What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-03-28 compared with 2022-03-30 · 212 added, 194 removed, 270 unchanged (60% of the section changed)

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Market Information

Our Series A Common Stock trades on the Nasdaq Capital Market under the symbol "SQFT" beginning on October 7, 2020.  Our Series D Preferred Stock is listed on The Nasdaq Capital Market under the symbol “SQFTP”

beginning on June 11, 2021. 

Our Series A Common Stock has been listed on the Nasdaq Capital Market under the symbol "SQFT" since October 7, 2020.  Our Series D Preferred Stock has been listed on the Nasdaq Capital Market under the symbol “SQFTP”

since June 11, 2021. 

On January 24, 2022, our Series A Warrants began trading on the Nasdaq Capital Market under the symbol "SQFTW".

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Number of Common Stockholders

As of March 25, 2022, there were approximately 5,000 holders of our Series A Common Stock .

As of March 27, 2023, there were approximately 6,000 holders of our Series A Common Stock .

Dividend Payments

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Series A Common Stock

Cash Dividend

Quarter Ended

Distributions Declared

Series D Preferred Stock

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We provide each of our stockholders a statement detailing dividends paid during the preceding year and their characterization as ordinary income, capital gain or return of capital annually.

During the year ended December 31, 2021, all dividends to holders of our Series A Common Stock were non-taxable as they were considered return of capital to the stockholders.

During the year ended December 31, 2020, all dividends to holders of Series A Common Stock were taxable as they were considered capital gain to the stockholders.

During the years ended December 31, 2022 and December 31, 2021, all dividends to holders of our Series A Common Stock were non-taxable as they were considered return of capital to the stockholders.

Equity Compensation Plan Information

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The 1999 Plan provided that the maximum number of shares to be issued under the 1999 Plan would be an amount equal to 10% of the Company’s issued and outstanding common stock at such time;

the aggregate number of common stock that may be issued under the 2017 Plan is 1,100,000 shares. At December 31, 2021, approximately 651,000 restricted shares of common stock had been issued under the 1999 Plan and approximately 514,000 shares of Restricted Stock as defined in the 2017 Plan had been issued under such Plan. At December 31, 2021, the amount of shares of common stock available for future grants under the 2017 Plan was approximately 586,000 shares.

the aggregate number of common stock that may be issued under the 2017 Plan is 2,500,000 shares. 

At December 31, 2022 , approximately 651,000 restricted shares of common stock had been issued under the 1999 Plan and approximately 1,017,346 shares of Restricted Stock as defined in the 2017 Plan had been issued under such plan. At December 31, 2022 , the amount of shares of common stock available for future grants under the 2017 Plan was approximately 1,483,000 shares.

Issuer Purchases of Equity Securities

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

Purchases under the repurchase program may be made in the open market, through block trades, and other negotiated transactions.

We expect to execute the share repurchase program primarily in open market transactions, subject to market conditions.

There is no fixed termination date for the repurchase program, and the program may be suspended, discontinued, or accelerated at any time.

The following table contains information for shares of common stock repurchased during the three months ended December 31, 2021.

On September 17, 2021, the Board of Directors authorized a stock repurchase program of up to $10 million of outstanding shares of our Series A Common Stock, which expired in September 2022.

On September 15, 2022, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock. 

During the year ended December 31, 2021, the Company repurchased 29,721 shares of our Series A Common Stock at an average price of approximately $3.7223 per share, including a commission of $0.035 per share, for a total cost of $110,631. 

During the year ended December 31, 2022 , the Company repurchased 196,631 shares of our Series A Common Stock at an average price of approximately $1.59 per share, including a commission of $0.035 per share, and 6,013 shares of our Series D Preferred Stock at an average price of approximately $20.31 per share, including a commission of $0.035 per share, for a total cost of $313,578 for the Series A Common Stock and $122,141 for the Series D Preferred Stock. The repurchased shares will be treated as authorized and 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 of Directors believes there is significant embedded value in our assets that is yet to be realized by the market.

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

The following tables contain information for shares of Series A Common Stock and Series D Preferred Stock repurchased during the year ended December 31, 2022 .

Series A Common Stock:

Total Number of Shares Purchased

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Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

February 2022

September 2022

November 2022

December 2022

SELECTED FINANCIAL DATA

Series D Preferred Stock:

Total Number of Shares Purchased

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

February 2022

September 2022

November 2022

December 2022

Not required.

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As of December 31, 2022, including properties held for sale, the Company owned or had an equity interest in:

 office buildings and  industrial buildings (“Office/Industrial Properties”) which total approximately 757,578  rentable square feet,

 retail shopping centers (“Retail Properties”) which total approximately 121,052 rentable square feet, and

 Eight office buildings and one industrial building (“Office/Industrial Properties”) which total approximately 756,265  rentable square feet,

Three retail shopping centers (“Retail Properties”) which total approximately 65,242 rentable square feet, and

92 model homes owned by five affiliated limited partnerships and one corporation (“Model Home Properties”).

Presidio Property Trust’s office, industrial and retail properties are located California, Colorado, Maryland, North Dakota and Texas.

Our Model Home Properties are located in four states, primarily in Texas.

Our Model Home Properties are located in three states, primarily in Texas.

We acquire properties that are stabilized or that we anticipate will be stabilized within two or three years of acquisition.

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Acquisitions during the year ended December 31, 2022:

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.

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.

We acquired 31 Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2022.

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.

The purchase price for these properties was $15.6 million.

The purchase price consisted of cash payments of $4.8 million and mortgage notes of $10.8 million.

