2020 

with ASU 

2020 - 02,  Financial Instruments—Credit Losses (Topic 

326 ) and Leases (Topic 

842 ). ASU 

2016 - 13  introduces a new model for estimating credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities, and net investments in direct financing leases, amongst other financial instruments.

2016 - 13  also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses.

While ASU 

2016 - 13  was effective for periods beginning after 

December 15, 2019, 

the issuance of ASU 

2020 - 02  has allowed for the delay in adoption for certain smaller public companies, and is now effective for fiscal periods beginning after 

December 15, 2022. 

Retrospective adjustments shall be applied through a cumulative-effect adjustment to retained earnings. The Company is continuing to evaluate the impact of this guidance on its financial statements, and does 

not  believe it will have a material impact on the financial statements.

August 2018, 

the FASB issued ASU 

2018 - 13,  Disclosure Framework —

Changes to the Disclosure Requirements for Fair Value Measurement which removes, modifies, and adds certain disclosure requirements related to fair value measurements in ASC 

 This guidance is effective for public companies in fiscal years beginning after 

December 15, 2019 

with early adoption permitted.

The Company adopted this guidance as of 

January 1, 2020 

and noted 

no  impact on its consolidated financial statements.

 In June 2017, the FASB issued ASU No.

2016 - 13,  

Financial Instruments –

Credit Losses, amended in February 2020 with ASU No.

2020 - 02, Financial Instruments —

Credit Losses (Topic 326 ) and Leases (Topic 842 ) . ASU 2016 - 13 introduces a new model for estimating credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities, and net investments in direct financing leases, amongst other financial instruments.

ASU 2016 - 13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses.

While ASU 2016 - 13 was effective for periods beginning after December 15, 2019, the issuance of ASU 2020 - 02 has allowed for the delay in adoption for certain smaller public companies and is now effective for fiscal periods beginning after December 15, 2022.

In August 2020, the FASB issued ASU No.

2020 - 06, Debt —

Debt with Conversion and Other Options  

(Subtopic 470 - 20 ) and Derivatives and Hedging - Contracts in Entity ’

s Own Equity  

(Subtopic 815 - 40 ).

 This ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S.

Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features.

The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it.

The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas.  The amendments in ASU No.

2020 - 06 are effective for public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning after 

December 15, 2020, including interim periods within those fiscal years.  The Company is continuing to evaluate the impact of this guidance on its financial statements and does not believe it will have a material impact on the financial statements.

RECENT REAL ESTATE TRANSACTIONS

Acquisitions during the year ended December 31, 2021

On August 17, 2021, the Company, through its 61.3 % owned subsidiaries NetREIT Palm Self Storage, LP and NetREIT Highland LLC, acquired a single story newly constructed 10,500 square foot building in Houston, Texas for a purchase price of approximately $ 4.9 million, in connection with a like-kind exchange transaction pursued under Section 1031 of the Code. 

The building is 100 % occupied under a 15 -year triple net lease, and purchased with all cash.

On December 22, 2021, the Company purchased a 31,752 square foot building in Baltimore, Maryland for a purchase price of approximately $ 8.9 million. 

The building is 100 % occupied under a five  year triple net lease to Johns Hopkins’

University’s Bloomberg School of Public Health, and purchased with all cash.

We acquired 18  Model Home Properties and leased them back to the home builders under triple net leases during the year ended December 31, 2021 .

The purchase price for the properties was $ 8.4 million.

The purchase price consisted of cash payments of $ 2.7 million and mortgage notes of $ 5.7 million.

Acquisitions during the year ended December 31, 2020

We acquired 28  Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2020 .

The purchase price for the properties was $ 10.2 million.

The purchase price consisted of cash payments of $ 3.1 million and mortgage notes of $ 7.1 million.

Dispositions during the year ended December 31, 2021

We review our portfolio of investment properties for value appreciation potential on an ongoing basis, and dispose of any properties that no longer satisfy our requirements in this regard, taking into account tax and other considerations.

The proceeds from any such property sale, after repayment of any associated mortgage or repayment of secured or unsecured indebtedness, are available for investing in properties that we believe will have a greater likelihood of future price appreciation. 

During year ended December 31, 2021  we disposed of the following properties:

Waterman Plaza, which was sold on January 28, 2021, for approximately $ 3.5 million and the Company recognized a loss of approximately $ 0.2 million.

Garden Gateway, which was sold on February 19, 2021, for approximately $ 11.2  million and the Company recognized a loss of approximately $ 1.4 million.

Highland Court, which was sold on May 20, 2021, for approximately $ 10.2  million and the Company recognized a loss of approximately $ 1.6 million.

Executive Office Park, which was sold on May 21, 2021, 

for approximately $ 8.1  million and the Company recognized a gain of approximately $ 2.5 million.

During the year ended December 31, 2021 , we disposed of 

44  model homes for approximately $ 20.7 million and recognized a gain of approximately $ 3.2 million.

Dispositions during the year ended December 31, 2020

During year ended 

December 31, 2020 we disposed of the following properties:

Centennial Tech Center, which was sold on 

February 5, 2020 

for approximately $ 15.0  million and the Company recognized a loss of approximately $ 0.9 million.

for approximately $ 15.0  million and the Company recognized a loss of approximately $ 913,000 .

Union Terrace, which was sold on 

March 13, 2020  

for approximately $ 11.3  million and the Company recognized a gain of approximately $ 0.7 million.

for approximately $ 11.3  million and the Company recognized a gain of approximately $ 688,000 .

One of four Executive Office Park buildings, which was sold on December 2, 2020 

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During the year ended December 31, 2020 , we disposed of 

46 model homes for approximately $ 18.1 million and recognized a gain of approximately $ 1.6 million.

During year ended 

December 31, 2019 we disposed of the following properties:

Morena Office Center, which was sold on January 

15, 2019 for approximately $ 5.6  million and the Company recognized a gain of approximately $ 0.7 million.

Nightingale land, which was sold on May 

8, 2019 for approximately $ 0.9 million and the Company recognized a loss of approximately $ 93,000 .

On July 1, 2019, NetREIT Genesis, LLC sold a 43 % tenants-in-common interest in Genesis Plaza (“TIC Interest”) for $ 5.6  million to a newly formed entity, NetREIT Genesis II, LLC, in which NetREIT Casa Grande LP is the sole member.

NetREIT Casa Grande LP owned and sold Morena Office Center on January 15, 2020.

The sale of the TIC Interest was structured as a 1031 exchange and included $ 2.9  million in cash and assumption of debt.

The Company remains a guarantor of the debt and NetREIT Genesis, LLC and NetREIT Genesis II, LLC are jointly and severally liable for the debt securing Genesis Plaza, the financial terms and conditions of which remain materially unchanged.

The Presidio office building, which was sold on July 31, 2019 for approximately $ 12.3  million and the Company recognized a gain of approximately $ 4.5  million.

During the year ended December 31, 2019 , we disposed of 

46 model homes for approximately $ 18.1 million and recognized a gain of approximately $ 1.6 million.

We acquired 28  Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2020 .

The purchase price for the properties was $ 10.2 million.

The purchase price consisted of cash payments of $ 3.1 million and mortgage notes of $ 7.1 million.

We acquired 33 Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2019 .

The purchase price for the properties was $ 13.0 million.

The purchase price consisted of cash payments of $ 3.9 million and mortgage notes of $ 9.1 million.

