Presidio Property Trust, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES   We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, Management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and Management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.   As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.   Changes in Internal Control over Financial Reporting   There were no changes in our internal control over financial reporting that occurred during the fiscal year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Although we have modified our workplace practices due to the COVID-19 pandemic, resulting in most of our employees working remotely, this has not materially affected our internal controls over financial reporting. We continue to monitor and assess the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.   Management’s Report on Internal Control over Financial Reporting   Our Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our Management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on our evaluation under the framework in Internal Control — Integrated Framework, our Management concluded that our internal control over financial reporting was effective as of December 31, 2021.   This annual report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding our internal control over financial reporting as such report is not required for the Company.     ITEM 9B. 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.   58 Table of Contents   ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE   The information required by this item is set forth under the captions “Board of Directors” and “Executive Officers of the Company” 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. The Annual Meeting of Stockholders is presently scheduled to be held on May 26, 2022.     ITEM 11. EXECUTIVE COMPENSATION   The information required by this item is set forth under the caption “Executive Compensation” 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.     ITEM 12. 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 2022 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.     ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE   The information required by this item is set forth under the caption “Related Party Transactions” 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.     ITEM 14. 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 2022 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.       PART IV   ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES   (1) Financial Statements - the following documents are filed as part of this report:     • Report of Independent Registered Public Accounting Firm   • Consolidated Balance Sheets as of December 31, 2021 and 2020   • Consolidated Statements of Operations for the years ended December 31, 2021 and 2020   • Consolidated Statements of Equity for the years ended December 31, 2021 and 2020   • Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020   • Notes to Consolidated Financial Statements   (2) Financial Statement Schedules - the following documents are filed as part of this report:     • Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization as of December 31, 2021   All other financial statement schedules have been omitted for the reason that the required information is presented in the financial statements or notes thereto, the amounts involved are not significant or the schedules are not applicable.   59 Table of Contents   (3) Exhibits - an index to the Exhibits as filed as part of this Form 10-K is set forth below.   Number   Description           3.1   Articles of Merger filed with the Maryland State Department of Assessments and Taxation and the California Secretary of State on August 4, 2010 (incorporated by reference to Exhibit 3.03 of the Company’s Current Report on Form 8-K filed on August 10, 2010).           3.2   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).           3.3   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).           3.4   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).           3.5   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).           3.6   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).           3.7   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).           3.8   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).           3.9   Second Amended and Restated Bylaws of Presidio Property Trust, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on October 19, 2017).           4.1   Form of Series A Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form 10-12B filed on May 6, 2008).           4.2   Description of Securities*           4.3   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).           4.4   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).           4.5   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).           4.6   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).           4.7   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).           10.1+   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).           10.2   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).           10.3   Promissory Note, dated as of September 17, 2019, by and between Presidio Property Trust, Inc. and Polar Multi-Strategy Master Fund (incorporated by reference to Exhibit 1.1 of the Company’s Current Report on Form 8-K filed on September 23, 2019).           10.4   Agreement, dated as of September 17, 2019, by and between Presidio Property Trust, Inc. 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).           10.5+   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).           10.7   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).           10.8   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).           10.9+   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).           10.10+   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).           10.11   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).           10.12   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).           10.13   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).           10.14   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).           10.15   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).           10.16   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).           14   Code of Ethics (incorporated by reference to Exhibit 14 of the Company’s Annual Report on Form 10-K filed on March 30, 2021).           