Acquisitions during the year ended December 31, 2021:

The building is 100% occupied under a 15-year triple net lease and was 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 5 year triple net lease to Johns Hopkins University’s Bloomberg School of Public Health and was purchased with all cash.

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

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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:

During year ended December 31, 2022, we disposed of the following properties:

World Plaza, which was sold on March 11, 2022, for approximately $10.0 million and the Company recognized a loss of approximately $0.3 million.

31 model homes for approximately $17.5 million and the Company recognized a gain of approximately $5.4 million.

Dispositions during the year ended December 31, 2021:

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.

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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.

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

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”

The SPAC raised $132,250,000 in capital investment to acquire an operating business.

We, through our wholly-owned subsidiary, owned approximately 23.49% 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.

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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.

On November 8, 2022, the SPAC entered into an agreement and plan of merger with Conduit Pharmaceuticals Limited, a Cayman Islands exempted company (“Conduit”), and Conduit Merger Sub, Inc., a Cayman Islands exempted company and the SPAC’s wholly owned subsidiary.

If the merger agreement is approved by the SPAC’s stockholders and the transactions under the merger agreement  are consummated, the SPAC’s Cayman Island subsidiary will merge with and into Conduit, with Conduit surviving the merger as the SPAC’s wholly owned subsidiary.

Pursuant to the merger agreement, the outstanding ordinary shares (including the shares issued upon conversion of all outstanding convertible debt, which conversion shall have occurred prior to the consummation of the merger) of Conduit will be converted into an aggregate of 65,000,000 shares of the SPAC’s newly issued common stock, with each such outstanding Conduit ordinary share (including the ordinary shares issued upon conversion of all outstanding convertible debt, which conversion shall have occurred prior to the consummation of the merger) converted into newly issued shares of the SPAC’s common stock on a pro rata basis.

Initially, the SPAC was required to complete its initial business combination transaction by 12 months from the consummation of its initial public offering or up to 18 months if it extended the period of time to consummate a business combination in accordance with its certificate of incorporation. 

On January 26, 2023, at a special meeting of the stockholders, the stockholders approved a proposal to amend the SPAC’s certificate of incorporation to extend the date by which it has to consummate a business combination up to 12 times, each such extension for an additional one month period, from February 7, 2023, to February 7, 2024.  The stockholders also approved a related proposal to amend the trust agreement allowing the SPAC to deposit into the trust account, for each one-month extension, one-third of 1% of the funds remaining in the trust account following the redemptions made in connection with the approval of the extension proposal at the special meeting.  Following redemptions made in connection with the special meeting, we owned approximately 65% of the issued and outstanding equity of the SPAC.

On March 3, 2023 we loaned Murphy Canyon $300,000 to fund its trust account and for operating expenses, and may lend up to $1.5 million in total. 

 The loan is non-interest bearing, unsecured and will be repayable in full upon the earlier of (i) the date on which Murphy Canyon consummates its initial business combination and (ii) the date that its winding up is effective.

ECONOMIC ENVI RONMENT

On March 11, 2020, the World Health Organization declared COVID-19, a respiratory illness caused by the novel coronavirus, a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.

The COVID-19 pandemic caused state and local governments within our areas of business operations to institute quarantines, “shelter-in-place”

mandates, including rules and restrictions on travel and the types of businesses that may continue to operate.

While certain areas have re-opened, others have seen an increase in the number of cases reported, prompting local governments to consider enforcing further restrictions.

We continue to monitor our operations and government recommendations.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law to provide widespread emergency relief for the economy and to provide aid to corporations.

The CARES Act includes several significant provisions related to taxes, refundable payroll tax credits and deferment of social security payments.

We utilized certain relief options offered under the CARES Act and continue to evaluate the relief options for us and our tenants available under the CARES Act, as well as other emergency relief initiatives and stimulus packages instituted by the federal government.

A number of the relief options contain restrictions on future business activities, which require careful evaluation and consideration, such as restrictions on the ability to repurchase shares and pay dividends.

We will continue to assess these options, and any subsequent legislation or other relief packages, including the accompanying restrictions on our business, as the effects of the pandemic continue to evolve.

The effects of the COVID-19 pandemic did not significantly impact our operating results during the fiscal 

We continue to monitor and communicate with our tenants to assess their needs and ability to pay rent.

We have negotiated lease amendments with certain tenants who have demonstrated financial distress caused by the COVID-19 pandemic, which have included or may include rent deferral, temporary rent abatement, or reduced rental rates and/or lease extension periods, however no new negotiations were initiated during the first and second quarters of 2021.

While these amendments have affected our short-term cash flows, we do not believe they represent a change in the valuation of our assets for the properties affected and have not significantly affected our results of operations.

Given the longevity of this pandemic and the potential for other variants of the coronavirus, such as the delta variant, the COVID-19 outbreak may materially affect our financial condition and results of operations going forward, including, but not limited to, real estate rental revenues, credit losses, leasing activity, and potentially the valuation of our real estate assets.

We do not expect additional rent deferrals, abatements, and credit losses from our commercial tenants during the remainder of 2021 which may have a material impact on our real estate rental revenue and cash collections.

While we do expect that the effects of the COVID-19 pandemic will impact our ability to lease up available commercial space, our business operations and activities in many regions may be subject to future quarantines, “shelter-in-place”

rules, and various other restrictions for the foreseeable future.

Due to the uncertainty of the future impacts of the COVID-19 pandemic, the extent of the financial impact cannot be reasonably estimated at this time.