 REAL ESTATE ASSETS

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The primary types of properties the Company invests in are office, industrial, retail, and NNN leased model home properties located primarily in Southern California and Colorado, with four properties located in North Dakota.

Our model home properties are located in seven states.

Our model home properties are located in four states.

As of December 31, 2021 , the Company owned or had an equity interest in:

Ten office buildings and one industrial buildings (“Office/Industrial Properties”) which total approximately 982,796 rentable square feet;

Four retail shopping centers (“Retail Properties”) which total approximately 131,722  rentable square feet;

Eight  office buildings and one  industrial buildings (“Office/Industrial Properties”) which total approximately rentable 

757,578  square feet;

Four  retail shopping centers (“Retail Properties”) which total approximately 

121,052 rentable square feet;

92 homes owned by our affiliated limited partnerships and one corporation (“Model Homes”

3 unchanged sentences

The Company’s real estate assets consisted of the following as of December 31, 2021  and 2020 :

Real estate assets, net (in thousands)  

Real estate assets, net

Property Name

Garden Gateway Plaza (1)  

March 2007  

Colorado Springs, Colorado  

Garden Gateway Plaza (1)

Colorado Springs, CO

$ 11,464,531  

World Plaza (2)

September 2007

San Bernardino, CA

9,272,213  

World Plaza (1)  

September 2007  

San Bernardino, California  

Executive Office Park (3)  

July 2008  

Colorado Springs, Colorado  

Waterman Plaza (1)  

August 2008  

San Bernardino, California  

Genesis Plaza  

August 2010  

San Diego, California  

Dakota Center  

May 2011  

Fargo, North Dakota  

Grand Pacific Center  

March 2014  

Bismarck, North Dakota  

Union Terrace (4)  

August 2014  

Lakewood, CO  

Centennial Tech Center (4)  

December 2014  

Colorado Springs, Colorado  

9,272,213  

Arapahoe Center  

December 2014  

Centennial, Colorado  

Union Town Center  

December 2014  

Colorado Springs, Colorado  

West Fargo Industrial  

August 2015  

Fargo, North Dakota  

August 2015  

Fargo, North Dakota  

Research Parkway  

August 2015  

Colorado Springs, Colorado  

One Park Center  

August 2015  

Westminster, Colorado  

Highland Court (1)  

August 2015  

Centennial, Colorado  

Executive Office Park (1)

Colorado Springs, CO

5,105,831  

Waterman Plaza (1)

San Bernardino, CA

3,500,002  

Shea Center II  

December 2015  

Highlands Ranch, Colorado  

Genesis Plaza (3)

San Diego, CA

8,310,803  

8,651,177  

Dakota Center

8,607,360  

8,597,493  

Grand Pacific Center (6)

5,457,447  

5,683,823  

Arapahoe Center

December 2014

Centennial, CO

8,821,278  

9,233,078  

Union Town Center

December 2014

Colorado Springs, CO

9,169,387  

9,344,563  

West Fargo Industrial

7,025,325  

7,061,122  

2,929,563  

3,279,522  

Research Parkway

Colorado Springs, CO

2,375,943  

2,438,594  

One Park Center

Westminster, CO

7,992,420  

8,586,309  

Highland Court (1)(4)

Centennial, CO

10,500,001  

Shea Center II

December 2015

Highlands Ranch, CO

20,246,645  

21,026,112  

4,875,696  

December 2021

Baltimore, MD

8,891,810  

Presidio Property Trust, Inc.

1 unchanged sentence

123,744,371  

Model Home properties (2)  

Model Home properties (5)

2014 - 2021  

AZ, FL, IL, PA, TX, WI  

34,089,046  

3 unchanged sentences

$ 166,253,967  

Property held for sale as of December 31, 2020 .

Includes seven Model Homes that are listed as held for sale as of December 31, 2020 .

One of four buildings within this property was sold as of December 31, 2020 .

This property was sold during the year ended December 31, 2021 .

( 2 ) This property is held for sale as of December 31, 2021 .

( 3 ) Genesis Plaza is owned by two tenants-in-common, each of which own 57 % and 43 %, respectively, and we beneficially own an aggregate of 76.4 %, based on our ownership percentages of each tenant-in-common.

( 4 ) A portion of the proceeds from the sale of Highland Court were used in like-kind exchange transactions pursued under Section 1031 of the Code for the acquisition of our Mandolin property.

Mandolin is owned by NetREIT Palm Self-Storage LP, through its wholly owned subsidiary NetREIT Highland LLC, and the Company is the sole general partner and owns 61.3 % of NetREIT Palm Self-Storage LP.

( 5 ) Includes six  Model Homes listed as held for sale as of December 31, 2021 .

( 6 ) Property was listed as held for sale in February 2022.

The Company’s commercial properties are leased to tenants under non-cancelable operating leases for which terms and expirations vary.  Future minimum rental revenues under existing leases on Office/Industrial and Retail Properties as of December 31, 2021  are expected to be as follows:

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2,218,671  

Thereafter  

1,540,799  

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In-place leases

$ 2,515,264  

$ ( 2,353,782 )  

$ 161,482  

$ 3,136,587  

$ ( 2,757,530 )  

$ 379,057  

Leasing costs

Above-market leases

As of December 31, 2020  and 2019 , gross lease intangible assets of $ 1.1 million and $ 3.4 million, respectively, were included in real estate assets held for sale.

As of December 31, 2020  and 2019 , accumulated amortization related to the lease intangible assets of $ 1.1 million and $ 2.4 million, respectively, were included in real estate assets held for sale.

The net value of acquired intangible liabilities was $ 0.1 million and $ 0.3 million relating to below-market leases as of December 31, 2020  and 2019 , respectively.

Aggregate approximate amortization expense for the Company's lease intangible assets is as follows:

1,261,390  

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( 1,510,559 )  

Thereafter  

220,097  

Above-market leases

333,485  

The weighted average amortization period for the intangible assets as of December 31, 2020  was approximately 1.6 years.

Lease intangible assets are amortized over the term of the related lease and included as a reduction of rental income in the Statement of Operations.

Other assets consist of the following:

Deferred rent receivable

Prepaid expenses, deposits and other

Accounts receivable, net

Right-of-use assets, net

Other intangibles, net

Notes receivable

Deferred offering costs

Total other assets

 MORTGAGE NOTES PAYABLE

Mortgage notes payable consisted of the following:

Principal as of

Mortgage note property

Waterman Plaza  

( 333,485 )  

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( 291,421 )  

Variable  

42,064  

$ 4,110,139  

World Plaza  

$ ( 3,852,968 )  

1 unchanged sentence

$ 5,200,728  

Variable  

$ ( 4,559,510 )  

$ 641,218  

Garden Gateway Plaza  

As of December 31, 2021  and 2020 , gross lease intangible assets of $ 0.0 million and $ 1.1 million, respectively, were included in real estate assets held for sale.

As of December 31, 2021  and 2020 , accumulated amortization related to the lease intangible assets of $ 0.0 million and $ 1.1 million, respectively, were included in real estate assets held for sale.

The net value of acquired intangible liabilities was approximately $73,000 and $139,000  relating to below-market leases as of December 31, 2021  and 2020 , respectively.

Aggregate approximate amortization expense for the Company's lease intangible assets is as follows:

$ 202,342  

3 unchanged sentences

$ 257,171  

The weighted average amortization period for the intangible assets as of December 31, 2021  was approximately 1.35  years.