21.1   Subsidiaries of the Registrant*           23.1   Consent of Independent Registered Public Accounting Firm *           31.1   Certificate of the Company’s Chief Executive Officer (Principal Executive Officer) pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *           31.2   Certification of the Company’s Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *           31.3   Certification of the Company’s Principal Accounting Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *           32.1   Certification of Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *           101.INS   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)     60 Table of Contents   101.SCH   Inline XBRL Taxonomy Extension Schema Document        101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document        101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document        101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document        101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document        104            Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)   ____________________________________________________   ∗ Filed herewith   + Denotes a compensatory plan or arrangement   61 Table of Contents   Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.     Signature   Title   Date           /s/ Jack K. Heilbron   Director, Chairman of the Board and Chief Executive Officer   March 29, 2022 Jack K. Heilbron   (Principal Executive Officer)               /s/ Adam Sragovicz   Chief Financial Officer   March 29, 2022 Adam Sragovicz                   /s/ Ed Bentzen   Chief Accounting Officer   March 29, 2022 Ed Bentzen   (Principal Accounting Officer)               /s/ Jennifer A. Barnes   Director   March 29, 2022 Jennifer A. Barnes                   /s/ David T. Bruen   Director   March 29, 2022 David T. Bruen                   /s/ James R. Durfey   Director   March 29, 2022 James R. Durfey                   /s/ Sumner J. Rollings   Director   March 29, 2022 Sumner J. Rollings           62 Table of Contents         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS     Page     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  (PCAOB ID 23 ) F-1     FINANCIAL STATEMENTS:   Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization F-29     Table of Contents     Report of Independent Registered Public Accounting Firm     To the Shareholders and the Board of Directors of Presidio Property Trust, Inc. and Subsidiaries   Opinion on the Financial Statements   We have audited the accompanying consolidated balance sheets of Presidio Property Trust, Inc. 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). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.   Basis for Opinion   These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.   Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.   Critical Audit Matters   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.   F-1 Table of Contents   REAL ESTATE ASSETS AND LEASE INTANGIBLES IMPAIRMENT ASSESSMENT   Critical Audit Matter Description   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. When indicators of potential impairment suggest that the carrying value of real estate assets may not be recoverable, management assesses the recoverability by estimating whether the Company will recover the carrying value of its real estate assets through the undiscounted future cash flows and the eventual disposition of the investment. 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. These assumptions include, among others, cash flow projections, discount rates, market capitalization rates, and recent sales data for comparable properties. The assumptions are generally based on management’s experience and assessment of market participants in its local real estate markets, and the effects of current market conditions, which are subject to economic and market uncertainties. As disclosed by management, changes in these assumptions could have a significant impact on either the cash flows or fair value of the real estate assets, the amount of any impairment charge, or both.   We identified the real estate asset and lease intangibles impairment assessment of the Company as a critical audit matter. The Company experienced fluctuations in tenant occupancy and related cash flows from the real estate properties based on rental demand, completion of tenant improvements, and other economic factors. In turn, auditing management’s judgments regarding forecasts of future revenue and cash flows, and the resulting fair value of real estate assets compared to their carrying value involved a high degree of judgement and subjectivity.   How We Addressed the Matter in Our Audit   The primary procedures we performed to address this critical audit matter included:     ● Testing management’s process for determining the fair value of real estate assets including testing the completeness and accuracy of underlying data used in management’s model.     ● Evaluating the reasonableness of management’s fair value estimates which are based on Argus models that include rental revenues per executed lease agreements, occupancy, and expected renewal rates, and on broker opinions of value which utilize historical listing and sale prices for comparable real estate properties.     ● Independently comparing current fair values to trends in fair value of each property over time and for consistency with evidence obtained in other areas of the audit.     ● 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.   /s/ Baker Tilly US, LLP      We have served as the Company’s auditor since 2009.   Irvine, California March 29, 2022   F-2 Table of Contents     Presidio Property Trust, Inc. and Subsidiaries Consolidated Balance Sheets       December 31,     December 31,       2021     2020                     ASSETS                 Real estate assets and lease intangibles:                 Land   $ 21,136,379     $ 18,827,000   Buildings and improvements     119,224,375       115,409,423   Tenant improvements     12,752,518       11,960,018   Lease intangibles     4,110,139       4,110,139   Real estate assets and lease intangibles held for investment, cost     157,223,411       150,306,580   Accumulated depreciation and amortization     ( 30,589,969 )     ( 26,551,789 ) Real estate assets and lease intangibles held for investment, net     126,633,442       123,754,791   Real estate assets held for sale, net     11,431,494       42,499,176   Real estate assets, net     138,064,936       166,253,967   Cash, cash equivalents and restricted cash     14,702,089       11,540,917   Deferred leasing costs, net     1,348,234       1,927,951   Goodwill     2,423,000       2,423,000   Other assets, net     4,658,504       3,422,781   TOTAL ASSETS   $ 161,196,763     $ 185,568,616   LIABILITIES AND EQUITY                 Liabilities:                 Mortgage notes payable, net   $ 87,324,319     $ 94,664,266   Mortgage notes payable related to properties held for sale, net     1,535,513       25,365,430   Mortgage notes payable, total net     88,859,832       120,029,696   Note payable, net     —       7,500,086   Accounts payable and accrued liabilities     4,585,036       5,126,199   Accrued real estate taxes     1,940,913       2,548,686   Dividends payable preferred stock     179,685       —   Lease liability, net     75,547       102,323   Below-market leases, net     73,130       139,045   Total liabilities     95,714,143       135,446,035   Commitments and contingencies (Note 9)                     Equity:                 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     9,200       —   Series A Common Stock, $0.01 par value per share, shares authorized: 100,000,000 ; 11,599,720 shares and 9,508,363 shares were issued and outstanding at December 31, 2021 and December 31, 2020, respectively     