We are currently focused on growing our portfolio with the recent capital raised from the sale of our 9.375% Series D Cumulative Redeemable Perpetual Preferred Stock in June 2021 and our Series A Common Stock in July 2021.  For more information, see Part II - Item 1A.

Risk Factors”

included elsewhere in this Annual Report on Form 10-K.

We have taken steps to best protect the health and safety of our employees globally.  Our daily execution has evolved largely into a virtual model, but we believe we have been successful in maintaining our ability to effectively communicate with and service our tenants during the pandemic period. 

It is impossible to project U.S.

economic growth, but economic conditions could have a material effect on our business, financial condition and results of operations.

According to Nareit's, the National Association of Real Estate Investment Trusts, 2022 Outlook for the Economy, published on it website in December 2021, Commercial Real Estate and REITs, the coming year is likely to see significant further improvement in overall economic conditions, with rising GDP, job growth, and higher incomes, in a supportive financial market environment where inflation pressures gradually subside and long-term interest rates remain well below their historical norms.

The emergence of the new Omicron variant of COVID-19 in late November 2021 serves as a reminder that the threat of new waves of infection looms over all aspects of the global economy.

Increasing vaccination rates and natural immunity due to prior infection may help contain these risks. 

Nareit does not expect commercial real estate markets or the rest of the economy to go back completely to the way they were before the pandemic.  Overall, the year ahead is likely to build on the recovery that is already underway in the macroeconomy and in commercial real estate markets.

REITs are likely to perform well in this growth environment.

Three obstacles are challenging the outlook over the near-term:

ongoing high levels of COVID-19 infections, production and supply chain bottlenecks, and an elevated inflation rate.

First, the pandemic continues to hold back many types of economic activity that involve face-to-face interactions, including employees’

return to the office, business travel, and many forms of entertainment.

Second, the supply chain issues are well known, and have restricted auto production and availability of many types of goods.

Finally, the consumer price index has risen 6.2% over the past 12 months, well above the Federal Reserve’s target, raising the possibility of higher interest rates to slow the economy to prevent it from overheating.

Labor shortages, especially in a few sectors like hotels and restaurants, have limited some businesses’

ability to reopen fully.

Most of the inflation pressures have resulted, however, from shortages of key components due to production and supply chain disruptions, and there is little evidence to date that inflation is being driven by higher labor costs.

There has been, in fact, significant progress on the return-to-office.

In May 2020, 46 million employees reported that they were working from home due to the pandemic.

There has been a steady flow over the past 18 months of millions of workers returning to the office, although this trend was briefly interrupted by the surge in cases of COVID-19 in November-December 2020 and again by the Delta variant last summer (see Nareit's chart 1.4:

Return to Office).

Nearly two-thirds of employees who had reported they were working from home in May 2020 had returned to the office by November 2021, although the pace of return has varied month-to-month according to the rate of vaccinations and infections.

These trends show that workers are coming back, but the pace at which they return to the office still depends on the pandemic.

Recent new leases signed by major technology companies indicates that offices are an essential part of their business model.

As COVID-19 cases decline, Nareit expects workers will continue to come back.

According to Nareit's, the National Association of Real Estate Investment Trusts, 2023 Outlook for the Economy, published on its website in December 2022, the U.S .

economy will continue to be marked by mixed economic growth results, waning job gains, elevated inflation, and higher interest rates.

The confluence of these factors has resulted in increased uncertainty surrounding the economic outlook.

In November 2022, the Bloomberg consensus forecast survey placed the odds of a U.S.

recession within the next 12 months at 62.5%;

the likelihood was 15% at the start of the year. While property fundamentals generally remained solid at the end of 2022, there has been some evidence of softening going into 2023.

The industrial, retail, and apartment property types maintained elevated occupancy rates that were higher than their respective pre-pandemic levels.

Office occupancy continued its downward trajectory, dropping nearly 3% from its 2019 average.

Four-quarter rent growth rates remained healthy for the industrial, retail, and apartment sectors;

office continued work toward maintaining positive rent gains. Higher interest rates and debt costs are throttling commercial real estate transaction volume.

The combination of high rates and weak valuations resulted in a dearth of REIT capital raising in the third quarter of 2022;

it is at its lowest level since 2009.

CREDIT MARKET ENVIRON MENT

As noted in Nareit's "REITs & Inflation Outlook 2022:

What to Know" article published on its website in December 2021, inflationary pressure to the macroeconomy from the effects of supply chain interruptions will likely lead to moderate inflation levels over the next year, rising above the Federal Reserve's target of 2.5% but likely well below historically high levels seen in the 1970s and early 1980s.  Same store net operating income (SSNOI) from Nareit’s T-Tracker gives a conservative estimate of REIT growth during different periods of inflation.

SSNOI doesn’t include growth from acquisitions and the data exclude some of the highest growth property sectors of the last decade—lodging/resorts, timber, infrastructure, data centers, and specialty. 

Annual SSNOI growth outpaced annual inflation in 63% of quarters from 1996Q1 to 2021Q3.

There are no periods of high inflation in this time period, and the average inflation is under the Federal Reserve target at 2.2%.

REIT operating income is consistently higher during periods of higher inflation, SSNOI growth averaged 2.5% during low inflation periods compared to 3.0% in periods of moderate inflation.

While past performance is not always predictive of the future, Nareit see that in the current environment REIT operating income is more than keeping pace with price level increases.

In the two most recent quarters when consumer price index jumped over 5%, SSNOI outpaced the uptick in annualized inflation by 23 basis points in 2021Q2 and 187 basis points in Q3.