Lease intangible assets are amortized over the term of the related lease and included as a reduction of rental income in the Statement of Operations.

Other assets consist of the following:

Deferred rent receivable

$ 1,660,197  

$ 1,912,048  

Prepaid expenses, deposits and other

473,554  

Highland Court  

215,946  

Investment in marketable securities, at fair value

1,514,483  

83,241  

Accounts receivable, net

401,927  

Dakota Center  

541,885  

Right-of-use assets, net

74,643  

102,144  

Other intangibles, net

82,483  

Union Terrace  

142,483  

Notes receivable

316,374  

Centennial Tech Center  

Deferred offering costs

134,843  

108,660  

Total other assets

$ 4,658,504  

Research Parkway  

$ 3,422,781  

Periodically, the Company may sell an option in the marketable securities it holds to unrelated third parties for the right to purchase certain securities held within its investment portfolios (“covered call options”).

These option transactions are designed primarily to increase the total return associated with holding the related securities as earning assets by using fee income generated from these options.

These transactions are not designated as hedging relationships pursuant to accounting guidance ASC 815 and, accordingly, changes in fair values of these contracts, are reported in other non-interest income. 

There are several risks associated with transactions in options on securities.

For example, there are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives.

A transaction in options or securities may be unsuccessful to some degree because of market behavior or unexpected events.

When we write a covered call option, we forgo, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the strike price of the call, but retain the risk of loss should the price of the underlying security decline.

The writer of an option has no control over the time when it may be required to fulfill its obligation before the sold option expires, and once an option writer has received an exercise notice, it must deliver the underlying security in exchange for the strike price.

As of December 31, 2021 , we owned common shares of 19 different publicly traded REITs and an immaterial amount of covered call options in 10 of those same REITs. 

The gross fair market value on our publicly traded REIT securities was $ 1,522,137 , with covered call options totaling $ 2,254 . 

As of December 31, 2021 , the net fair value of our publicly traded REIT securities was $ 1,514,483  based on the December 31, 2021 closing price. 

As of December 31, 2020, we owned common shares and options of two different publicly traded REITs and a money market account with a closing market value of approximately $ 83,000 . 

These shares are presented at fair value as “marketable securities”

on our consolidated balance sheets and the gains and losses resulting from the mark-to-market of these securities are recognized in current period earnings.

 MORTGAGE NOTES PAYABLE

Mortgage notes payable consisted of the following:

Principal as of

Mortgage note property

Waterman Plaza (2)

$ 3,207,952  

World Plaza (3) (4)

5,802,568  

Garden Gateway Plaza (2)

5,861,523  

Arapahoe Service Center  

2,232,923  

1 unchanged sentence

4.95 %  

Highland Court (2)

6,274,815  

Union Town Center  

3.82 %  

Dakota Center

9,677,108  

1 unchanged sentence

4.74 %  

One Park Centre  

Research Parkway

1,705,438  

1 unchanged sentence

3.94 %  

Arapahoe Service Center

7,770,887  

Genesis Plaza  

7,932,255  

4.34 %  

Union Town Center

8,173,568  

8,315,550  

Shea Center II  

4.28 %  

One Park Centre

6,276,849  

1 unchanged sentence

4.77 %  

Executive Office Park  

Genesis Plaza

6,168,604  

1 unchanged sentence

4.71 %  

Shea Center II

17,494,527  

West Fargo Industrial  

17,727,500  

4.92 %  

Executive Office Park (2)

2,985,998  

4.83 %  

Grand Pacific Center  

West Fargo Industrial

4,148,405  

1 unchanged sentence

3.27 %  

Grand Pacific Center (5) (7)

3,619,695  

3,738,142  

4.02 %  

Subtotal, Presidio Property Trust, Inc.

1 unchanged sentence

$ 92,704,649  

Model Home mortgage notes  

Model Home mortgage notes (3)

22,154,128  

4 unchanged sentences

$ 120,788,005  

Unamortized loan costs  

( 562,300 )  

4 unchanged sentences

Interest rates as of December 31, 2021 .

Property sold during the year ended December 31, 2020 , see Footnote 3 above for further detail. 

One  of 

four  buildings at Executive Office Park were sold.

( 2 ) Waterman Plaza and Garden Gateway Plaza were sold during the first quarter of 2021, while Highland Court and Executive Office Park were sold in the second quarter of 2021.

( 3 ) Properties held for sale as of 

December 31, 2020. 

Seven model homes were included as held for sale.

December 31, 2021 . Five model homes were included as held for sale.

( 4 ) During June 2021, this loan was paid in full with cash from the sale of other properties and excess cash on hand.

( 5 ) Interest rate is subject to reset on September 1, 2023.

Interest on this loan is ABR + 0.75 % and LIBOR plus 2.75 %.

For the year-ended December 31, 2020 , the weighted average interest rate was 3.37 %.

Interest on this loan resets annually at LIBOR plus 

3.00 %, with a floor of 

( 6 ) Each Model Home has a stand-alone mortgage note at interest rates ranging from 2.5 % to 4.33 % at December 31, 2021 . 

The Company is in compliance with all conditions and covenants of its mortgage notes payable.

( 7 ) Property was listed as held for sale in February 2022.

( 8 ) The mortgage note payable for 300 N.P. is an amortizing loan with a balloon payment of $ 2.2 million due at maturity, on June 11, 2022, 

and is no longer subject to defeasance or yield maintenance. 

The Company expects to pay this note in full at or before maturity with proceeds from property sales, property financing and other available cash on hand.  

The Company is in compliance with all material conditions and covenants of its mortgage notes payable.

Scheduled principal payments of mortgage notes payable are as follows:

Presidio Property

Total Principal

15 unchanged sentences

16,644,046  

Thereafter  

6,477,731  

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On September 

17, 2019, the Company executed a Promissory Note pursuant to which Polar Multi-Strategy Master Fund (“Polar”), extended a loan in the principal amount of $ 14.0 million to the Company ("Polar Note").

The Polar Note bears interest at a fixed rate of 8 % per annum and requires monthly interest-only payments.

September 1, 2020 , 

we extended the maturity of the Polar Note from 

17, 2019, the Company executed a Promissory Note pursuant to which Polar, extended a loan in the principal amount of $ 14.0 million to the Company (the “Polar Note”).

The Polar Note bore interest at a fixed rate of 8 % per annum and required monthly interest-only payments.

September 1, 2020 ,  we extended the maturity of the Polar Note from 

October 

2020  to 

March 31, 2021 , 

at which time the entire outstanding principal balance of $ 8.8  million and accrued and unpaid interest will be due and payable. On 

September 30, 2020 , 

we paid the extension or renewal fee, which was 

4 % of the unpaid principal balance. 

The Company may repay the Polar Note at any time, subject to the payment of an Optional Redemption Fee (as defined in the Note), if applicable.

Such fee is not applicable to repayments made from the proceeds of property sales.

The principal balance of the Note as of December 31, 2020  consists of cash received, less cash repayments from property sales of $ 6.3 million and Original Issue Discount ("OID") of $ 1.4 million.