115,997       95,038   Additional paid-in capital     186,492,012       156,463,146   Dividends and accumulated losses     ( 130,947,434 )     ( 121,674,505 ) Total stockholders' equity before noncontrolling interest     55,669,775       34,883,679   Noncontrolling interest     9,812,845       15,238,902   Total equity     65,482,620       50,122,581   TOTAL LIABILITIES AND EQUITY   $ 161,196,763     $ 185,568,616       See Notes to Consolidated Financial Statements   F-3 Table of Contents     Presidio Property Trust, Inc. and Subsidiaries Consolidated Statements of Operations       For the Year Ended December 31,       2021     2020   Revenues:                 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-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 )     ( 20,636 ) 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     —       ( 530,639 ) Income tax credit (expense)     47,620       ( 370,884 ) Total other income (expense), net     ( 2,280,354 )     ( 8,037,981 ) Net loss     ( 1,463,442 )     ( 6,261,398 ) Less: Income attributable to noncontrolling interests     ( 2,162,140 )     ( 1,412,507 ) Net loss attributable to Presidio Property Trust, Inc. stockholders   $ ( 3,625,582 )   $ ( 7,673,905 ) Less: Preferred Stock Series D dividends     ( 1,173,948 )     —   Net loss attributable to Presidio Property Trust, Inc. common stockholders   $ ( 4,799,530 )   $ ( 7,673,905 ) Net loss per share attributable to Presidio Property Trust, Inc. common stockholders:                 Basic & Diluted   $ ( 0.46 )   $ ( 0.85 ) Weighted average number of common shares outstanding - basic and diluted     10,340,975       9,023,914     See Notes to Consolidated Financial Statements   F-4 Table of Contents     Presidio Property Trust, Inc. and Subsidiaries Consolidated Statements of Equity                         Additional   Dividends and   Total   Non-           Preferred Stock Series D Common Stock   Paid-in   Accumulated   Stockholders’   controlling   Total     Shares Amount Shares   Amount   Capital   Losses   Equity   Interests   Equity   Balance, December 31, 2019   — $ -   8,881,842   $ 88,818   $ 152,129,120   $ ( 113,037,144 ) $ 39,180,794   $ 17,440,394   $ 56,621,188   Net loss   —   —   —     —     —     ( 7,673,905 )   ( 7,673,905 )   1,412,507     ( 6,261,398 ) Shares issued, initial public offering   —   —   500,000     5,000     1,999,984     —     2,004,984     —     2,004,984   Dividends paid to Series A Common Stockholders   —   —   —     —     —     ( 963,456 )   ( 963,456 )   —     ( 963,456 ) Distributions in excess of contributions received   —   —   —     —     —     —     —     ( 2,366,009 )   ( 2,366,009 ) Repurchase of common stock   —   —   ( 3,000 )   ( 30 )   ( 17,970 )   —     ( 18,000 )   —     ( 18,000 ) Share reconciliation adjustment   —   —   ( 16,080 )   ( 162 )   162     —     —     —     —   Issuance of stock for Limited Partnership interests   —   —   59,274     594     1,247,396     —     1,247,990     ( 1,247,990 )   —   Vesting of restricted Series A Common Stock   —   —   86,327     818     1,104,454     —     1,105,272     —     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   Net loss   —   —   —     —     —     ( 3,625,582 )   ( 3,625,582 )   2,162,140     ( 1,463,442 ) Dividends paid to Series A Common Stockholders   —   —   —     —     —     ( 4,473,399 )   ( 4,473,399 )   —     ( 4,473,399 ) Dividends to Series D Preferred Stockholders   —   —   —     —     —     ( 1,173,948 )   ( 1,173,948 )   —     ( 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     —     8,871,879   Issuance of Series D Preferred Stock, net of issuance costs   920,000   9,200   —     —     20,480,603     —     20,489,803     —     20,489,803   Distributions in excess of contributions received   —   —   —     —     —     —     —     ( 7,588,197 )   ( 7,588,197 ) Repurchase of Common Stock, at cost   —   —   ( 29,721 )   ( 252 )   ( 110,379 )   —     ( 110,631 )   —     ( 110,631 ) Vesting of restricted Series A Common Stock   —   —   121,078     1,211     806,763     —     807,974     —     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.   F-5 Table of Contents     Presidio Property Trust, Inc. and Subsidiaries Consolidated Statements of Cash Flows       For the Year Ended December 31,       2021     2020   Cash flows from operating activities:                 Net loss   $ ( 1,463,442 )   $ ( 6,261,398 ) Adjustments to reconcile net loss to net cash provided by operating activities:                 Depreciation and amortization     5,397,498       6,274,321   Stock compensation     1,614,228       1,105,272   Bad debt expense     164,623       77,898   Gain on sale of real estate assets, net     ( 2,487,528 )     ( 1,245,460 ) Gain on extinguishment of government debt     ( 10,000 )     ( 451,785 ) Net change in fair value of marketable securities     ( 39,429 )     —   Impairment of real estate assets     608,000       1,730,851   Accretion of original issue discount     —       1,013,405   Amortization of financing costs     479,853       1,287,430   Amortization of above-market leases     42,064       50,682   Amortization of below-market leases     ( 60,203 )     ( 170,887 ) 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 )     ( 1,344,636 ) Accrued real estate taxes     ( 607,773 )     ( 438,915 ) Net cash provided by operating activities     2,374,943       3,693,417   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 ) Investment in marketable securities     ( 3,819,882 )     —   Proceeds from sale of marketable securities     2,380,476       —   Additions to deferred leasing costs     ( 117,062 )     ( 175,828 ) Proceeds from sales of real estate, net     49,583,445       40,849,654   Net cash provided by investing activities     24,204,965       27,677,840   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 ) Repayment of note payable     ( 7,675,598 )     ( 6,324,401 ) Payment of extension costs, note payable     —       ( 351,025 ) Payment of deferred offering costs     ( 572,458 )     ( 45,016 ) Distributions to noncontrolling interests, net     ( 7,588,197 )     ( 2,366,009 ) Issuance of stock for Initial Public Offering, net of underwriters fees     —       2,050,000   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       —   Repurchase of common stock     ( 110,631 )     ( 18,000 ) Dividends paid to Series D preferred stockholders     ( 994,263 )     —   Dividends paid to Series A common stockholders     ( 4,473,399 )     ( 963,456 ) Net cash used in financing activities     ( 23,418,736 )     ( 30,221,615 ) Net increase in cash equivalents and restricted cash     3,161,172       1,149,642   Cash, cash equivalents and restricted cash - beginning of period     11,540,917       10,391,275   Cash, cash equivalents and restricted cash - end of period   $ 14,702,089     $ 11,540,917   Supplemental disclosure of cash flow information:                 Interest paid-mortgage notes payable   $ 4,320,174     $ 5,892,025   Interest paid-notes payable   $ 103,861     $ 778,414   Unpaid deferred financing costs   $ 15,449     $ 83,659   Non-cash financing activities:                 Issuance of stock for limited partnership interests   $ —     $ 1,247,990   Dividends payable - Preferred Stock Series D   $ 179,685       —     See Notes to Consolidated Financial Statements   F-6 Table of Contents   Presidio Property Trust, Inc. and Subsidiaries Notes to Consolidated Financial Statements     1. ORGANIZATION AND BASIS OF PRESENTATION   Organization . Presidio Property Trust, Inc. (“we”, “our”, “us” 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  28, 1999, and in August 2010, we reincorporated as a Maryland corporation. In October 2017, we changed our name from “NetREIT, Inc.” to “Presidio Property Trust, Inc.” 