As noted in Nareit's "2023 REIT Outlook:

REITs, Recessions, and Economic Uncertainty" article published on its website in December 2022, the Bloomberg forecast survey made in November of 2022 placed the odds of a recession in the US within the next year at 62.5%.

It was 15% at the beginning of 2022.

The commercial property market has shown some signs of softening as we enter 2023.

Higher interest rates and debt costs continue to slow commercial real estate transaction volume.

The combination of high rates and weak valuations resulted in little REIT capital raising.

In the third quarter of 2022, REIT capital raising was at its lowest level since 2009.

Our ability to execute our business strategies, and in particular to make new investments, is highly dependent upon our ability to procure external financing.

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We continue to obtain mortgages from the commercial mortgage-backed securities (“CMBS”) market, life insurance companies and regional banks.

Although these lenders are currently optimistic about the outlook of the credit markets, the potential impact of new regulations and market volatility remain a concern.

Even though we have been successful in procuring equity financing and secured mortgages financing, we cannot be assured that we will be successful at doing so in the future.

Although these lenders are cautious about the outlook of the credit markets, financing does appear to be available for desirable properties in strong locations.

Even though we have been successful in procuring equity financing and secured mortgages financing in the past, we cannot be assured that we will be successful at doing so in the future.

Rising inflation and elevated U.S.

budget deficits and overall debt levels, including as a result of federal pandemic relief and stimulus legislation and/or economic or market and supply chain conditions, can put upward pressure on interest rates and could be among the factors that could lead to higher interest rates in the future.

Higher interest rates could adversely affect our overall business, income, and our ability to pay dividends, including by reducing the fair value of many of our assets and adversely affecting our ability to obtain financing on favorable terms or at all, and negatively impacting the value of properties and the ability of prospective buyers to obtain financing for properties we intend to sell.

budget deficits and overall debt levels, including as a result of federal pandemic relief and stimulus legislation and/or economic or market and supply chain conditions, can continue to put upward pressure on interest rates and could be among the factors that could lead to even higher interest rates in the future.

Prolonged higher interest rates could adversely affect our overall business, income, and our ability to pay dividends, including by reducing the fair value of many of our assets and adversely affecting our ability to obtain financing on favorable terms or at all, and negatively impacting the value of properties and the ability of prospective buyers to obtain financing for properties we intend to sell.

This may affect our earnings results, reduce our ability to sell our assets, or reduce our liquidity.

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Our results of operations for the years ended December 31, 2022 and 2021 are not indicative of those expected in future periods. Management does not expect that the level of commercial property sales experienced over the last 24 months to continue in the near future. 

Additionally, with the recent equity raised in June and July 2021, management is working to increase the number of commercial properties in the portfolio with new acquisitions. 

Additionally, with the equity raised in June and July 2021, management is working to increase the number of properties in the portfolio with new acquisitions. 

However, elevated real estate prices in both commercial and residential real estate and compressing capitalization rates have made it challenging to acquire properties that fit our portfolio needs. 

As a result, we did not find any suitable commercial properties to acquire during 2022, but we were able to acquired 31 Model Home Properties. 

Management will continue to evaluate potential acquisitions in an effort to increase our portfolio of commercial real estate.

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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 .

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.

Revenue Recognition .  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 we are the owner of the tenant improvements, rental revenue begins when the tenant takes possession or has control of the physical use of the leased space and any tenant improvement allowance, 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.

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A TRS is subject to federal and state income taxes.

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.

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.

Our cash equivalents, mortgage notes receivable, accounts receivable and payables and accrued liabilities all approximate fair value due to their short-term nature.

Management believes that the recorded and fair values of notes payable are approximately the same as of December 31, 2021 and 2020.

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

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

Additionally, in an inactive market, a market price quoted from an independent third-party may rely more on models with inputs based on information available only to that independent third-party.

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

As of December 31, 2021 and December 31, 2020, our marketable securities presented on the balance sheet were measured using Level 1 market prices. 

There were no financial liabilities measured at fair value as of December 31, 2021 and 2020.

unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets;

prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

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, 2022 and December 31, 2021, our marketable securities presented on the balance sheet were measured at fair value using Level 1 market prices and totaled approximately $0.8 million and $1.5 million, respectively, with a cost basis of approximately $0.9 million and $1.6 million, respectively.  There were no financial liabilities measured at fair value as of December 31, 2022 and December 31, 2021 .

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.

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Diluted earnings per share is computed by dividing net income by the weighted average shares of common stock and potentially dilutive securities outstanding in accordance with the treasury stock method.

Dilutive common stock equivalents include the dilutive effect of in-the-money stock equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common stock equivalents if their effect would be anti-dilutive.

In periods in which a net loss has been incurred, all potentially dilutive common stock shares are considered anti-dilutive and thus are excluded from the calculation. Securities that are excluded from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive, are:

For the Year Ended December 31,

Common Stock Warrants

Placement Agent Warrants

Series A Warrants

Unvested Common Stock Grants

Total potentially dilutive shares

RESULTS FROM OPERATIONS FOR THE YEARS ENDED  

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$1.4 million or 7% .

The decrease in rental income reported in 2021  compared to 2020  is directly related to the sale of four commercial properties during 2021 and three commercial properties during 2020, and the net decrease in model home property (26) during the year ended December 31, 2021 . 

The decrease in rental income reported in 2022  compared to 2021  is related to the sale of four commercial properties during 2021 and the common area maintenance recovery ("CAM") income associated with those properties, and the sale of World Plaza in March of 2022. 