The OID was recorded on the accompanying consolidated balance sheets as a direct deduction from the principal of the Note and was recognized as interest expense over the term of the Note commencing on September 

March 31, 2021 ,  at which time the entire outstanding principal balance of $ 8.8  million and accrued and unpaid interest was to be due and payable. On 

September 30, 2020 ,  we paid the extension or renewal fee, which was 

4 % of the unpaid principal balance.  The principal balance of the Polar Note as of December 31, 2020, consisted of cash received, less cash repayments from property sales of $ 6.3 million and Original Issue Discount (“OID”) of $ 1.4 million.

The OID was recorded on the accompanying condensed consolidated balance sheets as a direct deduction from the principal of the Polar Note and was recognized as interest expense over the term of the Polar Note commencing on September 

17, 2019 through October 

There was 

no  unrecognized OID as of December 31, 2020 .

The accretion of the OID recognized during the year ended December 31, 2020  was $ 1.0 million.

no  unrecognized OID as of 

September 30, 2021 

December 31, 2020.  

The Company incurred approximately $ 1.1 million in legal and underwriting costs related to the transaction.

These costs have been recorded as debt issuance costs on the accompanying consolidated balance sheets as a direct deduction from the principal of the Note and are being amortized over the term of the Note.

Amortization expense totaling approximately $ 0.9 million was included in interest expenses for the year ended December 31, 2020 , in the accompanying condensed consolidated statements of operations.

The unamortized debt issuance costs related to the 

4%  renewal fee for the loan extension totaled $ 0.4 million to be amortized over the extended term of the Note, of which the Company recognized $ 0.2 million through 

December 31, 2020 .

Under the terms of the Polar Note, the Company is subject to certain financial covenants including maintaining a debt to property fair value ratio of no greater than 75 %.

As of December 31, 2020 , the Company is in compliance with such covenants.

April 22, 2020, 

the Company received an Economic Injury Disaster Loan ("EIDL") of $ 10,000  from the Small Business Administration ("SBA") which will provide economic relief during the COVID- 19  pandemic.

This loan advance is 

not  required to be repaid, has 

no  stipulations on use, and has been recorded as fees and other income in the Condensed Consolidated Statements of Operations during fiscal 

August 17, 2020 

we received an additional EIDL of $ 0.2 million, for which principal and interest payments are deferred for 

twelve  months from the date of issuance, and interest accrues at 

3.75%  per year.

The loan matures on 

August 17, 2050. 

We utilized the funds for general corporate purposes to alleviate economic injury caused by the COVID- 19  pandemic, which economic injury included abating or deferring rent to certain tenants (primarily retail tenants).

These costs were recorded as debt issuance costs on the accompanying consolidated balance sheets as a direct deduction from the principal of the Polar Note and were amortized over the term of the Polar Note.   During the first quarter of 2021, prior to maturity, the Polar Note was paid in full, primarily from available cash on hand and proceeds of property sales and all unamortized debt issuance costs were expensed.

On April 22, 2020, the Company received an Economic Injury Disaster Loan of $ 10,000 from the Small Business Administration ("SBA") to provide economic relief during the COVID- 19 pandemic.

This loan advance is not required to be repaid, has no stipulations on use, and has been recorded as fees and other income in the condensed consolidated statements of operations during fiscal 2020.

August 17, 2020, we received an additional Economic Injury Disaster Loan ("EIDL") of $ 150,000 , for which principal and interest payments are deferred for twelve months from the date of issuance, and interest accrues at 3.75% per year.

The loan matures on August 17, 2050. 

We have used the funds for general corporate purposes to alleviate economic injury caused by the COVID- 19 pandemic, which economic injury included abating or deferring rent to certain tenants (primarily retail tenants).

April 30, 2020, 

the Company received a Paycheck Protection Program ("PPP") loan of $ 0.5 million from the SBA which will provide additional economic relief during the COVID- 19  pandemic.

the Company received a Paycheck Protection Program ("PPP") loan of $ 0.5 million from the SBA to provide additional economic relief during the COVID- 19  pandemic.

The PPP loan, less the $ 10,000 related to the EIDL received on April 22, 2020, was forgiven by the SBA prior to December 31, 2020, and the remaining $ 10,000 was fully forgiven in January 2021, upon repeal of the EIDL holdback requirements.

June 5, 2020, 

the period over which the loan could be utilized was extended to 

the period in which the loan could be utilized was extended to 

24  weeks.

The unforgiven portion of the PPP loan was recorded in accounts payable and accrued liabilities on the Consolidated Balance Sheets as of 

December 31, 2020, while the forgiven portion was recorded a gain on extinguishment of debt in the Consolidated Statement of Operations.

We have used the funds to cover payroll related costs.

SERIES B MANDATORILY REDEEMABLE PREFERRED STOCK

During the year ended 

December 31, 2019, the Company redeemed all of its remaining 

16,900  shares of its Series B Preferred Stock for $ 16.9  million.

December 31, 2020 

December 31, 2019, 

no  Series B Preferred Stock remained issued or outstanding.

Amortization expense of $ 0.1 million was included in interest expense for the year ended 

December 31, 2019, and 

no  related amortization expense was incurred during the year ended 

December 31, 2020 

in the accompanying condensed consolidated statements of operations.

There were 

no  unamortized deferred costs as of 

The unforgiven portion of the PPP loan was recorded in accounts payable and accrued liabilities on the Consolidated Balance Sheet as of 

December 31, 2020. 

During the quarter ended March 31, 2021, the forgiven amount totaling $ 10,000 was recorded as a gain on extinguishment of debt in the Consolidated Statement of Operations. 

We have used the funds received from the PPP loan to cover payroll related costs.

April 1, 2021, 

our wholly-subsidiary, Dubose Model Homes Investors 

#203 LP ("DMH 203" ) ,  issued an unsecured promissory note with LGD Investments Ltd ("LGD") for $ 330,000  with an interest rate of 

4 % per annum and a maturity date of 

April 30, 2022 .

  LGD Investments is owned and controlled by 

one  of our directors at the time, Larry Dubose. 

During April and May 2021, DMH 203 paid LGD $ 2,200 in interest related to the promissory note. 

On June 1, 2021, the Company assumed the promissory note from LGD a face value for $ 330,000 with no other changes in the terms of the note. 

The note payable and note receivable, including interest expense and interest income related to this promissory note during June 2021 were eliminated through consolidation. 

There are no future plans to issue additional promissory notes to LGD.

On September 3, 2021, we issued promissory notes to our majority owned subsidiary Dubose Model Home Investors 202 LP and Dubose Model Home Investors 204 LP for the refinancing of four model home properties in Texas and Wisconsin, for $ 0.9 million with an interest rate of 3.0 % per annum and a maturity date of November 15, 2022.  

These notes payable and note receivable, including interest expense and interest income related to this promissory note, are eliminated through consolidation on our financial statements.

On August 17, 2021, we issued a promissory note to our majority owned subsidiary NetREIT Highland for the acquisition of the Mandolin property in Houston Texas, for $ 1.56 million with an interest rate of 4.0 % per annum and a maturity date of August 17, 2022. 

This note payable and note receivable, including interest expense and interest income related to this promissory note, are eliminated through consolidation on our financial statements.

On December 20, 2021, we issued a promissory note to our majority owned subsidiary PPT Baltimore for the acquisition of the Baltimore property in Baltimore, MD, for $ 5.65 million with an interest rate of 4.5 % per annum and a maturity date of December 20, 2022. 

This note payable and note receivable, including interest expense and interest income related to this promissory note, are eliminated through consolidation on our financial statements.

 COMMITMENTS AND CONTINGENCIES

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The Company monitors its properties for the presence of hazardous or toxic substances.