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:     • The Company is the sole general partner and limited partner in two limited partnerships (NetREIT Palm Self-Storage LP and NetREIT Casa Grande LP), all with ownership in real estate income producing properties. The Company refers to these entities collectively, as the “NetREIT Partnerships”.     • The Company is the general partner and/or limited partner in six limited partnerships that purchase model homes and lease them back to homebuilders (Dubose Model Homes Investors #202, LP, Dubose Model Homes Investors #203, LP, Dubose Model Homes Investors #204, LP, Dubose Model Homes Investors #205, LP, Dubose Model Homes Investors #206, LP and NetREIT Dubose Model Home REIT, LP). The Company refers to these entities collectively, as the “Model Home Partnerships”.   The Company has determined that the limited partnerships in which it owns less than 100%, should be included in the Company’s consolidated financial statements as the Company directs their activities and holds a variable interest in these limited partnerships for which the Company is the primary beneficiary.   Unit-based information used herein (such as references to square footage or property occupancy rates) is unaudited.   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. 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 .  On  July  29,   2020,  we amended our charter to effect a  one -for- two  reverse stock split of every outstanding share of our Series A Common Stock. The financial statements and accompanying footnotes have been retroactively restated to reflect the reverse stock split.   F- 7 Table of Contents   Initial Public Offering . On  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 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.     Repaid Note. 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.   F- 8 Table of Contents   Liquidity.  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.   Segments. The Company acquires and o perates income producing properties in three business segments including Office/Industrial Properties, Model Home Properties and Retail Properties. See Note 14. “Segments”.   Customer Concentration. 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 .     2. SIGNIFICANT ACCOUNTING POLICIES   Basis of Presentation. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).   Principles of Consolidation . The accompanying consolidated financial statements include the accounts of Presidio Property Trust and its subsidiaries, NetREIT Advisors, LLC and Dubose Advisors LLC (collectively, the “Advisors”), and NetREIT Dubose Model Home REIT, Inc. The consolidated financial statements also include the results of the NetREIT Partnerships, the Model Home Partnerships.  As used herein, references to the “Company” include references to Presidio Property Trust, its subsidiaries, and the partnerships. 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  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.   Use of Estimates . The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include the allocation of purchase price paid for property acquisitions between land, building and intangible assets acquired including their useful lives; valuation of long-lived assets, and the allowance for doubtful accounts, which is based on an evaluation of the tenants’ ability to pay. Actual results may differ from those estimates.   F- 9 Table of Contents   Real Estate Assets and Lease Intangibles. Land, buildings and improvements are recorded at cost, including tenant improvements and lease acquisition costs (including leasing commissions, space planning fees, and legal fees). The Company capitalizes any expenditure that replaces, improves, or otherwise extends the economic life of an asset, while ordinary repairs and maintenance are expensed as incurred. The Company allocates the purchase price of acquired properties between the acquired tangible assets and liabilities (consisting of land, building, tenant improvements, and long-term debt) and identified intangible assets and liabilities (including the value of above-market and below-market leases, the value of in-place leases, unamortized lease origination costs and tenant relationships), based in each case on their respective fair values.   The Company allocates the purchase price to tangible assets of an acquired property based on the estimated fair values of those tangible assets assuming the building was vacant. Estimates of fair value for land, building and building improvements are based on many factors including, but not limited to, comparisons to other properties sold in the same geographic area and independent third -party valuations. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair values of the tangible and intangible assets and liabilities acquired.   The value allocated to acquired lease intangibles is based on management’s evaluation of the specific characteristics of each tenant’s lease. Characteristics considered by management in allocating these values include the nature and extent of the existing business relationships with the tenant, growth prospects for developing new business with the tenant, the remaining term of the lease and the tenant’s credit quality, among other factors.   The value allocable to the above-market or below-market component of an acquired in-place lease is determined based upon the present value (using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of rents that would be paid using fair market rates over the remaining term of the lease. 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 $ 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. The amount allocated to acquired in-place leases is determined based on management’s assessment of lost revenue and costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased. The amount allocated to unamortized lease origination costs is determined by what the Company would have paid to a third -party to secure a new tenant reduced by the expired term of the respective lease. 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 $ 0.3  million and $ 0.4  million for years ended December 31, 2021  and 2020 , respectively.   Real Estate Held for Sale and Discontinued Operations. Real estate sold during the current period is classified as “real estate held for sale” for all prior periods presented in the accompanying condensed consolidated financial statements. 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.   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.   F- 10 Table of Contents   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,  2021. 