The CAM reduction for the year ended December 31, 2022 as compared to the same period in 2021 , totaled approximately $0.9 million. 

The decrease in rental income is also connected to the reduction of model homes in 2021 (going from 118 at the beginning of the year to 92 at December 31, 2021). 

As of December 31, 2022, we owned 92 model homes, the same number of homes as of December 31, 2021. 

The decrease in rental income was partially offset by the acquisition of our Mandolin and Baltimore properties during August and December 2021, respectively.

Rental Operating Costs . 

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32.2% for the years ended December 31, 2022  and 2021 , respectively.

The decrease in rental operating costs as a percentage of total revenue for the years ended December 31, 2021  compared to 2020  is due to the mix of properties held to include a higher percentage of triple net properties and model homes period over period, which have significantly lower operating costs.

The decrease in rental operating costs for the years ended December 31, 2022  compared to 2021  is mainly due to the overall reduction in commercial properties.

General and Administrative .

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$6.2 million for the year ended December 31, 2022 , compared to approximately 

$5.75 million for the same period in 2020 , representing an increase of approximately 

$0.47 million or 8% .

$6.2 million for the same period in 2021 , representing a decrease of approximately $62,000 or 1%.

As a percentage of total revenue, our general and administrative costs was approximately 

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32.4% for the years ended December 31, 2022  and 2021 , respectively.

The increase in G&A expense for the years ended December 31, 2021  compared to 2020  is mainly due to the increase in stock compensation which increased approximately $0.5 million.  

In connection with the Company becoming publicly traded in October 2020, the Company plans to continue rewarding its employee through stock-based compensation at a greater rate than historically. 

The increase was slightly offset by the decreased payroll related costs, temporally reduced by the Employee Retention Credit ("ERC") received during the second quarter of 2021.

The G&A expense for the years ended December 31, 2022  was affected by a reduction in payroll costs totaling approximately $878,000, including stock compensation, off set by the increase in D&O insurance for the SPAC totaling approximately $465,000 and higher accounting and consulting fees of approximately $412,000.

Depreciation and Amortization .

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$5.5 million for the year ended December 31, 2022 , compared to approximately 

$6.27 million for the same period in 2020 , representing a decrease of approximately 

$0.88 million or 14% .

The decrease in depreciation costs is associated with the properties sold in 2021  and 2020 .

$5.4 million for the same period in 2021.  

Asset Impairments

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, we recognized a non-cash impairment charge of approximately 

$1.73 million  on the Waterman Plaza property and Highland Court.

This impairment charges reflect management’s revised estimate of the fair market value based on sales comparable of like property in the same geographical area as well as an evaluation of future cash flows or an executed purchase sale agreement. The Company recognized a non-cash impairment of $0.3 million, related to the potential sale or our Highland Court property, and $0.3 million non-cash impairment related to 300 N.P. during the year ended December 31, 2021 . 

 on Highland Court and 300 N.P. This impairment charges reflect management’s revised estimate of the fair market value based on sales comparable of like property in the same geographical area as well as an evaluation of future cash flows or an executed purchase sale agreement. The Company did not recognize a non-cash impairment during the year ended

December 31, 2022

Interest Expense-mortgage notes. 

Interest expense, including amortization of deferred finance charges was approximately $4.54 million for the year ended December 31, 2021 compared to approximately 

$6.10 million  for the same period in 2020, a decrease of approximately 

$1.56 million , or 26% .

The decrease in mortgage interest expense relates to the decreased number of commercial properties owned in 2021 compared to 2020 and the related mortgage debt.

The weighted average interest rate on our outstanding debt was 4.25% and 4.18% as of December 31, 2021 and 2020 , respectively.

Interest expense, including amortization of deferred finance charges was approximately

for the year ended

December 31, 2022

compared to approximately 

 for the same period in

, an increase of  approximately 

The increase in mortgage interest expense relates to the increase mortgage debt on our commercial properties and model homes. 

During March and April 2022, we added approximately $9.3 million in mortgage debt related to our Baltimore and Mandolin properties and had a net increase in mortgage debt on our model home of approximately $2.6 million, in connection with model home sales and acquisitions.   The weighted average interest rate on our outstanding debt was

 and 4.25% as of

December 31, 2022

, respectively.

Interest Expense-note payable.  

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

Interest expense, including amortization of the deferred offering costs and Original Issue Discount of approximately $1.4 million, totaled approximately $0.3 and $2.7 million for the year ended December 31, 2021 and 2020, resp ectively. 

The Polar Note was paid in full during March 2021.

Interest expense, including amortization of the deferred offering costs and Original Issue Discount of approximately $1.4 million, totaled approximately $0.3 million for the year ended December 31, 2021. 

The Polar Note was paid in full during March 2021, and no similar expenses were recorded during the year ended 

December 31, 2022 .

Gain on Sale of Real Estate Assets.

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December 31, 2022 and 2021 , respectively.

Deferred Offering Costs.

 For the year ended December 31, 2020 , the Company recorded approximately $0.5 million in legal, accounting and filing related expenses upon completion of our initial public offering.

Income Tax Expense / Credit.

For the year ended December 31, 2021 , the Company recorded an income tax credit of approximately $48,000 related to estimated refunds from federal and state taxes for capital gains from the sale of model homes held by the taxable REIT subsidiary compared to a income tax expense of approximately $371,000, for the year ended December 31, 2020 .