While there can be no assurance that a material environmental liability does not exist, the Company is not currently aware of any environmental liability with respect to the properties that would have a material effect on the Company’s financial condition, results of operations and cash flow.

While there can be no assurance that a material environmental liability does not exist, the Company is not currently aware of any environ mental liability with respect to the properties that would have a material effect on the Company’s financial condition, results of operations and cash flow.

Further, the Company is not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that the Company believes would require additional disclosure or recording of a loss contingency.

Financial Markets.  

The Company monitors concerns over economic recession, the COVID- 19 pandemic, interest rate increases, policy priorities of the U.S.

presidential administration, trade wars, labor shortages, or inflation may contribute to increased volatility and diminished expectations for the economy and markets.

Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability.

For example, the conflict between Russia and Ukraine could lead to disruption, instability and volatility in global markets and industries.

government and other governments in jurisdictions have imposed severe economic sanctions and export controls against Russia and Russian interests, have removed Russia from the SWIFT system, and have threatened additional sanctions and controls.

The impact of these measures, as well as potential responses to them by Russia, is unknown.

We have not currently experienced a direct material impact to our Company or operations;

however, we will continue to monitor the financial markets for events that could impact our commercial real estate properties.

Sponsorship of Special Purpose Acquisition Company . 

On January 7, 2022, we announced our sponsorship, through our wholly-owned subsidiary, Murphy Canyon Acquisition Sponsor, LLC (the “Sponsor”), of a special purpose acquisition company (“SPAC”) initial public offering.

The SPAC raised $132,250,000 in capital investment to acquire businesses in the real estate industry, including construction, homebuilding, real estate owners and operators, arrangers of financing, insurance, and other services for real estate, and adjacent businesses and technologies targeting the real estate space, which we may refer to as “Proptech”

We, through our wholly-owned subsidiary, owned approximately 19 % of the issued and outstanding stock in the entity upon the initial public offering being declared effective and consummated (excluding the private placement units described below), and that following the completion of its initial business combination that the SPAC will operate as a separately managed, publicly traded entity.

The SPAC offered $ 132,250,000 units, with each unit consisting of one share of common stock and three -quarters of one redeemable warrant.

The Sponsor purchased an aggregate of 828,750 units (the “placement units”) of the SPAC at a price of $ 10.00 per unit, for an aggregate purchase price of $ 8,287,500 .

The placement units were sold in a private placement that closed simultaneously with the closing of the SPAC initial public offering. The Sponsor has agreed to transfer an aggregate of 45,000  placement units ( 15,000 each) to each of Murphy Canyon’s independent directors.

The SPAC's ability to complete a business combination may be extended in additional increments of three months up to a total of six ( 6 ) additional months from the closing date of the offering, subject to the payment into the Trust Account by the Sponsor (or its designees or affiliates) of the sum of 

$1,322,500, representing the sum of $0.10 per share of Common Stock sold to Public Stockholders, and which extension payments, if any, shall be added to the Trust Account. 

The Company has committed to provide additional funds if need to make such a deposit for the extension.

 STOCKHOLDERS’

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The Preferred Stock may be issued from time to time in one or more series.

The Board of Directors is authorized to fix the number of shares of any series of the Preferred Stock, to determine the designation of any such series, and to determine or alter the rights granted to or imposed upon any wholly unissued series of Preferred Stock including the dividend rights, dividend rate, conversion rights, voting rights, redemption rights (including sinking fund provisions), redemption price, and liquidation preference. As of 

December 31, 2020 

December 31, 2019, 

no  Series B Preferred Stock remained issued or outstanding.

On June 15, 2021, the Company completed its secondary offering of 800,000 shares of our Series D Preferred Stock for cash consideration of $ 25.00 per share to a syndicate of underwriters led by Benchmark, as representative, resulting in approximately $ 18.1  million in net proceeds, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company.

The Series D Preferred Stock is listed and trading on The Nasdaq Capital market under the symbol SQFTP.   The Company intends to use these proceeds for general corporate and working capital purposes, including to potentially acquire additional properties. 

Below are some of the key terms of the Series D Preferred Stock:

Holders of shares of the Series D Preferred Stock are entitled to receive cumulative cash dividends at a rate of 9.375 % per annum of the $ 25.00 per share liquidation preference (equivalent to $ 2.34375 per annum per share).

Dividends will be payable monthly on the 15th day of each month (each, a “Dividend Payment Date”), provided that if any Dividend Payment Date is not a business day, then the dividend that would otherwise have been payable on that Dividend Payment Date may be paid on the next succeeding business day without adjustment in the amount of the dividend.

Voting Rights:

Holders of shares of the Series D Preferred Stock will generally have no voting rights.

However, if the Company does not pay dividends on the Series D Preferred Stock for eighteen or more monthly dividend periods (whether or not consecutive), the holders of the Series D Preferred Stock (voting separately as a class with the holders of all other classes or series of the Company’s preferred stock it may issue upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series D Preferred Stock in the election referred to below) will be entitled to vote for the election of two additional directors to serve on the Company’s  Board of Directors until the Company pays, or declares and sets apart funds for the payment of, all dividends that it owes on the Series D Preferred Stock, subject to certain limitations.

In addition, the affirmative vote of the holders of at least two -thirds of the outstanding shares of Series D Preferred Stock (voting together as a class with all other series of parity preferred stock the Company may issue upon which like voting rights have been conferred and are exercisable) is required at any time for the Company to (i) authorize or issue any class or series of its stock ranking senior to the Series D Preferred Stock with respect to the payment of dividends or the distribution of assets on liquidation, dissolution or winding up or (ii) to amend any provision of the Company charter so as to materially and adversely affect any rights of the Series D Preferred Stock or to take certain other actions. 

Liquidation Preference :

In the event of the Company’s voluntary or involuntary liquidation, dissolution or winding up, the holders of shares of Series D Preferred Stock will be entitled to be paid out of the assets the Company has legally available for distribution to its stockholders, subject to the preferential rights of the holders of any class or series of its stock the Company may issue ranking senior to the Series D Preferred Stock with respect to the distribution of assets upon liquidation, dissolution or winding up, a liquidation preference of $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the date of payment, before any distribution of assets is made to holders of the Company’s common stock or any other class or series of the Company’s stock it may issue that ranks junior to the Series D Preferred Stock as to liquidation rights.

In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the Company’s available assets are insufficient to pay the amount of the liquidating distributions on all outstanding shares of Series D Preferred Stock and the corresponding amounts payable on all shares of other classes or series of the Company’s stock that it issues ranking on parity with the Series D Preferred Stock in the distribution of assets, then the holders of the Series D Preferred Stock and all other such classes or series of stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. 

Commencing on or after June 15, 2026, the Company may redeem, at its option, the Series D Preferred Stock, in whole or in part, at a cash redemption price equal to $ 25.00 per share, plus any accumulated and unpaid dividends to, but not including the redemption date.

Prior to June 15, 2026, upon a Change of Control (as defined in the Articles Supplementary), the Company may redeem, at its option, the Series D Preferred Stock, in whole or part, at a cash redemption price of $25.00 per share, plus any accumulated and unpaid dividends to, but not including the redemption date.

The Series D Preferred Stock has no stated maturity, will not be subject to any sinking fund or other mandatory redemption, and will not be convertible into or exchangeable for any of our other securities.