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 .  Intangible assets, including goodwill and lease intangibles, are comprised of finite- lived and indefinite-lived assets. Lease intangibles represents the allocation of a portion of the purchase price of a property acquisition representing the estimated value of in-place leases, unamortized lease origination costs, tenant relationships and land purchase options. Intangible assets that are not deemed to have an indefinite useful life are amortized over their estimated useful lives. 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, 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. Impairment is recognized only if the carrying amount of the intangible asset is considered to be unrecoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and the estimated fair value of the asset. Based on the review, no impairment was deemed to exist at December 31, 2021  and 2020 .   Depreciation and Amortization. The Company records depreciation and amortization expense using the straight-line method over the useful lives of the respective assets. 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. The Company considers all short-term, highly liquid investments that are both readily convertible to cash and have an original maturity of three months or less at the date of purchase to be cash equivalents. Items classified as cash equivalents include money market funds. Cash balances in individual banks may exceed the federally insured limit of $250,000 by the Federal Deposit Insurance Corporation (the "FDIC"). No losses have been experienced related to such accounts. At December 31, 2021 , the Company had approximately $ 7.3 million in deposits in financial institutions that exceeded the federally insurable limits. Restricted cash consists of funds held in escrow for Company lenders for properties held as collateral by the lenders. The funds in escrow are for payment of property taxes, insurance, leasing costs and capital expenditures. 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. In addition, the Company maintains an allowance for deferred rent receivable that arises from straight lining of rents. The Company exercises judgment in establishing these allowances and considers payment history and current credit status of its tenants in developing these estimates. As of December 31, 2021  and 2020 , the balance of allowance for possible uncollectable tenant receivables included in other assets, net in the accompanying consolidated balance sheets was approximately $ 70,000 and $ 70,000 , respectively.   Deferred Leasing Costs. Costs incurred in connection with successful property leases are capitalized as deferred leasing costs and amortized to leasing commission expense on a straight-line basis over the terms of the related leases which generally range from one to five years. Deferred leasing costs consist of third -party leasing commissions. Management re-evaluates the remaining useful lives of leasing costs as the creditworthiness of the tenants and economic and market conditions change. If management determines the estimated remaining life of the respective lease has changed, the amortization period is adjusted. At December 31, 2021  and 2020 , the Company had net deferred leasing costs of approximately $ 1.4 million and $ 1.9 million, respectively. Total amortization expense for the years ended December 31, 2021  and 2020  was approximately $ 0.3  million and $ 0.4 million, respectively.   F- 11 Table of Contents   Deferred Financing Costs. 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, 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 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 .   As of  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 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 of 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. 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.   We, together with our subsidiary, NetREIT Dubose, have elected to treat such subsidiary as 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 major tax jurisdictions.   Fair Value Measurements. Certain assets and liabilities are required to be carried at fair value, or if long-lived assets are deemed to be impaired, to be adjusted to reflect this condition. The guidance requires disclosure of fair values calculated under each level of inputs within the following hierarchy:   Level 1 – Quoted prices in active markets for identical assets or liabilities at the measurement date.   Level 2 – Inputs other than quoted process that are observable for the asset or liability, either directly or indirectly.   Level 3 – Unobservable inputs for the asset or liability.   Fair value is defined as the price at which an asset or liability is exchanged between market participants in an orderly transaction at the reporting date. Cash equivalents, mortgage notes receivable, tenant receivable and payables and accrued liabilities all approximate fair value due to their short-term nature. During the year ended December 31, 2021 , the Company measured the fair value of two of its real estate properties on a nonrecurring basis using Level 3 inputs. 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 .   F- 12 Table of Contents   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 .  Effective January 1, 2018, we adopted the guidance of ASC 610 - 20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610 - 20” ), which applies to sales or transfers to noncustomers of nonfinancial assets or in substance nonfinancial assets that do not meet the definition of a business. Generally, our sales of real estate would be considered a sale of a nonfinancial asset as defined by ASC 610 - 20.   ASC 610 - 20 refers to the revenue recognition principles under ASU No. 2014 - 9. Under ASC 610 - 20, if we determine we do not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, we would derecognize the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer. Revenue Recognition and Accounts Receivables . We recognize minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is reasonably assured and record amounts expected to be received in later years as deferred rent receivable. If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or by us. When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that the tenant can take in the form of cash or a credit against its rent) that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:     • whether the lease stipulates how a tenant improvement allowance may be spent;     • whether the amount of a tenant improvement allowance is in excess of market rates;     • whether the tenant or landlord retains legal title to the improvements at the end of the lease term;     • whether the tenant improvements are unique to the tenant or general-purpose in nature; and     • whether the tenant improvements are expected to have any residual value at the end of the lease.   We record property operating expense reimbursements due from tenants for common area maintenance, real estate taxes, and other recoverable costs in the period the related expenses are incurred.   