For the year ended December 31, 2022 , the Company recorded an expense of approximately $1.2 million  related to estimated refunds from federal and state taxes for capital gains from the sale of model homes held by the taxable REIT subsidiary compared to a recorded an income tax credit of approximately $47,620,  for the year ended December 31, 2021 .

Income allocated to non-controlling interests. 

Income allocated to non-controlling interests for the year ended December 31, 2021  and 2020  totaled approximately 

Income allocated to non-controlling interests for the years ended December 31, 2022  and 2021  totaled approximately 

$3.6 million , and 

$1.41 million  

$2.2 million , and was directly impacted by the sale of 19 and 34 model homes during the years ended December 31, 2022  and 2021 , respectively, held by our 

Model Home Partnerships.

Geographic Diversification Tables

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LIQUIDITY AND CAPITAL RESOURCES

Our 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.

Management believes that the number of recent real estate sales and resulting cash generated may not be indicative of our future strategic plans. 

We intend to grow our portfolio with the recent capital raised from the sale of our Series D Preferred Stock in June 2021 and our Series A Common Stock in July 2021.

Our cash and restricted cash at December 31, 2021  was $14.7 million , which included our available liquidity of cash and cash equivalents.

Our 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.

Our anticipated fut ure sources of liquidity may include existing cash and cash equivalents, cash flows from operations, refinancing of existing mortgages, future real estate sales, new borrowings from our model home lines of credit, and the sale of equity or debt securities.

Management believes that the number of commercial real estate sales during 2021 (4 properties) and high level of model home sales during 2022 (31 homes) and 2021 (44 homes), and resulting cash generated thereby may not be indicative of our future strategic plans. 

We intend to grow our portfolio with cash on hand and future equity sales. 

Our cash and restricted cash at December 31, 2022  was approximately  

$16.5 million .

Our 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 le nder-held reserve deposits), and the payment of dividends to our stockholders.

We also are actively seeking investments that are likely to produce income and achieve long-term gains in order to pay dividends to our stockholders, and may seek a revolving line of credit to provide short-term liquidity.

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Our short-term liquidity needs include paying our current operating costs, satisfying the debt service requirements of our existing mortgages, completing tenant improvements, paying leasing commissions, and funding dividends to stockholders. 

Future principal payments due on our mortgage notes payables during 2022, total approximately $12.2 million, of which 

$8.6 million is related to model home properties. 

Management expects certain model home and commercial properties will be sold, and that the underlying mortgage notes will be paid off with sales proceeds, while other mortgage notes will be refinanced as the Company has done in the past.

Additional principal payments will be made with cash flows from ongoing operations.  

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. 

This property was not encumbered by any debt and net cash proceeds will be used for future cash needs.

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 $42,234.78. 

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.

Future principal payments due on our mortgage notes payables during 2023, total appr oximately $8.3 million , of which 

$6.8 million  is related to model home propertie s. 

Additional principal payments will be made with cash flows from ongoing operations.  On March 11, 2022, the Company completed the sale of our property World Plaza, located in San Bernardino, CA, for $10 million to an unrelated third party. 

This property was not encumbered by any debt and net cash proceeds will be used for future cash needs. 

On December 31, 2022, the lease for our largest tenant, Halliburton Energy Services, Inc., expired. 

Halliburton Energy Services, Inc.

was located in our Shea Center II property in Colorado, and made up approximately 

8.57%  of our annual base as of December 31, 2022 . 

The tenant did not renew the lease and we placed approximately $1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary. 

Our management team is working to fill the space as quickly as possible, and has filled approximately 20% of the space in the first quarter of 2023. 

On September 17, 2021, the Board of Directors authorized a stock repurchase program of up to $10 million of outstanding shares of our Series A Common Stock, which expired in September 2022.

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

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

There can be no assurance that the Company will refinance loans, take out additional financing or capital 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 or certain discretionary spending, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

We believe that cash on hand, cash flow from our existing portfolio, distributions from joint ventures in Model Home Partnerships and property sales during 2021 will be sufficient to fund our operating costs, planned capital expenditures and required dividends for at least the next twelve months.

If our cash flow from operating activities is not sufficient to fund our short-term liquidity needs, we plan to fund a portion of these needs from additional borrowings of secured or unsecured indebtedness, from real estate sales, issuance of debt instruments, additional investors, or we may reduce the rate of dividends to the stockholders.

We believe that cash on hand, cash flow from our existing portfolio, distributions from joint ventures in Model Home Partnerships and property sales during 2022 will be sufficient to fund our operating costs, planned capital expenditures and required dividends for at least the next twelve months.

If our cash flow from operating activities is n ot sufficient to fund our short-term liquidity needs, we plan to fund a portion of these needs from additional borrowings of secured or unsecured indebtedness, from real estate sales, issuance of debt instruments, additional investors, or we may reduce the rate of dividends to our stockholders.

Our long-term liquidity needs include proceeds necessary to grow and maintain our portfolio of investments.

We believe that the potential financing capital available to us in the future is sufficient to fund our long-term liquidity needs. We are continually reviewing our existing portfolio to determine which properties have met our short- and long-term goals and reinvesting the proceeds in properties with better potential to increase performance. We expect to obtain additional cash in connection with refinancing of maturing mortgages and assumption of existing debt collateralized by some or all of our real property in the future to meet our long-term liquidity needs. If we are unable to arrange a line of credit, borrow on properties, privately place securities or sell securities to the public we may not be able to acquire additional properties to meet our long-term objectives.

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, 2022 and 2021 . 