The Company evaluated the accounting guidance in ASC 480 regarding the classification of the Series D Preferred Stock as equity or a liability and determined that it should be classified as permanent equity.  On June 24, 2021, the Board of Directors of the Company declared the first dividend on its Series D Preferred Stock for the initial period from the issue date of June 15, 2021 to June 30, 2021. 

In accordance with the terms of the Series D Preferred Stock, the Series D monthly dividend has been approved by the Board of Directors through December 2021 in the amount of $ 0.10417 per share payable on the 15th  of every month to stockholders of record of Series D Preferred Stock as of the last day of the prior month. 

Total dividends paid to holders of Series D Preferred Stock as of 

December 31, 2021 was approximately $ 1.0 million. 

Common Stock.

The Company is authorized to issue up to 100,000,000 shares of Series A Common Stock, 

1,000 shares of Series B Common Stock and 9,000,000 shares of Series C Common Stock (collectively, the “common stock”) each with a $ 0.01  par value.

The common stock have identical rights, preferences, terms and conditions except that the Series B Common Stockholders are not entitled to receive any portion of Company assets in the event of Company liquidation.

There have been no Series B or Series C Common Stock issued.

The Company is authorized to issue up to 100,000,000 shares of Series A Common Stock, 1,000 shares of Series B Common Stock, and 9,000,000 shares of Series C Common Stock (collectively, the "Common Stock") each with $ 0.01 par value per share.

Each class of Common Stock has identical rights, preferences, terms, and conditions except that the holders of Series B Common Stock are not entitled to receive any portion of Company assets in the event of the Company's liquidation.

No shares of Series B or Series C Common Stock have been issued.

Each share of Common Stock entitles the holder to one vote.

The Common Stock is not subject to redemption and it does not have any preference, conversion, exchange or pre-emptive rights.

Shares of our Common Stock are not subject to redemption and do not have any preference, conversion, exchange, or preemptive rights.

The articles of incorporation contain a restriction on ownership of the Common Stock that prevents one person from owning more than 9.8 % of the outstanding shares of common stock.

On July 12, 2021, the Company entered into a securities purchase agreement with a single U.S.

institutional investor for the purchase and sale of 1,000,000 shares of its Series A Common Stock, Common Stock Warrants to purchase up to 2,000,000 shares of Series A Common Stock and Pre-Funded Warrants to purchase up to 1,000,000 shares of Series A Common Stock.

The Pre-Funded Warrants were exercised in full during August 2021 at a nominal exercise price of $ 0.01 per share.

The Common Stock Warrants have an exercise price of $ 5.50 per share, were exercisable upon issuance and will expire five years from the date of issuance. 

In connection with thi s additional offering, we agreed to issue the Placement Agent Warrants to purchase up to 80,000 shares of Series A Common Stock, representing 4.0 % of the Series A Common Stock and shares of Series A Common Stock issuable upon exercise of the Pre-Funded Warrant. 

The Placement Agent Warrants were issued in August 2021, post exercise of the Pre-Funded Warrants with an exercise price of $ 6.25 and will expire five years from the date of issuance.

The Company evaluated the accounting guidance in ASC 480 and ASC 815 regarding the classification of the Pre-Funded Warrant, Common Stock Warrants, and Placement Agent Warrants as equity or a liability and determined that it should be classified as permanent equity.  As of December 31, 2021 , none of the Common Stock Warrants and Placement Agent Warrants have been exercised.

Stock Repurchase Program .  On September 17, 2021, the Board of Directors authorized a stock repurchase program of up to $ 10 million outstanding shares of our Series A Common Stock. 

During September 2021, the Company was able to purchase 18,133 shares at an average price of $ 3.73692 per share, plus commission of $ 0.035 per share, for a total cost of $ 68,396 . 

During December 2021, the Company was able to purchase 11,588 shares at an average price of $ 3.6097  per share, plus commission of $ 0.035 per share, for a total cost of $ 42,235 . 

These shares will be treated as unissued in accordance with Maryland law and shown as a reduction of stockholders' equity at cost. 

While we will continue to pursue value creating investments, the Board believes there is significant embedded value in our assets that is yet to be realized by the market.

Therefore, returning capital to shareholders through a repurchase program is an attractive use of capital currently.

Cash Dividends.

For the year ended December 31, 2020 , the Company declared and paid cash dividends of $ 1.0 million at a rate of $ 0.10  per share.

For the year ended December 31, 2021 , the Company declared and paid cash dividends of approximately $ 4.5 million.

For the year ended 

December 31, 2019 the Company declared and paid $ 1.1 million and $ 2.2 million, respectively at a rate of $ 0.12 per share.

December 31, 2020 the Company declared and paid 

$ 1.1 million.  

The following is a summary of distributions declared per share of our Series A Common Stock and for our Series D Preferred Stock for the years ended December 31, 2021  and 2020 . 

The Company intends to continue to pay dividends to our common stockholders on a quarterly basis, and on a monthly basis to holders of our Series D Preferred Stock going forward, but there can be no guarantee the Board of Directors will approve any future dividends.

Series A Common Stock

Cash Dividend

$ 0.101  

$ 0.410  

$ 0.100  

Series D Preferred Stock

Distributions Declared

0.10417  

0.19531  

$ 1.27603  

Partnership Interests. 

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13  commercial properties in fee interest, 

two  of which we own partial interests in through our holdings in various affiliates in which we serve as general partner, member and/or manager.

We purchased the partnership interest in 

one  limited partnership that owned 

one  property during 

 Each of the limited partnerships is referred to as a “DownREIT.”

In each DownREIT, we have the right, through put and call options, to require our co-investors to exchange their interests for shares of our common stock at a stated price after a defined period (generally 

five  years from the date they 

first  invested in the entity’s real property), the occurrence of a specified event or a combination thereof.

The Company is a limited partner in 

four  partnerships and sole stockholder in 

one  corporation, which entities purchase and leaseback model homes from homebuilders.

During the year ended December 31, 2020 , the Company exercised 

two  put options with a limited partner in 

two  limited partnerships and exchanged a total of 

59,274  shares of the Company’s Series A Common Stock for the limited partner’s partnership interests, resulting in an increase in ownership interest of each limited partnership by the Company.

As part of this non-cash equity transaction, the Company reclassified $ 1.2  million in minority interest to common stock and additional paid in capital on the Condensed Consolidated Balance Sheets.

two of which we own partial interests in through our holdings in various affiliates in which we serve as general partner, member and/or manager.

Each of the limited partnerships is referred to as a “DownREIT.”

In each DownREIT, we have the right, through put and call options, to require our co-investors to exchange their interests for shares of our Common Stock at a stated price after a defined period (generally five years from the date they first invested in the entity’s real property), the occurrence of a specified event or a combination thereof.

The Company is a limited partner in five partnerships and sole stockholder in one corporation, which entities purchase and leaseback model homes from homebuilders.

Dividend Reinvestment Plan.

The Company had adopted a distribution reinvestment plan that allowed stockholders to have dividends or other distributions otherwise distributable to them invested in additional shares of Company common stock.

The Company registered 3,000,000 of common stock pursuant to the dividend reinvestment plan.

The purchase price per share is 95 % of the price the Company was formerly selling its shares for $ 10.00 per share.

No sales commission or dealer manager fee will be paid on shares sold through the dividend reinvestment plan.

The Company may amend, suspend or terminate the Plan at any time.