We make estimates of the collectability of our tenant receivables related to base rents, including deferred rent receivable, expense reimbursements and other revenue or income. We specifically analyze accounts receivable, deferred rent receivable, historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, management makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. 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.    F- 13 Table of Contents   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 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, 2021  and 2020 , the basic and diluted net loss per share are equivalent at  $ ( 0.46 ) and  $ ( 0.85 )  per share becau se the Company had incurred a net loss causing any potentially dilutive securities to be anti-dilutive.   Recently Issued Accounting Pronouncements.    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. 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.   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. GAAP. 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.   3. 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.   F- 14 Table of Contents   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 $ 913,000 .     • Union Terrace, which was sold on  March 13, 2020   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  for approximately $ 2.3 million and the Company recognized a loss of approximately $ 75,000 .     • 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.   F- 15 Table of Contents       4.  REAL ESTATE ASSETS   The Company owns a diverse portfolio of real estate assets. 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 four states. As of December 31, 2021 , the Company owned or had an equity interest in:     • 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” or “Model Home Properties”) leased back on a triple-net basis to homebuilders that are owned by  six  affiliated limited partnerships and  one  wholly-owned corporation.   The Company’s real estate assets consisted of the following as of December 31, 2021  and 2020 :       Date       Real estate assets, net   Property Name   Acquired   Location   2021     2020   Garden Gateway Plaza (1)   March 2007   Colorado Springs, CO   $ —     $ 11,464,531   World Plaza (2)   September 2007   San Bernardino, CA     9,272,213       9,272,213   Executive Office Park (1)   July 2008   Colorado Springs, CO     —       5,105,831   Waterman Plaza (1)   August 2008   San Bernardino, CA     —       3,500,002   Genesis Plaza (3)   August 2010   San Diego, CA     8,310,803       8,651,177   Dakota Center   May 2011   Fargo, ND     8,607,360       8,597,493   Grand Pacific Center (6)   March 2014   Bismarck, ND     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   August 2015   Fargo, ND     7,025,325       7,061,122   300 N.P.   August 2015   Fargo, ND     2,929,563       3,279,522   Research Parkway   August 2015   Colorado Springs, CO     2,375,943       2,438,594   One Park Center   August 2015   Westminster, CO     7,992,420       8,586,309   Highland Court (1)(4)   August 2015   Centennial, CO     —       10,500,001   Shea Center II   December 2015   Highlands Ranch, CO     20,246,645       21,026,112   Mandolin (4)   August 2021   Houston, TX     4,875,696       —   Baltimore   December 2021   Baltimore, MD     8,891,810       —   Presidio Property Trust, Inc. properties               103,975,890       123,744,371   Model Home properties (5)     2014 - 2021   AZ, FL, IL, PA, TX, WI     34,089,046       42,509,596   Total real estate assets and lease intangibles, net             $ 138,064,936     $ 166,253,967     ( 1 ) 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.   F- 16 Table of Contents   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:   2022   $ 3,362,188   2023     1,990,408   2024     1,136,825   2025     1,210,653   2026     2,218,671   Thereafter     1,540,799   Totals   $ 11,459,544     The Company generally rents Model Home Properties to homebuilders under non-cancelable lease agreements with a term of 18 months with an option to extend in six months increments. Future minimum rental revenues under existing leases on Model Home Properties as of December 31, 2021  are expected to be as follows:   2022   $ 2,121,864   2023     540,504       $ 2,662,368       5. LEASE INTANGIBLES   Lease intangibles consist of the following:       December 31, 2021     December 31, 2020       Lease     Accumulated     Lease     Lease     Accumulated     Lease       Intangibles     Amortization     Intangibles, net     Intangibles     Amortization     Intangibles, net   In-place leases   $ 2,515,264     $ ( 2,353,782 )   $ 161,482     $ 3,136,587     $ ( 2,757,530 )   $ 379,057   Leasing costs     1,261,390       ( 1,165,701 )     95,689       1,730,656       ( 1,510,559 )     220,097   Above-market leases     333,485       ( 333,485 )     —       333,485       ( 291,421 )     42,064       $ 4,110,139     $ ( 3,852,968 )   $ 257,171     $ 5,200,728     $ ( 4,559,510 )   $ 641,218     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:   2022   $ 202,342   2023     17,526   2024     17,526   2025     15,670   2025     4,107   Thereafter     —   Total   $ 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.   F- 17 Table of Contents     6. OTHER ASSETS   Other assets consist of the following:     December 31,     December 31,       2021     2020   Deferred rent receivable   $ 1,660,197     $ 1,912,048   Prepaid expenses, deposits and other     473,554       215,946   Investment in marketable securities, at fair value     1,514,483       83,241   Accounts receivable, net     401,927       541,885   Right-of-use assets, net     74,643       102,144   Other intangibles, net     82,483       142,483   Notes receivable     316,374       316,374   Deferred offering costs     134,843       108,660   Total other assets   $ 4,658,504     $ 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.     F- 18 Table of Contents     7.  MORTGAGE NOTES PAYABLE   Mortgage notes payable consisted of the following:       Principal as of                             December 31,     December 31,     Loan     Interest           Mortgage note property   2021     2020     Type     Rate (1)     Maturity   Waterman Plaza (2)   $ —     $ 3,207,952     Variable       —       —   World Plaza (3) (4)     —       5,802,568     Variable       —       —   Garden Gateway Plaza (2)     —       5,861,523     Fixed       —       —   300 N.P. (8)     2,232,923       2,273,478     Fixed       4.95 %   6/11/2022   Highland Court (2)     —       6,274,815     Fixed       3.82 %   —   Dakota Center     9,677,108       9,900,279     Fixed       4.74 %   7/6/2024   Research Parkway     1,705,438       1,760,432     Fixed       3.94 %   1/5/2025   Arapahoe Service Center     7,770,887       7,932,255     Fixed       4.34 %   1/5/2025   Union Town Center     8,173,568       8,315,550     Fixed       4.28 %   1/5/2025   One Park Centre     6,276,849       6,385,166     Fixed       4.77 %   9/5/2025   Genesis Plaza     6,168,604       6,276,273     Fixed       4.71 %   9/6/2025   Shea Center II     17,494,527       17,727,500     Fixed       4.92 %   1/5/2026   Executive Office Park (2)     —       2,985,998     Fixed       4.83 %   6/1/2027   West Fargo Industrial     4,148,405       4,262,718     Fixed       3.27 %   8/5/2029   Grand Pacific Center (5) (7)     3,619,695       3,738,142     Fixed       4.02 %   8/1/2037   Subtotal, Presidio Property Trust, Inc. Properties   $ 67,268,004     $ 92,704,649                         Model Home mortgage notes (3)     22,154,128       28,083,356     Fixed       (6 )     2022 - 2024   Mortgage Notes Payable   $ 89,422,132     $ 120,788,005                         Unamortized loan costs     ( 562,300 )     ( 758,309 )                       Mortgage Notes Payable, net   $ 88,859,832     $ 120,029,696                           ( 1 ) Interest rates as of December 31, 2021 . ( 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, 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. ( 6 ) Each Model Home has a stand-alone mortgage note at interest rates ranging from 2.5 % to 4.33 % at December 31, 2021 .  ( 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:   F- 19 Table of Contents       Commercial     Model               Properties     Homes     Total Principal   Years ending December 31:   Notes Payable     Notes Payable     Payments   2022     3,577,700       8,633,455     $ 12,211,155   2023     1,406,466       4,376,107       5,782,573   2024     10,379,660       9,144,566       19,524,226   2025     28,782,401       —       28,782,401   2025     16,644,046       —       16,644,046   Thereafter     6,477,731       —       6,477,731   Total   $ 67,268,004     $ 22,154,128     $ 89,422,132       8. NOTE PAYABLE   On September  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. 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 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  1, 2020. There was  no  unrecognized OID as of  September 30, 2021  or  December 31, 2020.   The Company incurred approximately $ 1.1 million in legal and underwriting costs related to the transaction. 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. On  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).   On  April 30, 2020,  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. On  June 5, 2020,  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 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.   On  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.   F- 20 Table of Contents   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.   9.  COMMITMENTS AND CONTINGENCIES   The Company is obligated under certain tenant leases to fund tenant improvements and the expansion of the underlying leased properties.   Litigation. From time to time, we may become involved in various lawsuits or legal proceedings which arise in the ordinary course of business. Neither the Company nor any of the Company’s properties are presently subject to any material litigation nor, to the Company’s knowledge, is there any material threatened litigation.   Environmental Matters. 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 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. The U.S. 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” businesses. 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.   F- 21 Table of Contents     10.  STOCKHOLDERS’ EQUITY     Preferred Stock. The Company is authorized to issue up to 1,000,000 shares of Preferred Stock (the “Preferred Stock”). 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.   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 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 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:   Dividends: 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.   F- 22 Table of Contents   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.    Redemption: 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 $ 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. 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. 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 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.   F- 23 Table of Contents   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, 2021 , the Company declared and paid cash dividends of approximately $ 4.5 million. For the year ended  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 Month   2021     2020       Cash Dividend     Cash Dividend   March 31   $ 0.101     $ —   June 30     0.102       —   September 30     0.103       —   December 31     0.104       0.100   Total   $ 0.410     $ 0.100       Series D Preferred Stock Month   2021     2020       Distributions Declared     Distributions Declared   January   $ —     $ —   February     —       —   March     —       —   April     —       —   May     —       —   June     0.10417       —   July     0.19531       —   August     0.19531       —   September     0.19531       —   October     0.19531       —   November     0.19531       —   December 31     0.19531       —   Total   $ 1.27603       —     Partnership Interests.  Through the Company, its subsidiaries, and its partnerships, we own  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. 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.   F- 24 Table of Contents   Dividend Reinvestment Plan. 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 .    11. SHARE-BASED INCENTIVE PLAN   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. The Company recognized compensation cost for these fixed awards over the service vesting period, which represents the requisite service period, using the straight-line method. 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 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:   Outstanding shares:   Common Shares             Balance at December 31, 2020     126,190   Granted     320,096   Forfeited     ( 29,737 ) Vested     ( 121,078 ) Balance at December 31, 2021     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.     F- 25 Table of Contents     12.  SEGMENTS   The Company’s reportable segments consist of the three types of commercial real estate properties for which the Company’s decision-makers internally evaluate operating performance and financial results: Office/Industrial Properties, Model Homes and Retail Properties. The Company also has certain corporate level activities including accounting, finance, legal administration and management information systems which are not considered separate operating segments. The accounting policies of the reportable segments are the same as those described in Note 2.  There is no significant intersegment activity.   The Company evaluates the performance of its segments based upon net operating income (“NOI”), which is a non-GAAP supplemental financial measure. The Company defines NOI for its segments as operating revenues (rental income, tenant reimbursements and other operating income) less property and related expenses (property operating expenses, real estate taxes, insurance, asset management fees, impairments and provision for bad debt) excluding interest expense. NOI excludes certain items that are not considered to be controllable in connection with the management of an asset such as non-property income and expenses, depreciation and amortization, real estate acquisition fees and expenses and corporate general and administrative expenses. The Company uses NOI to evaluate the operating performance of the Company’s real estate investments and to make decisions about resource allocations.   