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

Quarter Ended

Distributions Declared

Cash, Cash Equivalents and Restricted Cash

At December 31, 2021 , and December 31, 2020, we had approximately 

At December 31, 2022  and December 31, 2021, we had approximately 

$16.5 million and $14.7 million in cash equivalents, respectively, including 

$4.7 million  and 

$4.2 million of restricted cash, respectively. Our cash equivalents and restricted cash consist of invested cash, cash in our operating accounts and cash held in bank accounts at third-party institutions. During 2021 and 2020, we did not experience any loss or lack of access to our cash or cash equivalents.

$4.4 million and 

$4.7 million of restricted cash, respectively. Our cash equivalents and restricted cash consist of invested cash, cash in our operating accounts and cash held in bank accounts at third-party institutions. During the years ended 

December 31, 2022 and 2021 , we did not experience any loss or lack of access to our cash or cash equivalents.

Approximately $4.1 million of our cash and restricted cash balance is intended for capital expenditures on existing properties (including deposits held in reserve accounts by our lenders) over the next 12 months of 2023.

We intend to use the remainder of our existing cash and cash equivalents for asset/property acquisitions, reduction of principal debt, general corporate purposes, common stock repurchases (if market conditions are met),or dividends to our stockholders and sponsorship of Murphy Canyon Acquisition Corp.

As of December 31, 2021 , all our commercial properties had fixed-rate mortgage notes payable in the aggregate principal amount of $67.3 million, collateralized by a total of 10 commercial properties with loan terms at issuance ranging from 5 to 22 years. The weighted-average interest rate on these mortgage notes payable as of December 31, 2021  was approximately 4.5%, and our debt to estimated market value for our commercial properties was approximately 51.9%. The debt to estimated market value includes the $7.2 million related party loans on our Mandolin and McElderry properties in Houston, TX and Baltimore, MD, respectively, which are eliminated in consolidation. 

As of December 31, 2021 , the Company had 84 fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of $22.2 million, excluding loans eliminated through consolidation, collateralized by a total of 84 Model Homes.

These loans generally have a term at issuance of three to five years. As of December 31, 2021 , the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are approximately $264,000 and 3.4%, respectively. Our debt to estimated market value on these properties is approximately 56.1%, including loan eliminated through consolidation. The Company has guaranteed approximately 15% of these mortgage loans.

We have been able to refinance maturing mortgages to extend maturity dates and we have not experienced any notable difficulties financing our acquisitions.

This includes approximately $3.2 million related to tenant improvements and building improvements for a long-term lease agreement with KLJ Engineering LLC to occupy 33,296 square feet at our Grand Pacific Center office building in Bismarck, North Dakota. 

We plan on financing a portion of the Bismark construction costs with a new loan that will also refinance the existing mortgage on the property.  We intend to use the remainder of our existing cash and cash equivalents for asset/property acquisitions, reduction of principal debt, general corporate purposes, common stock repurchases (if market conditions are met),or dividends to our stockholders and sponsorship of Murphy Canyon Acquisition Corp.

As of December 31, 2022 , all our commercial properties, except 300 NP which has no debt, had fixed-rate mortgage notes payable in the aggregate principal amount of 

$73.0 million , collateralized by a total of 11 commercial properties with loan terms at issuance ranging from 7 to 22 years. The weighted-average interest rate on these mortgage notes payable as of December 31, 2022 was approximately 4.53% , and our debt to estimated market value for our commercial properties was approximately 54.3%. 

As of December 31, 2022 , the Company had fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of 

$24.8 million , excluding loans eliminated through consolidation, collateralized by a total of 86 Model Homes and five intercompany loans from the Company to our Model Home entities, Dubose Model Home Investors #202, LP and Dubose Model Home Investors #204, LP.

The intercompany loans are fully eliminated in consolidation. 

These loans generally have a term at issuance of three to five years. As of December 31, 2022 , the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are approximately $288,000 and 4.69% , respectively. Our debt to estimated market value on all our model home properties is approximately 58%, excluding any loans eliminated through consolidation.  We have been able to refinance maturing mortgages to extend maturity dates and we have not experienced any notable difficulties financing our acquisitions. 

The Company anticipates that any new mortgages used to acquire commercial properties or model homes in the near future will be at rates higher than our currently weighted average interest rate.

Cash Flows for the years ended December 31, 2022  and December 31, 2021

Operating Activities:

Net cash provided by operating activities for the years ended December 31, 2021  and 2020  decreased by $1.3 million 

to approximately $2.4 million 

from $3.7 million .  The change in net cash provided in operating activities is mainly due to changes in net income, which fluctuates based on timing of receipt and payment, as well as an increase in non-cash addbacks such as straight-line rent.

Net cash provided by operating activities for the years ended December 31, 2022  and 2021  decreased by 

$1.4 million  to approximately 

$0.9 million  from 

$2.4 million .  The change in net cash provided in operating activities is mainly due to changes in net income, including operating activities of the SPAC, which fluctuates based on timing of receipt and payment, as well as an increase in non-cash addbacks such as straight-line rent.

Investing Activities:

Net cash provided by investing activities for the year ended December 31, 2021  decreased $3.5 million 

to approximately $24.2 million 

compared to $27.7 million for the same period in 2020 .

During the year ended December 31, 2021 , the Company received gross proceeds from the sale of four office buildings for approximately $35.4 million, and sales of 42 Model Homes for approximately $20.7 million, which was offset by the purchase of 

two commercial properties for approximately $13.6 million and 17 Model Homes for approximately $8.1 million.