Any such amendment, suspension or termination will be effective upon a designated dividend record date and notice of such amendment, suspension or termination will be sent to all Participants at least thirty ( 30 ) days prior to such record date.

The dividend reinvestment plan became effective on January 23, 2012, was suspended on December 7, 2019 and adopted on 

October 6, 2020  

in connection with our IPO, updated to reflect a change in transfer agent and registrar.

No dividend reinvestments were made for the year ended December 31, 2020 .

As of December 31, 2020 , approximately $ 17.4 million or 1,834,147 shares of common stock have been issued under the dividend reinvestment plan to date.

The Company adopted a distribution reinvestment plan (the “DRIP”) that allowed stockholders to have dividends and other distributions otherwise distributable to them invested in additional shares of the Company’s Common Stock.

The Company registered 3,000,000 shares of Common Stock pursuant to the DRIP.

The purchase price per share used in the past was 95 % of the price the Company sold its shares, or $ 19.00 per share.

No sales commission or dealer manager fees were paid on shares sold through the DRIP.

The Company may amend, suspend or terminate the DRIP at any time.

Any such amendment, suspension or termination is effective upon a designated dividend record date and notice of such amendment, suspension or termination is sent to all participants at least thirty ( 30 ) days prior to such record date.

The DRIP became effective on January 23, 2012, 

was suspended on December 7, 2018 

and adopted on October 6, 2020 in connection with our IPO, and updated to reflect a change in transfer agent and registrar.

As of December 31, 2021 , approximately $ 17.4 million or approximately 917,074 shares of Common Stock have been issued under the DRIP.

No shares were issued under the DRIP during the years ended December 31, 2021  and 2020 . 

SHARE-BASED INCENTIVE PLAN

The Company maintains a restricted stock incentive plan for the purpose of attracting and retaining officers, key employees and non-employee board members.

Share awards vest in equal annual installments over a three to ten year period from date of issuance.

The Company maintains a restricted stock incentive plan for the purpose of attracting and retaining officers, employees, and non-employee board members.

Share awards generally vest in equal annual installments over a three to ten year period from date of issuance.

Non-vested shares have voting rights and are eligible for any dividends paid to common shares.

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Prior to our IPO, the value of non-vested shares was calculated based on the offering price of the shares in the most recent private placement offering of $ 20.00 , adjusted for stock dividends since granted and assumed selling costs, which management believed approximated fair market value as of the date of grant.

Upon our IPO, the value of non-vested shares granted is calculated based on the closing price of our common stock on the date of the grant.

Upon our IPO, the value of non-vested shares granted is typically calculated based on the closing price of our common stock on the date of the grant.

A summary of the activity for the Company’s restricted stock was as follows:

Common Shares

Outstanding shares:

Common Shares

Balance at December 31, 2020

126,190  

320,096  

Balance at December 31, 2021

The non-vested restricted shares outstanding as of December 31, 2020  will vest over the next one to seven years.

The value of non-vested restricted stock granted for the years ended December 31, 2020  and 2019  was approximately $ 0.9 million and $ 1.7 million, respectively.

Share-based compensation expense for the years ended December 31, 2020  and 2019  was approximately $ 1.1 million and $ 0.8 million, respectively.

295,471  

The non-vested restricted shares outstanding as of December 31, 2021  will vest over the next one to six years.

Share-based compensation expense for the years ended December 31, 2021  and 2020  was approximately $ 1.6 million and $ 1.1 million , respectively. 

As of December 31, 2021 and December 31, 2020, future unrecognized stock compensation related to unvested shares totaled approximately $ 1.6 million and $ 1.2 million, respectively.

 SEGMENTS

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Rental, fees and other income

$ 13,161,268  

$ 17,128,687  

Property and related expenses

( 5,769,843 )  

( 7,977,561 )

Net operating income, as defined

7,391,425  

9,151,126  

Model Home Properties:

Rental, fees and other income

3,211,149  

4,251,980  

Property and related expenses

( 129,389 )  

Net operating income, as defined

3,081,760  

4,049,313  

Retail Properties:

Rental, fees and other income

3,023,316  

2,971,125  

Property and related expenses

Net operating income, as defined

( 1,056,581 )  

( 2,368,906 )

Net operating (loss) income, as defined

1,966,735  

602,219  

Reconciliation to net loss:

Total net operating income, as defined, for reportable segments

12,439,920  

13,802,658  

General and administrative expenses

( 6,225,510 )  

( 5,751,754 )

Depreciation and amortization

( 5,397,498 )  

( 6,274,321 )

Interest expense

( 4,822,085 )  

( 8,813,067 )

Deferred offering costs

Gain on extinguishment of government debt

10,000  

451,785  

Other income (expense), net

( 3,417 )  

Income tax expense

47,620  

Gain on sale of real estate

2,487,528  

1,245,460  

$ ( 1,463,442 )  

$ ( 6,261,398 )

Assets by Reportable Segment:

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Land, buildings and improvements, net (1)

$ 78,240,086  

$ 99,120,649  

Total assets (2)

$ 76,453,436  

$ 100,046,782  

Model Home Properties:

Land, buildings and improvements, net (1)

$ 34,089,046  

$ 42,509,596  

Total assets (2)

$ 31,047,202  

$ 42,246,022  

Retail Properties:

Land, buildings and improvements, net (1)

$ 25,693,239  

$ 24,555,371  

Total assets (2)

$ 27,579,469  

$ 26,108,109  

Reconciliation to Total Assets:

Total assets for reportable segments

$ 135,080,107  

$ 168,400,913  

Other unallocated assets:

Cash, cash equivalents and restricted cash

6,738,345  

2,149,088  

Other assets, net

19,378,311  

15,018,615  

$ 161,196,763  

$ 185,568,616  

Includes lease intangibles and the land purchase option related to property acquisitions.

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Office/Industrial Properties:

Acquisition of operating properties

$ 8,891,810  

Capital expenditures and tenant improvements

1,513,362  

2,825,169  

Model Home Properties:

Acquisition of operating properties

8,426,750  

10,161,613  

Retail Properties:

Acquisition of operating properties

4,906,266  

Capital expenditures and tenant improvements

83,824  

Acquisition of operating properties, net

22,224,826  

10,161,613  

Capital expenditures and tenant improvements

1,597,186  

2,834,373  

Total real estate investments

$ 23,822,012  

$ 12,995,986  

 SUBSEQUENT EVENTS

We disposed of the following properties subsequent to December 31, 2020:

Waterman Plaza was sold on January 28, 2021 

for approximately $ 3.5 million.

Garden Gateway was sold on February 19, 2021 for approximately $ 11.2 million.

Notes Payable

On September 1, 2020, we extended the maturity of the Polar Note from October 1, 2020 to March 31, 2021 ( "Maturity"), as of December 31, 2020, the outstanding principal balance was approximately $ 7.7 million.

During the first quarter of 2021, prior to maturity, the Polar note was paid in full mainly from available cash on hand and proceeds of property sales as noted above.

Dividends 

On February 23, 2021, 

our Board of Directors declared a dividend of $ 0.101 per share of Series A Common Stock, payable on 

March 16, 2021  

to stockholders of record as of 

March 9, 2021 .

Sponsorship of Special Purpose Acquisition Company

The registration statement and prospectus relating to the initial public offering (“IPO”) of the SPAC, Murphy Canyon Acquisition Corp.

(“Murphy Canyon”), was declared effective by the Securities and Exchange Commission (the “SEC”) on February 2, 2022 and SPAC units, consisting of one share of Class A common stock, par value $ 0.0001 per share, of Murphy Canyon and one redeemable warrant, with each whole warrant entitling the holder thereof to purchase one share of common stock at a price of $ 11.50 per share, began trading on the Nasdaq Global Market on February 3, 2022.

Once the securities comprising the units begin separate trading, the common stock and the warrants are expected to be traded on the Nasdaq Global Market under the symbols “MURF”

and “MURFW,”

respectively.

The Murphy Canyon IPO closed on February 7, 2022, raising gross proceeds for Murphy Canyon of $ 132,250,000 , including the exercise in full by the underwriters of their over-allotment option.

In connection with the IPO, we purchased, through the Sponsor, 754,000 placement units (the “placement units”) at a price of $ 10.00 per unit, for an aggregate purchase price of $ 7,540,000 . 

The Sponsor has agreed to transfer an aggregate of 45,000  placement units ( 15,000 each) to each of Murphy Canyon’s independent directors.

Immediately following the IPO, Murphy Canyon began to evaluate acquisition candidates in the real estate industry, including construction, homebuilding, real estate owners and operators, arrangers of financing, insurance, and other services for real estate, and adjacent businesses and technologies targeting the real estate space with an aggregate combined enterprise value of approximately

$ 300 million to

$ 1.2 billion.

Murphy Canyon’s goal is to complete its initial business combination (“IBC”) within

one year of its IPO. 

We expect Murphy Canyon to operate as a separately managed, publicly traded entity following the completion of the IBC, or “De-SPAC”. 

$ 7,540,000 to purchase the placement units was funded with the use of our unrestricted cash on hand, which totaled approximately

$ 10 million as of

December 31, 2021. 

The Company is currently evaluating the consolidation treatment for our investment in the SPAC after the IPO on

February 7, 2022. 

While we have

not concluded our review it is possible that we will continue to consolidate Murphy Canyon into the Company’s financial statements after its IPO. 

If we ultimately consolidate Murphy Canyon into our financial statements, they would include approximately

$ 134 million in restricted cash held in trust.

Warrant Dividend

We set a record date of January 14, 2022 with respect to the distribution of five -year listed warrants (the “Series A Warrants”). 

The Series A Warrants and the shares of common stock issuable upon the exercise of the Series A Warrants were registered on a registration statement that was filed with the SEC and was declared effective January 21, 2022.

The Series A Warrants commenced trading on the Nasdaq Capital Market under the symbol “SQFTW”

on January 24, 2022 and were distributed on that date to persons who held shares of common stock and existing outstanding warrants as of the January 14, 2022 record date, or who acquired shares of common stock in the market following the record date, and who continued to hold such shares at the close of trading on January 21, 2022. 

The Series A Warrants give the holder the right to purchase one share of common stock at $ 7.00 per share, for a period of five years.

Should warrantholders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a common share at expiration, rounded down to the nearest number of whole shares.

During January, February and March 2022, the Company has continued to announce and pay the monthly dividend on its 9.375 % Series D Cumulative Redeemable Perpetual Preferred Stock in the amount of $ 0.19531 per share for each month, respectively.

On March 1, 2022, the Company announced that its Board of Directors has declared a cash dividend of $ 0.105 per share on its Series A Common Stock for the first quarter of 2022.

The dividend will be payable on March 28, 2022, to all stockholders of record as of the close of business on March 16, 2022.

In February 2022, the Company listed our property in Bismarck, ND, Grand Pacific Center, for sale at approximately $ 7.5 million. 

As of December 31, 2021, Grand Pacific Center had a book value of approximately $ 5.5 million.

On March 11, 2022, the Company completed the sale our property World Plaza, located in San Bernardino, CA, for $ 10 million to an unrelated third party.   

However, he will continue to remain an employee of our model home division.

Presidio Property Trust, Inc.

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Year Built / Renovated

Garden Gateway, Colorado Springs, CO (2)

Executive Park, Colorado Springs, CO (2)

Genesis Plaza, San Diego, CA

$ 6,169  

$ 1,400  

$ 8,600  

$ 10,000  

$ 2,661  

$ 1,400  

$ 11,261  

$ 12,661  

$ 4,350  

$ 8,311  

Dakota Center, Fargo, ND

11,619  

12,451  

Grand Pacific Center, Bismarck, ND (3)

Arapahoe Center, Centennial, CO

10,430  

11,850  

11,022  

12,442  

West Fargo Industrial, Fargo, ND

300 N.P., Fargo, ND

Highland Court, Centennial, CO (2)

One Park Centre, Westminster, CO

10,548  

Shea Center II, Highlands Ranch, CO

17,495  

23,747  

25,961  

26,028  

28,241  

20,247  

Baltimore, Baltimore, MD

Total Office/ Industrial properties

57,389  

11,981  

80,536  

92,517  

12,556  

11,981  

93,092  

105,073  

26,482  

78,283  

World Plaza , San Bernardino, CA (2)

Waterman Plaza, San Bernardino, CA (2)

10,521  

12,219  

Union Town Center, Colorado Springs, CO

11,212  

11,279  

Research Parkway, Colorado Springs, CO

( 50 )  

Mandolin, Houston, TX

Total Retail properties

Model Homes -NDMHR, LP

21,698  

26,884  

26,018  

31,203  

25,693  

Model Homes-DMH LP #202

2017 - 2018  

Model Homes-DMH LP #203

2016 - 2019  

Model Homes-DMH LP #204

2018 - 2020  

Model Homes-DMH LP #205

2019 - 2020  

Model Homes-DMH LP #206

2020 - 2021  

Model Homes-NMH Inc.

10,920  

12,801  

10,920  

12,801  

12,413  

2017 - 2021  

Total Model Home properties

22,154  

29,917  

35,746  

29,917  

35,746  

34,089  

CONSOLIDATED TOTALS:

$ 89,422  

$ 22,995  

$ 132,151  

$ 155,146  

$ 16,876  

$ 22,995  

$ 149,028  

$ 172,022  

$ 32,949  

$ 1,008  

$ 138,065  

( 1 )     Depreciation is computed on a straight-line basis using useful lives up to 39 years.

( 2 )     Property held for sale as of December 31, 2021 .

( 3 )     Waterman Plaza sold for approximately $ 3.5 million on January 28, 2021.

 Garden Gateway sold for approximately $ 11.2  million on February 19, 2021.

( 3 )     Property was listed as held for sale in February 2022.

Presidio Property Trust, Inc.

4 unchanged sentences

Balance at the beginning of the year

$ 208,641,166  

$ 244,320,582  

22,224,826  

10,161,613  

1,598,105  

2,834,367  

( 608,000 )  

( 1,730,851 )

Dispositions of real estate

( 60,842,404 )  

( 46,944,545 )

Balance at the end of the year

$ 171,013,693  

$ 208,641,166  

Accumulated depreciation and amortization

Balance at the beginning of the year

$ ( 42,387,199 )  

$ ( 44,113,962 )

Depreciation and amortization expense

( 5,029,579 )  

( 5,938,958 )

Dispositions of real estate

14,468,021  

7,665,721  

Balance at the end of the year

$ ( 32,948,757 )  

$ ( 42,387,199 )

Real estate assets, net

$ 138,064,936  

$ 166,253,967  

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

What changed 10-K

Item 9A. Controls and Procedures