The following tables reconcile the Company’s segment activity to its results of operations and financial position as of and for the years ended December 31, 2021  and 2020 , respectively.       For the Year Ended December 31,       2021     2020   Office/Industrial Properties:                 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 )     ( 202,667 ) 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     ( 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     —       ( 530,639 ) Gain on extinguishment of government debt     10,000       451,785   Other income (expense), net     ( 3,417 )     ( 20,636 ) Income tax expense     47,620       ( 370,884 ) Gain on sale of real estate     2,487,528       1,245,460   Net loss   $ ( 1,463,442 )   $ ( 6,261,398 )   F- 26 Table of Contents       December 31,     December 31,   Assets by Reportable Segment:   2021     2020   Office/Industrial Properties:                 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   Total Assets   $ 161,196,763     $ 185,568,616     ( 1 ) Includes lease intangibles and the land purchase option related to property acquisitions. ( 2 ) Includes land, buildings and improvements, current receivables, deferred rent receivables and deferred leasing costs and other related intangible assets, all shown on a net basis.       For the Year Ended December 31,   Capital Expenditures by Reportable Segment   2021     2020   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       9,205   Totals:                 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     F- 27 Table of Contents     13.  SUBSEQUENT EVENTS   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 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”.    The $ 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.      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.   F- 28 Table of Contents     Presidio Property Trust, Inc. and Subsidiaries Schedule III - Real Estate and Accumulated Depreciation and Amortization – as of December 31, 2021   All amounts are in thousands           Initial Cost             Total Cost     (1)                                   Property Name/ Location   Encumbrances     Land Cost     Building & Improvements     Acquisition Price     Capitalized Improvements     Land Cost     Building & Improvements     Total Cost     Accumulated Depreciation & Amortization     Reserve for Impairment     NBV Real Estate     Date Acquired     Year Built / Renovated   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     08/10       1989   Dakota Center, Fargo, ND     9,677       832       8,743       9,575       2,876       832       11,619       12,451       3,844       —       8,607     05/11       1982   Grand Pacific Center, Bismarck, ND (3)     3,620       413       4,926       5,339       2,124       413       7,050       7,463       2,006       —       5,457     03/14       1976   Arapahoe Center, Centennial, CO     7,771       1,420       10,430       11,850       592       1,420       11,022       12,442       3,621       —       8,821     12/14       2000   West Fargo Industrial, Fargo, ND     4,148       1,693       6,207       7,900       351       1,693       6,558       8,251       1,226       —       7,025     08/15     1998/2005   300 N.P., Fargo, ND     2,233       135       3,715       3,850       273       135       3,988       4,123       885       308       2,930     08/15       1922   One Park Centre, Westminster, CO     6,277       1,206       7,944       9,150       1,398       1,206       9,342       10,548       2,555       —       7,992     08/15       1983   Shea Center II, Highlands Ranch, CO     17,495       2,214       23,747       25,961       2,281       2,214       26,028       28,241       7,995       —       20,247     12/15       2000   Baltimore, Baltimore, MD     —       2,668       6,224       8,892       0       2,668       6,224       8,892       —             8,892     12/20       2006   Total Office/ Industrial properties     57,389       11,981       80,536       92,517       12,556       11,981       93,092       105,073       26,482       308       78,283                                                                                                                             World Plaza , San Bernardino, CA (2)     —       1,698       6,232       7,930       4,289       1,698       10,521       12,219       2,246       700       9,272     09/07       1974   Union Town Center, Colorado Springs, CO     8,174       1,750       9,462       11,212       67       1,750       9,529       11,279       2,110       —       9,169     12/14       2003   Research Parkway, Colorado Springs, CO     1,705       408       2,442       2,850       ( 50 )     408       2,392       2,799       424       —       2,376     08/16       2003   Mandolin, Houston, TX     —       1,330       3,562       4,892       15       1,330       3,577       4,906       31       —       4,876     08/21       2021   Total Retail properties     9,879       5,186       21,698       26,884       4,320       5,186       26,018       31,203       4,810       700       25,693                                                                                                                             Model Homes-DMH LP #202     822       235       1,435       1,670       —       235       1,435       1,670       141       —       1,529       2017 - 2018       2017 - 2018   Model Homes-DMH LP #203     3,273       1,080       4,697       5,777       —       1,080       4,697       5,777       412       —       5,365       2016 - 2019       2016 - 2019   Model Homes-DMH LP #204     2,810       980       4,903       5,883       —       980       4,903       5,883       361       —       5,522       2018 - 2020       2018 - 2020   Model Homes-DMH LP #205     4,207       1,260       5,223       6,482       —       1,260       5,223       6,482       280       —       6,202       2019 - 2020       2019 - 2020   Model Homes-DMH LP #206     2,097       392       2,740       3,132       —       392       2,740       3,132       75       —       3,057       2020 - 2021       2020 - 2021   Model Homes-NMH Inc.     8,945       1,881       10,920       12,801       —       1,881       10,920       12,801       388       —       12,413       2017 - 2021       2017 - 2021   Total Model Home properties     22,154       5,828       29,917       35,746       —       5,828       29,917       35,746       1,657       —       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 )     Property was listed as held for sale in February 2022.     F- 29 Table of Contents   Presidio Property Trust, Inc. and Subsidiaries Schedule III - Real Estate and Accumulated Depreciation and Amortization (continued) – as of December 31, 2021       For the Year Ended December 31,       2021     2020   Real estate                 Balance at the beginning of the year   $ 208,641,166     $ 244,320,582   Acquisitions     22,224,826       10,161,613   Improvements     1,598,105       2,834,367   Impairments     ( 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       F-30