During the year ended December 31, 2020 , the Company received gross proceeds from the sale of three office buildings for approximately $46.7 million, and sales of 46 Model Homes for approximately $18.1 million, which was offset by the purchase of 28 Model Homes for approximately $10.2 million

We currently project that we could spend up to $1.7 million (including deposits held in reserve accounts by lenders) on capital improvements, tenant improvements and leasing costs for properties within our portfolio on an annual basis.

Net cash used in investing activities for the year ended December 31, 2022 was approximately $126.4 million  compared to approximately 

$24.2 million  provided by investing activities during the same period in 2021.

The change from each period was primarily related to the gross cash invested into the trust account for Murphy Canyon totaling approximately $134.9 million. 

Additionally, proceeds from sale of real estate, net, were down approximately $23.8 million in 2022, as compared to 2021, and proceeds used for real estate acquisition and building improvements were down approximately $6.0 million.

We currently project that we could spend up to $4.1 million (some of which is held in deposits reserve accounts by our lenders) on capital improvements, tenant improvements and leasing costs for properties within our portfolio during the rest of the year.

Capital expenditures may fluctuate in any given period subject to the nature, extent, and timing of improvements required to the properties.

We may spend more on capital expenditures in the future due to rising construction costs and the anticipated increase in property acquisitions.

We may spend more on capital expenditures in the future due to rising construction costs.

Tenant improvements and leasing costs may also fluctuate in any given year depending upon factors such as the property, the term of the lease, the type of lease, the involvement of external leasing agents and overall market conditions.

Financing Activities: 

Net cash used in financing activities during the year ended December 31, 2021  

was $23.4 million compared to $30.2 million for the same period in 2020 .

The decrease of $6.8 million in net cash used in financing activities is primarily due to the following activities for the year ended December 31, 2021 :

Net increase in dividends of $3.5 million paid to holders of our Series A Common Stock and $1.0 million paid to holders of our Series D Preferred Stock;

Distributions to noncontrolling interest increased approximately $5.2 million related to sale of model home properties.

Net increase in repayment of the Polar Note, the fully payment of mortgage note on the World Plaza property and full payment of the four mortgage notes related to the properties sold during 2021; offset by

• 

The issuance of our Series D Preferred Stock with net proceeds of approximately $20.5 million and net Common Stock proceeds of approximately $8.9 million.

• 

Net proceeds from the issuance of mortgage notes payable on model homes.

Off-Balance Sheet Arrangements

Net cash provided by financing activities during the year ended December 31, 2022 was 

$127.3 million compared to 

$23.4 million  used in financing activities for the same period in 2021 and was primarily due to the following activities for the year ended December 31, 2022 :

Proceeds of approximately $132.3 million from public issuance for Murphy Canyon common stock during the year ended December 31, 2022 .

Net decrease in repayment of mortgage notes payable and notes payable totaling approximately $38.8 million.

Net increase in proceeds from mortgage notes payable totaling approximately $8.6 million.

A net decrease of dividends paid to Series A Common stockholders of approximately $1.4 million.

A net decrease of distributions to noncontrolling interest of approximately $3.2 million.

These increases to cash provided by financing activities were offset by the following:

Net increase of payment of deferred offering costs totaling approximately $2.6 million, mainly related to offering costs for Murphy Canyon of $3.2 million.

The issuance of Series A Common Stock and Series D Preferred Stock totaling approximately $8.9 million and $20.5 million, respectively during 2021 which was not repeated during 2022.

The increase in cash used to repurchase Series A Common Stock and Series D Preferred stock increased approximately $0.3 million.

Net increase in cash dividend payments to Series D Preferred Stockholders of approximately $1.2 million 

(the Series D Preferred Stock dividends began in June 2021).

Off-Balance Sheet Arrange ments

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

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Common Stock Warrants:

If all the potential Common Stock Warrants outstanding at December 31, 2021, were exercised at the price of $5.00 per share, gross proceeds to us would be $10 million and we would as a result issue an additional 2,000,000 shares of common stock.

Placement Agent Warrants:

If all the potential Placement Agent Warrants outstanding at December 31, 2021, were exercised at the price of $6.25 per share, gross proceeds to us would be $0.5 million and we would as a result issue an additional 80,000 shares of common stock.

 If all the potential Common Stock Warrants outstanding at December 31, 2022, were exercised at the price of $5.00 per share, gross proceeds to us would be approximately $10 million and we would as a result issue an additional 2,000,000 shares of common stock.

Placement Agent Warrants: 

If all the potential Placement Agent Warrants outstanding at December 31, 2022, were exercised at the price of $6.25 per share, gross proceeds to us would be approximately $0.5 million and we would as a result issue an additional 80,000 shares of common stock.

January 14, 2022 was the record date 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.

Series A Warrants:

 If all the potential Series A Warrants outstanding at December 31, 2022, were exercised at the price of $7.00 per share, gross proceeds to us would be approximately $101.2 million and we would as a result issue an additional 14,450,069 shares of common stock.

Leases generally provide for limited increases in rent as a result of fixed increases, increases in the consumer price index (typically subject to ceilings), or increases in the clients’

sales volumes.

We expect that inflation will cause these lease provisions to result in rent increases over time.

During times when inflation is greater than increases in rent, as provided for in the leases, rent increases may not keep up with the rate of inflation.

However, our use of net lease agreements tends to reduce our exposure to rising property expenses due to inflation because the client is responsible for property expenses.

Inflation and increased costs may have an adverse impact on our clients if increases in their operating expenses exceed increases in revenue.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.  

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity